3 Signs Energy Data Is Becoming a Competitive Advantage
Traditionally, businesses have considered energy a fixed, uncontrollable cost. But thanks to a number of emerging trends in the business world, energy data is becoming far more valuable to a company’s ability to compete in the market.
Pressure from regulators and investors are forcing businesses to improve energy efficiency and reduce their carbon footprint—not only in their own facilities, but across their supply chain. Increasingly environmentally minded customers are showing a willingness to pay more for products and services from companies that show a commitment to sustainability. And emerging technologies are even helping businesses harness energy costs in production or operations to create competitive pricing structures.
Of course, most people are generally aware of these trends, and it can be difficult for some to see the direct impact they can have on a business. But real opportunities are emerging in the market, and some companies have started using their energy data in strategic ways. Here’s a look at three industries where businesses are using energy data as a competitive advantage.
The Supply Chain Sustainability Mandate
Under pressure from the public to reduce the environmental impact of their supply chain, large businesses are demanding that their suppliers show progress toward that effort.
In 2014, nonprofit corporate sustainability advocacy Ceres evaluated the sustainability reporting practices of 600 of the world’s largest businesses. The study found that 58% of these companies set standards for social and environmental practices among suppliers and 34% monitor their suppliers’ performance in these areas—up from 43% and 25% in 2012, respectively.
Intel, for example, requires its suppliers to earn a 90% rating on its “supplier scorecard” for showing progress toward greenhouse gas emissions, water, and waste goals. And last year, food manufacturing company Kellogg set a public goal to achieve 50% reduction in carbon emissions from its suppliers by 2050. As part of its plan, Kellogg says it will require 75% of its direct suppliers to report progress through the Carbon Disclosure Project’s Supply Chain program by 2020.
While many of these large companies offer support for sustainability reporting, manufacturers and other suppliers will need to be able to show actual progress in these areas, or risk losing out to competitors that do.
Higher Rent in Commercial Real Estate
Commercial real estate (CRE) firms are finding value in the energy efficiency certification programs that their customers trust.
In 2014, CoStar released data from a study of the CRE market in Los Angeles that found tenants were willing to pay $2.69 per square foot in ENERGY STAR-certified buildings and $2.91 per square foot in LEED-certified buildings, compared to just $2.16 per square foot in buildings with no energy efficiency certification. Even with the increase in pricing, vacancy rates remained generally flat throughout the market, and were even lower among Class A buildings with ENERGY STAR certification. That means the ability to report progress in energy efficiency not only attracts higher revenue per square foot—it also drives higher volume of potential tenants.
Competition is sure to heat up as energy efficiency becomes more ubiquitous in the market. A survey released by Dodge Data Analytics earlier this year found that green construction will account for 60% of upcoming projects among respondents, and Booz Allen Hamilton’s 2015 US Green Building Council study projected that green construction will encompass more than one-third of the entire US construction market by 2016.
Competitive Pricing for Cloud Services
Thanks to a number of innovations over the past six years, the technology sector has helped reverse course on a dangerous trend.
In 2008, the Lawrence Berkeley National Laboratory warned Congress that energy consumption from data centers would double every five years, as servers struggle to meet rapidly growing demand for internet access to support trends like video streaming, the mobile web, and the Internet of Things.
So, to avoid the direct financial impact and the threat to long-term resilience, technology companies turned to energy software, more efficient hardware, and innovative data center design techniques to significantly reduce energy consumption even while supporting growing internet usage, the Berkeley Lab said in an updated report this summer. Based on trends from 2010 to 2014, the researchers projected data center energy consumption to grow just 4% from 2014 to 2020, which would represent $60 billion in savings from 2010 to 2020.
An interesting side effect of this trend is the introduction of new pricing models for cloud services. With granular visibility and control over energy usage in operations, cloud computing providers were able to control a key operational cost, which enabled them to create more competitive offerings.
“The cloud is certainly one of the drivers to more energy efficiency,” Dale Sartor, a researcher and one of the report’s authors, said in an article on the Berkeley Lab website. “Data centers used to be considered a fixed cost, but in a cloud environment, whoever is lowest cost provider is going to win. Energy is one of the easier things to optimize.”
Capitalizing on these kinds of opportunities requires a strategic approach to energy. Businesses need not only the tools to gain insights into their own energy consumption and costs, but also the ability to communicate across departments and coordinate resources to act when an opportunity arises. This interactive assessment tool will provide a visual breakdown and rating of your organization's capabilities and processes compared to industry best practices, and analysis explaining where you have room for improvement.