A changing corporate focus
The Harvard Business Review (HBR) article “Energy Strategy for the C-Suite” highlights that “sweeping environmental, social and business trends have propelled energy up the corporate agenda. But most firms still approach energy as merely a cost to be managed.”
There is little doubt that energy is becoming a strategic issue for businesses, with many large organisations actively reviewing their energy policies in light of both increased costs and growing pressure on their CSR position.
The article goes on to highlight the benefits of an energy strategy and recommends five steps to building one that is robust:
- Start with a C-level mandate
- Integrate energy into the company’s vision and operations
- Track energy at all levels
- Shift to renewables and other advanced technologies
- Engage key stakeholders
Energy a key consideration for all businesses
As far back as 2015 The Federation of Small Businesses stated in a report by the Department of Energy and Climate Change (DECC) that, “Almost a third of small firms highlight the cost of energy as a barrier to the growth and success of their business. Finding energy efficiency savings is the single best way of reducing these costs over the long-term. Small businesses need all the support and information they can get to help to make these savings wherever possible.”
With most other businesses subject to the same pressures as the large corporates; they need to be as cost efficient as possible and manage their own CSR considerations.
Whatever the reasons, renewable energy should feature high on the SME and smaller corporate strategic agenda.
Understanding the options
In the same 2015 DECC report, the Group Head of the CBI stated; “With energy prices (electricity) for a medium-sized user predicted to rise by almost 30% in the next 5 years, many businesses are looking to manage future risks by investing in energy efficiency.”
However, how well understood are the funding options available to effectively incorporate energy as a strategic issue?
The HBR article points out that “Renewables and other clean technologies are some of the fastest-growing parts of the economy… and yet CFOs generally have little knowledge of the dominant funding mechanisms” – this was specifically in reference to Power Purchase Agreements (PPAs). By taking advantage of the PPA approach, commercial property owners can benefit from reduced electricity costs without any capital outlay.
Emulating the corporate approach and don’t let funding be a limiting factor
Like their large corporate cousins, small and mid-sized businesses can be strategic in their ‘energy thinking’, adopting and adapting the five key points highlighted in the HBR article is a good start.
Financing options mean that adopting clean energy is not just the preserve of the cash rich. The article highlights the benefits of PPAs, stating “The most widely used renewable energy financing mechanism is the Power Purchase Agreement.”
Whilst there is no guarantee in the hedge against increasing energy costs, this is immediately counterbalanced by the fact there is no capital investment in a funded PPA system. Considering the energy price predictions of the CBI; this approach should be extremely beneficial for commercial property owners.
The article goes on to say that “smart firms understand the value of PPAs as a hedge against price volatility… and as a source of competitive advantage”.
At Zestec we are supporting our clients adopt a strategic approach to energy through a funded PPA that gives them a ‘smart’ solution to their energy needs. Contact us at firstname.lastname@example.org or 01202 862760 if you’d like an exploratory discussion on how this might work for your business.