Editor’s Note: This introduction begins our Business Impact report on the topic of Corporate Energy Strategy, unfolding here daily throughout January.
Businesses can be excused for feeling some confusion about what to do about their energy consumption. Though they’ve been told to expect an economy-wide price on carbon, the U.S. Congress failed to impose one last year, and the nations participating in the Copenhagen climate summit in 2009 did not reach a binding agreement on how to cut carbon dioxide emissions. But despite the uncertainties about what national energy policy will bring, companies ranging from big-box retailers like Wal-Mart and Costco to high-tech leaders like Google and Cisco to industrial behemoths like General Electric and IBM are embracing cleaner energy technologies that lower their carbon footprints and reduce their overall reliance on fossil fuels.
The overriding motivation has become one of simple economics. “Some of these things just pencil out well,” says Greg Neichin, a managing director at the Cleantech Group, a market intelligence firm. Indeed, a new report from Environmental Leader, a publisher of energy news and research, found that the majority of nearly 400 companies now generating their own renewable energy are doing so in order to reduce operating costs or to hedge against the prospect of higher prices for fossil fuels (see chart on next page).
This is a marked shift from the reasons companies have previously turned to environmentally friendly policies, such as a way of enhancing branding while largely continuing with business as usual—a tactic that some critics deride as “greenwashing.” In the past, companies typically pursued such efforts through corporate social responsibility (CSR) programs rather than core business units directed by senior management. According to a 2007 survey of 420 global businesses by public-relations firm Hill & Knowlton, 52 percent of companies cited “improved reputation” as the main reason for pursuing green policies and technologies.
This special report on corporate energy strategy will argue that the new corporate focus on the economic benefits of going green is being made possible not only by advances in technology but also by innovations in business models that help companies mitigate their energy risk. We’ll hear from corporate leaders who are putting energy strategies into practice, and we’ll cite research showing for the first time that a broad range of companies are actually receiving a return on their renewable-energy investments.
Over the course of this month, we’ll explore how better, cheaper renewable-energy technologies are making a difference for companies. Some of these technologies are well established. For instance, wind power has achieved “grid parity” in many parts of the world, matching the price of power generated by fuels such as natural gas. New ways of financing solar power have been making it more attractive to business. All-electric vehicles are coming to market in significant volume for the first time, and companies such as UPS and Coca-Cola are adding them to their fleets alongside hybrid vehicles.
Other technologies are newer to the mainstream. Among these are fuel cells that can now power entire buildings or retail centers for about the same cost as grid electricity, and low-power LED lighting, which retailers including Starbucks are installing in their stores. Telepresence systems and low-cost videoconferencing can dramatically reduce the need to travel by car and air. Creative new ways to power data centers can minimize carbon emissions while offering more capacity in less space. Smart building technology is poised to work with the coming smart grid to save companies substantial sums of money.
As more companies adopt these technologies, the cumulative effect could be big. Business software giant SAP calculates that its customer base, which includes 40,000 companies in 120 countries, collectively accounts for one-sixth of the world’s carbon emissions. By comparison, the entire European Union is responsible for about 14 percent.