Energy Management and Shareholder Value
by Joel Makower
In the wake of growing concern in the corporate set about energy prices, climate change, and shareholder activism, my GreenBiz.com team this week will publish a timely briefing paper: Energy Management and Shareholder Value. This free, downloadable paper shows how companies that take a systematic and strategic approach to energy management can enjoy a broad array of tangible and intangible benefits of increasing interest to investors. For years, companies have touted the benefits of energy efficiency at the facility level. Countless stories have told the relatively attractive returns on investment for such things as replacing older fluorescent light bulbs and ballasts with newer, more efficient ones; or upgrading inefficient motors, compressors, and boilers. Indeed, the financial opportunities are ripe: The Rocky Mountain Institute points out that in industrial settings, "there are abundant opportunities to save 70% to 90% of the energy and cost for lighting, fan, and pump systems; 50% for electric motors; and 60% in areas such as heating, cooling, office equipment, and appliances." But it’s more than merely reducing energy use and costs. Increasingly, a body of evidence suggests that companies that address energy mangement as a strategic corporate activity are better-run companies with potentially higher value to shareholders. And as financial analysts and institutional investors come to understand this energy-value connection, energy management is becoming another measure by which they assess company performance. The elevation of energy management in investors’ eyes is the result of a confluence of forces. Among them:
These forces have combined with a substantial body of research that show that strategic energy management isn’t just a nice thing -- it’s a competitiveness issue. For example, a series of studies by Innovest Strategic Value Advisors, a financial research firm, compared the relative stock price performance of energy management leaders and laggards in three sectors. The results in brief:
The briefing paper describes “the path to superior energy management,” including the barriers many companies face in trying to address energy at the strategic level, and how to overcome them. Also: I’ll be moderating panel discussions throughout the year on this topic at various business conferences. The first will be this week at the CERES 2005 Conference in Boston, featuring representatives of leadership companies and financial analysts. Another panel will take place at a Conference Board conference on Winning Strategies for Profitability and Sustainability on June 13 in New York.
Joel Makower |
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