Why Every Company is an Energy Company -- Or Will Be Soon

NEW YORK, NY — Companies such as Dell, Cadbury and PepsiCo carefully monitor energy use in their operations and supply chains, but too often, companies have no idea how much energy they’re using – or how much they’re spending on it.

But that will one day change, according to a new report from Deloitte, "Every Company is an Energy Company – and if it isn’t it will be soon." The report argues that the rigorous energy management programs in place at leading companies may be the exception today, but it will only be a matter of time until such programs becomes the rule.

"Every company is an energy company. This might come as a surprise to many of them," the report said. "But a decade from now, a company without an 'energy and sustainability' department could be as unusual as one without a human resources department. Either that, or it might be out of business."

Companies have strategies to mitigate risk, grow markets and manage human resources, but few have strategies for managing energy. Although energy represents between 5 percent and 20 percent of a company’s expenses, firms lack an understanding of their consumption or of ways to reduce it. As such, many companies are missing out on the associated business benefits.

"The sooner companies begin to understand and actively manage their energy use -- and their energy sources, including possible ways to produce their own energy -- the faster they’ll enter a more enlightened world, one with the potential for a number of advantages including significant savings, a better bottom line, greater customer loyalty, a cost-edge over competition, lower business risk, and a company wide awareness of sustainability that can rein in resources waste across the board," the report said.

Energy management sort of fell off the radar as the recession pushed climate change to the back burner, according to the report. As the economy recovers, energy expenditures will rise. A more serious threat, however, may be the potential for business disruptions caused by energy shortages, outages or rapid price escalation. Growing demand for energy sources from developing countries will likely complicate the scenario.

The report warns companies to avoid associating energy conservation with "green chic." Rather, these approaches are basic business decisions about effectively managing resources. Companies also need to somehow bridge the gap between the fossil fuels of today to the clean energy sources of tomorrow, the report said, though it acknowledges the clean energy movement is still in its infancy and may take one to two generations to really come into its own.

In the meantime, companies should become adept at doing more with less and creating an energy management strategy that may include: board-level buy-in for long-term energy management, an analytical platform for measuring energy use across the enterprise and supply chain, performance metrics to track progress, performance incentives, re-thinking all processes with energy efficiency in mind, building brand reputation, and moving the initiatives into the supply chain.