Clean Energy Strategies: 3 Priorities That Deliver the Greatest Value

Renewable energy and other low-carbon resources have the potential to deliver substantial benefits to companies, yet many organizations adopt a piecemeal approach that leaves much of the value untapped.

Part of the problem is that clean energy is an extremely young and dynamic field, with few universally applicable approaches. For example, many large corporations routinely receive unsolicited offers from developers to supply clean power for individual sites. If a company decides to move forward, the result is often a patchwork of individual solutions with little consistency and no coherent link to the company’s overarching strategy.

By comparison, leading companies align sustainability and clean energy strategies with business strategies. This is not easy. Establishing an overarching and systematic strategy for clean energy requires the proper corporate commitment, information, resources, and tools, along with a means to prioritize among various options. However, companies that develop an integrated clean energy strategy can realize a range of short- and long-term benefits -- not just cost savings, but also reduced operational risks, greater reputational and brand value, and an opportunity to shape energy practices in their industry.

Where to start? We think there are three main priorities.

1) Adopt innovative, company-wide approaches to financial analysis. According to basic metrics -- like the length of the payback period -- some clean energy initiatives may not appear to justify the needed investment. However, these projects often deliver value along several dimensions, and financial savings represent only one component.

A more accurate analysis includes elements like indirect savings (e.g., reduced employee turnover based on increased satisfaction with a company investing in renewable energy); indirect financial benefits (e.g., tax credits, enhanced brand value and customer loyalty); environmental factors (e.g., reduced liability and better regulatory compliance); and social benefits (e.g., employee retention, supporting more resilient communities and economies).

In addition, companies must understand the evolving legislative landscape, which impacts taxes, rebates and incentives at the federal, state and city levels. These programs can swing the financial impact of clean energy measures from red ink to black, but only if companies can effectively realize all of the benefits. For example, many companies have questions about how to evaluate the after-tax effects of an on-site investment in renewables. The answers are unique, as the accounting treatment for renewables projects varies from company to company based on the project structure and the host’s corporate structure -- the combination of which affects ultimate returns.

2) Coordinate across functions. Clean energy strategies will only succeed by involving the entire organization, including:

• Senior executives (C-level and board of directors), to ensure buy-in from the top
• Finance, to address funding and balance-sheet implications
• Operations, to collaborate with procurement in selecting and implementing the most promising projects
• Sustainability, to oversee and coordinate multiple initiatives
• HR, to increase employee engagement
• Brand/marketing, to promote the company’s story and enhance its reputation

Coordinating across functions isn’t easy, especially for companies with a global footprint or multiple lines of business. It often requires strategic partners (e.g., engineering, procurement and construction providers, developers, solution providers) who can work with the entire enterprise rather than a patchwork of local partners.

3) Look up and down the value chain. In some industries, the environmental impact upstream and downstream is greater than the environmental impact of a company’s own operations. For this reason, it’s critical to look at the complete value chain.

Upstream, companies can create energy use and emissions requirements for their suppliers, and reward those with better performance. The right partnership structure with suppliers can drive down costs; for instance, a consumer electronics company could provide financing to its outsourced manufacturers to install renewables, meeting the sustainability needs of end customers and providing tax benefits.

Downstream, companies can consider how their products are used in the marketplace, for example, by assessing potential design changes that make products compatible with cleaner fuels, use less fuel overall during operations, or both.

Companies can also engage with customers on the best ways to use products in order to minimize their environmental footprint, including one wireless provider that offers a gift card to customers who participate in its e-waste recycling program. Another downstream approach would be for a parent company to establish goals and incentives for their distributors, subsidiaries or franchisees to access when pursuing renewable energy. Taking a broad view up and down the value chain can not only help meet sustainability goals, but can also strengthen customer and supplier relationships by creating shared value.