Breaking down mindset barriers
25 March 2009
Energy efficiency initiatives give factory bosses improved CSR, potential safety benefits and cost-savings, says Keith Wyatt of Somar. What’s more, many can be bought through interest-free loans. So why do many still resist ‘green’ technologies?
If anything good can come out of a recession it’s that, as profit margins are squeezed, businesses should hasten their efforts to identify in-house energy efficiency savings.
It may be sophisticated monitoring equipment; a modern, economical boiler; variable speed motors; pipe work insulation or an advanced lighting system. Whatever the technology, with electricity and gas prices continuing their relentless ascent, forward-thinking companies are reporting five- or even six-figure savings on their annual bills.
And, of course, employing such energy-saving plant or machinery means owners reduce their carbon emissions liability, enhance their corporate reputation, and gain a competitive advantage with customers who seek suppliers that acknowledge their environmental responsibilities.
However, despite these benefits, many businesses are still sceptical about ‘green’ technologies. So why are surprisingly few energy and environmental projects being implemented in factories across the UK?
Risk-averse culture: Although energy efficiency is becoming a boardroom issue, a company director rarely oversees projects.
The environment and energy consumption is just one of many topics competing for industry’s time, resources and leadership. With MD’s embroiled in what’s viewed as core business concerns (though quite why saving up to 80% on electricity bills doesn’t warrant “core concern” status is puzzling) energy and utilities issues tend to be delegated down the chain.
Actually identifying someone for whom ‘energy efficiency’ comprises part of their job description isn’t always easy. So the job of reviewing a factory’s current energy usage and assessing technology presented by new suppliers might fall to a senior engineer or technician, a production manager, plant manager or even the procurement department.
What do all these employees have in common? They don’t pay the bills!
And in today’s corporate culture, where change equals risk, it’s easier for individuals to maintain the status quo rather than push company owners to act. After all, no facilities manager is going to be fired for not employing pioneering technology. They may also fear the question: “If what you’re telling me is true, why have we been operating inefficiently for so long?”
Chances are they also don’t have decisive, cross-departmental influence. In this instance, the biggest challenge is getting senior managers to rank their proposals high enough on the commercial agenda to warrant capital expenditure and win over the operational personnel whose working environment they wish to improve.
Somebody within the organisation, however, must be forward-thinking and bold enough to insist on change. Because while many bosses talk about energy saving as they feel it’s the ‘right’ thing to have on the agenda, many are blinkered to the real value of such a programme and, therefore, don’t consider it to be critical.
The real risk businesses face is not addressing energy wastage because continued haemorrhaging of finances is likely to jeopardise long-term success, or even survival.
Smooth transition…not seismic shift: Another common misconception is that adopting eco-friendly initiatives results in a seismic shift in work practices.
Many steps to reduce carbon emissions (such as using public transport or only buying home grown produce) involve major lifestyle changes. Similarly, plant managers often fear introducing energy-efficient systems will compromise procedures, increase their workload or require extra effort to maintain.
However, the opposite is true. Such systems slot seamlessly into the workplace, demand less maintenance, can improve health and safety (modern low-energy lights improve visibility and are flicker-free), and generally improve the work environment.
Budget constraints: Understandably in the current economic climate, budget constraints are a perceived barrier preventing an energy efficiency drive – and many industry professionals seem convinced going green comes at a high price.
A large-scale equipment overhaul can cost a few hundred thousand pounds but eco-friendly products that deliver impressive efficiency gains can be bought for just a few thousand pounds.
Finance directors will ask: “Do we want to spend the money?” They are likely to view the introduction of energy-saving technology as a new capital outlay. In reality, however, the money is already being spent through excessive energy consumption – it’s simply a case of redirecting this profligate spend and using it to invest in something that can aid cost control.
The resulting reduction in electricity costs also means the payback on such projects can be less than a year and, paradoxically, companies can make an instant net profit from buying technology with proven green credentials.
That’s because interest-free loans are available via the Carbon Trust – and the monthly repayments tend to be less than the amount saved in reduced energy consumption. Loans of up to £200,000 are available to UK SMEs wishing to replace or upgrade existing equipment with efficient alternatives, with about £35 million having been handed out so far in this financial year.
Another financial incentive comes in the form of an Enhanced Capital Allowance (ECA) tax break of 28% against the purchase and installation of products that feature on The Carbon Trust's Energy Technology List.
And although credit may now be harder to obtain, companies who approach lenders with investment plans that ultimately boost profits are often pleasantly surprised by their bank manager’s decision.
Too good to be true: Sometimes new energy-saving technology can be a victim of its own success. For example, on presenting forecasts to a plant manager, detailing how they could save between 60-80% on their annual lighting bill, I can almost hear them thinking “yeah, right…pull the other one”!
This cynicism is in part owing to previous mis-selling of so-called energy-saving solutions. For instance, I know of factories sold low-energy fluorescent fittings as an alternative to power-sapping traditional bulbs only to find the increased number needed at heights above five metres to match existing light levels has negated any electricity savings – and in some cases actually increased costs.
Fingers have been burned in the past; it’s up to manufacturers of proven technology to reassure clients through quantifiable demonstrations and trials, not unsubstantiated sales spin.
Safe investment: Electricity is one of the biggest overheads absorbed by most companies – and it will continue to be whether or not government acts to force energy bosses to reduce prices. Many businesses have experienced a doubling of energy costs after coming off contractual fixed tariffs and, looking further into the future, we can expect supply shortages to drive prices up significantly.
The solution is simply to use less. The key, however, is to use less and maintain the operational status quo. Saving energy may not be as glamorous as increasing sales when it comes to providing sustainable profits but it’s a much safer investment in today’s volatile marketplace.
Keith Wyatt is commercial general manager for, and honorary advisor on environmental matters to the UK Warehouse Association
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