Insights

2019 Corporate Energy & Sustainability Progress Report

More than 300 industry professionals reveal why and how companies are leading the transition to an energy efficient and sustainable future.

The data might surprise you.

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Introduction

Every year, companies spend more than $450 billion on energy and sustainability initiatives while 63% of Fortune 100 companies have set clean energy targets.

 

That’s a clear indication that companies recognize the positive benefits these efforts bring. And there’s ample proof to validate.

 

Organizations that actively manage for climate change see an average 67% higher return on equity than companies that don’t. And the nearly 80,000 emission-reducing projects reported by 190 Fortune 500 companies in 2016 returned almost $3.7 billion in savings.

 

A groundswell of new technology means that its increasingly easier for companies to meet their energy and environmental goals.

 

For corporate leaders, this creates an opportunity and a challenge: more technology enables greater resource efficiency with new financial upside. But it also takes greater due diligence in an increasingly complex marketplace.

What’s standing in the way of progress?

To find out, Schneider Electric partnered with GreenBiz Research to survey specialists and executives from top companies around the world. The 2019 Corporate Energy & Sustainability Progress Report is the result.

Responses from 309 people representing business with $100 million or more in annual revenue were used to build the 2019 Corporate Energy & Sustainability Progress Report, which sheds light on what corporations are doing to reduce emissions, how they are deploying energy and sustainability projects, what the drivers for corporate action are and what barriers to progress exist.

 

It is the second iteration of this research and the findings build on the 2018 report.

Finding 1


Is funding a false barrier?

CapEx is frequently perceived as a hurdle to accomplishing energy and sustainability projects. However, this may be misleading.

A key variable to the success of all corporate energy and sustainability initiatives is building and socializing an accurate business case. In fact, fewer than a third of survey respondents strongly agreed that they have been successful in building a business case and securing funding for programs. Moreover, it appears that developing a solid business case may even be more important than the immediate availability of capital.

Confusion about the true barriers for project approval

Views on how to get projects approved also vary depending on past success.

True Barriers for Project Approval

These findings indicate that corporate teams that have had trouble getting projects approved in the past may want to focus more on the business case — payback and long-term, non-financial benefits — than on the capital necessary to deploy a project. If the business case is solid, it should be easier to eventually locate budget.

New funding models may further reduce perceived capital barriers

The research indicates that corporations with a higher success rate of projects typically have a more diverse financing mix.

 

The survey asked respondents about their intent to use eight different financing mechanisms, including:

 

  • Asset leasing
  • Energy/green bonds
  • Energy-as-a-service (EaaS)
  • Energy performance contracting
  • Capital expenditure (CapEx)
  • Power purchase agreements (PPAs)
  • Operational expenditure (OpEx)
  • Procurement savings funding

 

In all cases, there were some respondents who agreed or strongly agreed that they would use each strategy in the coming year. The most popular funding mechanism for energy and sustainability projects is CapEx. 57% of survey respondents believe they will employ the CapEx model, and 48% of respondents believe they will employ the PPA model.

“Being able to show investment plans and their payback had a larger impact on leadership decision making than overwhelming them with lots of data about kilowatt hours and carbon output.”

— Food Manufacturer

Finding 2


The real data challenge

Data is readily available. What companies struggle with is ensuring data quality and using information to foster collaboration.

The data collection and sharing landscape

In the 2018 report, respondents indicated that 80% of their companies had energy and sustainability data collection projects underway. In 2019, the research finds that more companies are now seeking the most efficient ways to share the data that has been collected.

Multiple Sources of Collection

Note that Internet of Things (IoT) devices are only used by 18% of firms. This includes a variety of sensing devices with connectivity to the cloud, which enables remote monitoring and analysis in real time. This is a missed opportunity and companies will need to catch up quickly. Navigant estimates in North America IoT-enabled smart meter penetration will reach nearly 80% by 2023, and the total number of connected IoT sensors and devices is set to exceed 50 billion by 2022.

“We’re starting to improve; two of our major plants will put in energy monitoring systems where we can collect more data specific to individual equipment or individual operations.”

— Agricultural Business

Companies agree that sharing data is important, with those that share the most seeing significant benefit. But the reality is that data sharing practices are still not optimal.

Sharing is Still Not Optimal

There are a variety of barriers that make data sharing a challenge. In some cases, the quality of the data is suspect, or it is difficult to manipulate, which may make it less valuable.

Barriers to Sharing
“We’ve really been handicapped with just not having enough resources to be able to dive into the data as much as we need to.”

— Retailer

Data collection by industry and region of the world

The data collection story becomes more nuanced when it is viewed by industry and geography. 69% of respondents from the education field note that they have undefined data owners and processes. No other industry has more than 30% of respondents citing this challenge. Within finance and banking, a significant barrier is caused by inconsistent metrics across projects and regions, with 67% of firms citing this challenge.

 

Companies that operate in more than one region of the world are more likely to share their data — 85% do so. But, for businesses operating in only one region, data sharing drops to just over three-quarters of firms. Companies in Europe are less likely to share their data, with 65% of respondents operating solely in this region noting that their data is shared. In Asia and the Americas, sharing is more prevalent, with 80% of firms sharing data.

“I have my dashboard of real-time metering, and literally it’s less than 10 minutes, and I know what my demand is, what my kWh is in each and every building.”

— Commercial Real Estate Company

Finding 3


The aim of public targets

Companies that set public targets or goals move quickly and see advantages.

One of the most apparent signs of corporate leadership in energy and sustainability is the recent acceleration of publicly announced goals. Many companies are making quantifiable and measurable commitments to their customers, shareholders and the broader community at large, while simultaneously reducing their impact on the environment.

State of public energy and sustainability commitments

More than half of the companies responding to our survey have made public commitments to reduce resource consumption and improve sustainability. Of those companies making a commitment, about half have also set measurable goals with a third-party such as the Science-Based Targets Initiative, thus implementing rigorous and externally audited standards.

Sharing is Still Not Optimal
Impact of public commitments on performance

Companies that have made public commitments cite a wide variety of reasons and are more motivated than their peers without public commitments in every category.

Sharing is Still Not Optimal

These drivers indicate that companies that make public commitments have a better understanding of how they fundamentally improve the business. The research shows that companies with public commitments are also more successful at securing funds and building business cases for their projects.

Sharing is Still Not Optimal

Companies that make public commitments also are more likely to adopt emerging technologies. For example, only a minority of companies surveyed have implemented advanced and emerging technology like batteries for energy storage and load curtailment, but about 50% of those making public commitments have done so.

 

Regardless of the reason, the data is clear: Companies that want to accelerate their action on energy and sustainability find greater success when they set a public goal.

“By setting renewable energy targets, and joining the RE100, we’ve been able to make decisions more quickly, take bigger steps forward and advance our goals much faster than we could have otherwise.”

— Financial Services Company

Finding 4


Energy sourcing saves money

Companies are missing opportunities to capitalize on strategic energy purchasing.

A changing energy landscape provides opportunities for businesses to modify their fuel consumption mix and achieve financial benefits as a result. For example, growth in renewables creates a variety of new energy sources and suppliers for corporations to consider alongside more traditional power buying. Moreover, an increase in data-driven technology helps companies better understand their real-time, interval energy consumption and demand, which may provide the visibility required to curtail use when prices spike. Such data may also enable corporations to negotiate energy supply contracts that are more appropriate for their unique consumption and demand patterns.

Strategic energy sourcing: an opportunity hiding in plain sight

Energy purchasing should deliver significant cost savings to many corporations. But while 77% of respondents realized significant returns from energy efficiency, only 29% cited strategic sourcing as one of the top two initiatives “that have delivered the most cost savings." This was an even lower share than data collection and analysis (35% of firms), even though energy purchasing typically requires no capital expenditure and leads to rapid paybacks.

Sharing is Still Not Optimal

Surprisingly, only 6% of financial and banking firms, 17% of education firms, and 18% of technology firms cited energy procurement as a top savings strategy. The technology industry recognizes that energy sourcing is a missed opportunity: Only 23% of these firms strongly agree that they are taking proactive steps to manage price volatility.

The energy cost volatility challenge and opportunity

Of the companies that strongly agreed they are taking steps to deal with energy cost volatility, 71% are negotiating fixed-price purchasing contracts, 64% employ flexible-price purchasing and 57% have onsite generation. These strategies are shown to deliver favorable outcomes and most firms are in a position to use at least one of these techniques.

Sharing is Still Not Optimal

Moreover, the businesses that identified strategic energy sourcing and risk management as a top initiative to deliver cost savings are more likely to invest in an array of other strategies and technologies. For example, these leaders are more likely to use battery storage and combined heat and power (CHP) with small increases in the use of on- and offsite renewables.

Sharing is Still Not Optimal
“As prices continue to fall and buying options become more flexible, companies from every industry can capture the benefits of renewable energy. They have an opportunity and in many cases, multiple opportunities, to save money, make a difference and demonstrate leadership.”

— Steve Wilhite
Senior Vice President of Energy & Sustainability Services at Schneider Electric

Finding 5


Technology gets traction

Energy efficiency dominates, renewable energy accelerates and newer technologies gain purchase.

The clear financial benefits of energy efficiency initiatives and renewable energy projects have resulted in widespread adoption. New technologies such as battery storage are increasing in demand, but are still less frequently adopted, possibly because companies are hedging on innovations next on the horizon — or because cost, reliability, or availability of these technologies still remain a barrier, real or perceived.

State of technology and strategy adoption

In 2018, 81% of survey respondents had implemented energy efficiency projects, and 51% employed either on- or offsite renewable energy projects. By 2019, these numbers increased considerably, with 93% of respondents using energy efficiency to meet their goals and 63% implementing renewables. This impressive growth and penetration is occurring because these projects are reliable, well understood, financially attractive and accessible around the world.

Sharing is Still Not Optimal

The International Energy Agency (IEA) has called energy efficiency the “first fuel of economic development” because it is widely available and typically does not require significant upfront capital. It is the best place to start for any organization seeking to reduce energy and resource consumption.

 

In fact, 71% of survey respondents reported that energy efficiency projects have delivered the greatest cost savings to their organization. In 2018, 30% of respondents deployed CHP systems and 41% implemented battery storage. These technologies are less common, but the research shows that they are growing at a rate similar to renewable energy: 11% more in 2019.

Sharing is Still Not Optimal

Firms moving beyond energy efficiency and renewable energy report using a wide range of financing options. A quarter of respondents using battery storage have employed asset leasing and another 25% use green bonds. Of companies that have invested in CHP, 28% fund these projects with procurement savings, and 22% use energy performance contracts.

Active, strategic energy and resource management presents significant top- and bottom-line benefits. But the opportunities are changing. There are new financing mechanisms to accelerate adoption; new suppliers and business models to help deliver sustainable savings; and new technologies and data streams to boost, analyze and optimize results. It’s a changing world and corporate leaders need to stay ahead of the curve to ensure they stay competitive.

How does your company measure up?

Corporations are leading the efficiency and sustainability charge. How do your initiatives compare to others in your industry? Take our Progress Assessment to find out.

Want to learn more?

Read the full research report for additional insights and examples of leading organizations taking action.

Interested in learning more about Schneider Electric Energy & Sustainability Services?

Websites: schneider-electric.com/ess

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Email: contact@ems.schneider-electric.com