Importance of Measuring Energy Use

When the monthly utility bill comes, the CFO simply sees is another bill to be paid. Energy is just another operating expense…or is it?

An increasing number of international companies are measuring performance on a triple bottom line of organizational success, environmental success and economic success, and finding that adding social and environmental actions to daily practices can deliver a significant return on investment.

When it comes to understanding the true impact of energy and the environment, only limited data is available to CFOs. They still need that data translated into information to make informed decisions about their business.

CFOs who are determined to truly understand and reduce environmental costs of their business can take a huge step in that direction by understanding the entire environmental impact of their facility. In addition to energy usage and costs, environmental accounting looks at the total cost of production, distribution, use and waste of a product. This process, known as Lifecycle Assessment, charts the entire lifecycle of a company’s operations: from raw materials to suppliers to manufacturing, distribution, use, and disposal.

To fully complete the assessments, the processes and environmental impact involved in the company’s day-to-day operations are charted within five environmental categories:

  • Energy
  • Water
  • Air
  • Waste
  • Compliance

Developing the metrics to track processes and bring that information to the CFO level is crucial. In fact, many enterprise level resource planning software packages include a new environmental resource planning software add-on that financial executives can use to track pertinent environmental health and safety information.

By far, the environmental impact or “eco metric” most easily measured, monitored and reduced is energy. As energy bills continue to rise and become a larger part of the business operating budget, financial executives are driven to act and reduce cost. One CFO found that energy costs had increased from 12% of annual facility expenses to 17% in one year! This resulted in a 40% year to year increase. The question then arises, how does a CFO obtain the information needed to understand the cost of energy and how to reduce it.

While total cost of energy use can be extremely valuable to C-level executives, the capability to evaluate and utilize the information may not exist. The data may be available, but is not presented in a way that enables CFOs to make improvements that can deliver an acceptable return on investment. Partnering with a professional energy firm can prove to be a major benefit to CFOs.

By partnering with an energy specialist, the CFO can get actionable information to reduce operating expenses. Energy projects will have the added benefits of improving the facilities and reducing operating expenses while positively affecting the social bottom line and the impact on the environment. Armed with more information about the company’s costs and risk, C-level executives can make decisions with tangible and intangible benefits.

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