VERGE 2016: Why the C-Suite Needs to Get Proactive About Energy Strategy
While most businesses are aware of the major developments in the energy world—the high-level focus on climate change, the emergence of new technologies and alternative energy sources, the growing value of sustainable brands—many are still not fully prepared to embrace the trends.
Last year, when MIT Sloan Management Review and The Boston Consulting Group surveyed more than 3,000 managers and investors from businesses worldwide, 90% said sustainability strategy was an essential part of remaining competitive. However, just 60% of companies said they actually have a strategy in place, and only 25% said they have a clear business case for sustainability.
If businesses are going to prepare for the trends that are transforming the energy world, the C-suite will need to act. This week, Enel X co-founder and CEO Tim Healy will join PwC’s Managing Director of Sustainable Business Solutions George Favaloro for a session at the 2016 VERGE conference in Santa Clara, California, to discuss the factors that are driving the C-suite to think differently about corporate energy strategy. Based on research and analysis that Enel X and PwC conduced while writing the recently released strategy brief, Energy Strategy for the C-Suite: From Cost Center to Competitive Advantage, the session will discuss the value at stake and what businesses can do to embrace these trends.
The session will also discuss the gap between this realization of the importance of an energy strategy and the lack of action to put one in place. As a sneak peek into the discussion at VERGE, here are three reasons businesses need to be proactive about energy.
Climate Change Regulation is Happening Now
Just weeks ago, the US and China put aside their many differences to agree on one topic—the efforts they will make to limit the effects of climate change. By signing the Paris Agreement, the world’s two largest contributors of greenhouse gas emissions took a strong step toward creating a business environment with stricter policies and regulations on how and when enterprises use energy.
While the agreement between the US and China does not put the Paris Agreement into effect, businesses would be mistaken to think that the legislative shift to drive energy efficiency hasn’t already begun.
Some of these efforts are targeted directly at businesses, with major cities like San Francisco and New York City introducing strict new requirements for businesses to incorporate renewable energy technology and other efficiency measures. However, businesses are also likely to feel the downstream effects of climate change-focused efforts. For example, major Southern California utility Pacific Gas and Electric announced in June that it would seek to close the state’s last operating nuclear power plant and replace the supply with energy generated by renewable technologies—a decision driven largely by California’s mandates to reach ambitious renewable energy goals by 2030. As the regulatory environment and electricity grid itself continue to shift, the enterprises that developed their energy strategy proactively will thrive.
Investors, Customers, and the Workforce are Demanding Sustainability, Transparency
Although millennials are expected to account for more than one-third of retail sales and half of the US workforce by 2020, their environmentally minded preferences are already starting to influence businesses. After surveying 30,000 consumers in 60 different countries for its 2015 Corporate Social Sustainability Report, Nielsen found that 66% of global consumers say they would pay more for products and services from sustainable brands.
Appealing to customers and top talent in this growing demographic requires more than simply incorporating sustainability into marketing and advertising messaging. Paul Argenti, a professor of corporate communication at the Tuck School of Business at Dartmouth and the author of a new textbook on corporate responsibility, laid out the challenge in meeting millennials’ demands for sustainability in a recent article for NPR.
“Overall, millennials are more demanding, more in touch and more skeptical,” Argenti wrote. “Brushing these off as cynicism is too simplistic. It puts the onus on organizations to show that they are not simply paying lip service to [corporate social responsibility], as consumers will sniff out and publicize anything that smells of hypocrisy.”
This level of radical transparency is extending to investors as well. In April, the Wall Street Journal reported that investors have developed so many tools to rate corporate sustainability efforts that it’s becoming difficult to determine which rating is accurate for which company. The one thing they seem to agree on is that businesses need to be able to show evidence of their efforts.
This has led many businesses to jump at any suggestion to improve environmental, sustainability, and governance (ESG) efforts. However, recent research conducted by Harvard Business School has found that doing so without the capabilities and foresight to know what kinds of ESG efforts are material to your business could have serious financial implications.
The Technology to Elevate Energy Management is Available Now
As cloud computing and big data transformed enterprise IT in the past decade, energy was largely left behind. For many businesses, energy is the only remaining corporate expense for which a PDF of a monthly utility bill passes as “information.”
But with the continued development of the Internet of Things and cloud-based energy intelligence software, businesses are able to gain real-time visibility into their energy usage, compare trends with other facilities and industry benchmarks, forecast energy costs and budgets, and streamline reporting.
Advancements in these and other energy-related technologies—such as solar, wind, and energy storage—are enabling enterprises to find opportunities to reduce costs, improve efficiency, and report accurate energy data to embrace the trends stemming from climate change and the public’s evolving expectations.