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How do you get CFOs interested in energy management and energy efficiency? The answer of course is in the word “efficiency”. When I talk to CFOs about #energy management however, I find that some still see it as an area for the plant or facility head to manage. To communicate and deliberate on the need for CFOs to prioritize energy management, we ran a series of roundtable discussions with CFOs on this topic. In a room full of #CFOs, one can easily see how some companies are ahead in the energy management curve compared to the others. Our endeavour is to generate the interest of finance heads in this topic, for them to drive it as a strategic objective.
To understand why it is important for businesses and hence their CFOs to manage energy consumption, one must analyse the energy outlook for the world:
• The Global Energy Outlook 2014, which forecasts energy trends for the coming 20 years, projects that energy consumption is set to increase by 41% by 2035.
• Almost all (95%) of this increase is to come from non OECD countries.
• Rapid industrialization in growing economies, large scale urbanization and growth of services are expected to drive the increase in energy consumption.
• While fossil fuels remain dominant, renewable energy is to show rapid growth, though from a much smaller base.
• Most of Asia and Europe remain net importers of energy, while the total global growth in energy production almost equals consumption growth, therefore maintaining the current levels of demand-supply gap.
So especially for businesses which operate in Asia, energy is expected to remain a key resource with increasing demand, its price trending upwards over the long term. There would be dynamics between energy sources which would have to be managed in the short term, but usage and efficiency must be managed for the long term, as a continuous improvement initiative. One can switch between fuels to take advantage of price differences, which would change over time, but reducing usage of energy yields lasting savings.
What is the CFO’s role in this? The CFO is expected to partner the business in driving its strategy. Operational efficiency is a critical
part of any business strategy. When the business performance indicators for operational efficiency are set up, material, manpower, energy and overheads are the main elements. While energy prices cannot be controlled by consumers, usage most definitely can be.
Hence energy management offers strong potential for improving operational efficiency.
The world is changing and progressive companies have already upped their game. Hence the difference in energy consumption between the average company and the best in class can range from 30% to 75% depending on industry! This is achieved by installing smart equipments to optimize energy consumption according to need, designing facilities appropriately and using all the measurement and monitoring mechanisms available today.
So, when we talk about how energy management can completely change the game in recurring cost, it generates interest among the finance heads. They like to know what is possible and at what stages of planning they must get involved, to make the right decisions and make an impact on long term efficiency.
We must generate more conversations in this area in the finance community.
