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Juan Aguiriano ... 5 Key Components of Strategic Energy Management

Burgess COMMENTARY

Peter Burgess

Juan Aguiriano Unfollow Juan 5 Key Components of Strategic Energy Management

Juan Aguiriano ... President, Asia-Pacific at DuPont Sustainable Solutions

Energy efficiency can't be fully achieved through imperatives. An effective strategy is rooted in people and embodied values–driven through cultural change.

DuPont has identified five components of strategic energy management:

1) Identifying and elevating energy cost as a strategic business issue

2) Identifying and executing the right projects to drive highest gain results

3) Implementing a vertically integrated management approach to drive results

4) Connecting many disconnect components of complex energy management

5) Developing skills and capabilities of the people in the organizations

Learn more about how a strategic energy management system, applied with operational discipline, can lead to reductions in energy consumption, cost, risk and exposure to escalating energy prices.

Within the infographic, you can also download the white paper 'Optimizing the Success of Industrial Energy Efficiency Improvement by Driving Cultural Change'.

DuPont Sustainable Solutions Energy Efficiency Infographic dupont.com

The Energy Efficiency Infographic provides the key drivers for energy efficiency, the 5 components of a strategic energy management system and DuPont’s own success.

These are excellent key components to consider. Our company has found that energy cost savings are much greater when you have have buy-in from the rank and file. Like (1) Reply privately Flag as inappropriate 3 days ago Juan Aguiriano likes this

The efforts of DuPont in the area of energy efficiency, and in the broader area of corporate social responsibility are good, way better than the norm. Mallory Energy is another company that has embraced energy efficiency and CSR in a meaningful way.

I have to argue, however, that these efforts are not going to be enough to change the way society addresses the big issues so that there is the amount of change essential for a sustainable future.

Many of the proponents of sustainability and CSR are advocating for these things using the argument that 'it is good for corporate profit and for investors'. This may be true, but a lot of profits can be made without paying attention to energy efficiency and CSR, and as long as profits are the dominant measure, the same old same old behaviors will continue.

The American style consumption model for a society and an economy cannot be reproduced worldwide without huge damage to the environment and a dangerously high depletion of non-renewable resources.

Science can come to our help, but investment is needed and profit will not be as high. This change requires a change in the metrics we use to determine an organization's performance. Performance is not only profit, it is also impact on people and planet.

I think it is fair to say that there are huge issues around the world that cannot be addressed by economic activity that earns a commercial profit. What is needed to address issues at the bottom of the pyramid has value without any chance of being profitable in the conventional way. The same applies in the United States, for example, where the huge backlog of infrastructure deterioration cannot get funded using the prevailing economic analysis and understanding.

The Triple Bottom Line (TBL) is a step in the right direction. This is about people, profit and planet ... but while there is a widely accepted method for reporting profit, the same is not true for people and planet.

Also, to be effective the metrics have to be designed so that there can be easy summarization and ways to link decisions with impacts. I argue therefore for rigorous data about the performance of an economic activity that is implemented by an organization, financed by the same organization or another, is implemented in a place, and produces product.

The data about the economic activity can be aggregated (similar to consolidation in accounting) to the level of the organization (both the implementing and the financing), to the level of the place, and to the product (product life from beginning of the supply chain, through use to the end of the waste value chain).

As things stand, it is very difficult for people to hold a very large organization accountable ... maybe even impossible because there are too many entities and places where they operate. But in a place, the responsible parties are easier to identify, and hold accountable.

It is also possible to have impact on organizations and their behavior through the product. This has worked for organizations as evidenced by the big spending on advertising and PR around their products. This changes behavior of buyers to the benefit of the organization. When the product is also identified with the good and bad impact of its whole value chain, then buyers can make informed decisions about what they choose to buy.

Big data is talked about all the time. My understanding that big data is used almost exclusively within corporate organizations, and merely to promote business practices that will improve profit. Apparently government is doing some in connection with surveillance and security ... but hardly any of the power of big data is being deployed to measure the key parameters of value in society. Bits are starting to be developed, but, as far as I can see, a coherent framework has not yet emerged.

The framework I have described could be the coherent framework that we need.

Peter Burgess TrueValueMetrics Delete 2 days ago

Hello Peter thanks for your excellent comments. Agree that the solution is to agree on accounting standards to measure the value of environmental capital and human capital withe same level of attention and ffort that we apply to financial capital. it is true that externalities are not always easy to measure, but if it has been done for intangibles such as IP OR brand of corproations, it can be done for other intanngibles that have value in enviromental and human areas. Ona related topic, What do you think of GRI new framework that tries to integrate corporate and sustainability reporting ? Also the WBCSD and DuPont have been been investigating new ways of measuring the impacct of economic activity on society in differentways. We have collaborated and have developed a SROI stainability Return on investment methodology, a study in which my DuPont Angela Fratila has greatly contributed , measuring the social value of a project in Indonesia. I am interested in your perspectives

Like Reply privately Flag as inappropriate 1 day ago

Thank you Juan, there are a lot of points that you have raised. Let me give you my knee jerk reaction to each.

Standards: Standards are both a strength and a weakness. The process of establishing standards in the accountancy arena is slow and cumbersome and constrains progress ... something more approrporiate to the 21st century is needed. Before we get to the standards process we should really look pretty hard at the basics of what accounting is meant to be doing.

I totally agree that ALL the capitals should be accounted for with the same rigor as money capital gets accounted for. At the moment it is only money profit that gets accounted for with the rigor that is required. There are no widely used metrics for all of the other areas of impact, though many are being developed but not yet widely used. My solution to this problem is standard values similar to standard costs in cost accountancy, but about the issues that are important for quality of life and the sustainability of the planet.

With respect to valuing IP and valuing corporations. At at the present time, there is an intermediary step which is broadly whether the IP or the corporate entity is going to produce profit. If there is potential for profit, then that determines value for the investor. I argue that this means that from the perspective of the investor there is not value in anything except profit. Goven that a huge part of what needs to get done to improve the standard of living / quality of life of all of the Bottom of the Pyramid cannot be profitable, then progress worth a damn that is required cannot be funded. Accordingly I advocate for valuadd as a metric that is complementary to money profit. There is valuadd when there is positive impact on quality of life or when there is positive impact on the state of the planet ... resource use, environment, etc.

Reporting: I like the GRI effort, but I do not have high expectations that it will be a 'game changer'. Essentially GRI expects the corporate community to 'self-report' which works for the 'good guys' but leaves out everyone else. Sadly, many of the 'good guys' improve their profits by sub-contracting to entities that have issues that reduce costs/increase profits while having big time issues about impact on people and planet.

To be continued ...

Place: There is a lot of talk about accountability. From my perspective more talk than walk ... but better to have the talk than nothing. From the perspective of the corporate organizarion, there is a lot of advertising and PR, brand development and the rest that improves image, but more importantly improves profit performance. From the perspective of society we want to see what are the impacts of economic activity on people and planet ... and for this we need to understand economic activities at the level of the place.

Product: We also need to understand the flow of impact from raw material to final disposal for all the products flowing through the modern economy. At the moment the only data point that we have is the profit a product generates for the organization as a result of a buy-sell trancaction. All of the impacts associated with the supply chain, the use of the product and the post use waste chain are ignored. For much of the modern economy, the negative impact on people and planet is bigger than the profit from the product! This is a result of the stupid idea that GDP growth (a terribly flawed metrice) is a good thing when it is clearly not.

It is 400 or 500 years since double entry money profit accountancy was formulated, and over time this system has become ubiquitous in the business enterprise. What we need is Accountancy 2.0 to bring this system up to date and useful for the issues of the 21sr century. I argue that rigor about impact of people, profit and planet (the Triple Bottom Line) is needed and that for profit there is money and for impact there needs to be standard values.

But I also argue that perspective has to be addressed. Most everything today has an organization perspective, and I want to see a people perspective and a planet perspective. In practical terms I argue that this requires transparency, analysis and reporting about economic activities in a place. It is in a place where impact on people and planet can be observed. Where things can be observed, there can be accountabilty.

I also argue for a new dimension of information about products. Inside the organization there is a wealth of information about the costs and profits associated with a product. For the consumer there is advertising and brand PR to encourage the purchase of the product. There is virtually no information easily accessible about the impact of this product on people and planet as it flows through the life value chain ... the supply chain, the use, and the post use waste chain.

I have recently been told that more than 99% of the use of powerful modern Big Data technology is being used to optimize profit performance. OUCH. What would happen if Big Data was used 50% for profit performance optimization and 50% for people and planet optimization.

This is a big subject ... and we are only scratching the surface

Peter Burgess TrueValueMetrics

Delete 1 day ago Sandy Lu likes this