Credentials that make money-men happy

By Sarah Murray
Published: March 16 2009 02:00

When talking about resource efficiency, SustainAbility, the think-tank and consultancy, cites some compelling company statistics: between 2005 and 2008, Wal-Mart cut its fuel consumption by 25 per cent - and the US retailer reckons an initial 15 per cent improvement in fuel efficiency generated savings of more than $40m a year.
Between 2002 and 2005, a programme to cut power wastage and use more renewable energy saved Pfizer, the pharmaceuticals company, $30m a year.
These are the kinds of figures that make finance directors happy. With recession putting pressure on balance sheets, resource efficiency - something that in recent years has been trumpeted by many companies as evidence of their green credentials - is starting to look even more appealing as part of cost-cutting measures.
"When you're focusing on every penny, you can't afford to let any opportunity to cut costs or improve efficiency go by," says Gwen Ruta, director of corporate partnerships at the US-based Environmental Defense Fund.
For many companies, energy use tops the agenda, often delivering the biggest bang for your buck when it comes to resource efficiency.
Cisco Systems, for example, has developed a system it calls EnergyWise, which helps clients monitor the power used by all their Cisco-connected devices, assess aggregated consumption and create policies to maximise power efficiency.
Cisco says the system could, for example, help the average bank branch cut its energy bills by more than €28,000 a year by powering down equipment when not in use.
However, climate change has put the spotlight on power consumption, plenty of potential exists in other areas to conserve natural resources while also saving money.
Water is one of them. Dow Chemical has identified water saving potential in everything from steam leak elimination to reuse of high-quality effluent streams and alternative cooling techniques. Using seawater cooling for its largest manufacturing site in Freeport, Texas, has helped the company avoid more than $35m in capital spending.
"Most of our capital projects involve assets that are expected to run for the next 20-30 years," says Neil Hawkins, head of sustainability at Dow Chemical.
"We work to incorporate conservation design principles, recycle-reuse thinking and by-product synergies into the plants we build up front. Innovative design can help us reduce both capital outlays and long-term operational costs."
Coca-Cola is also focusing on water, aiming to improve efficiency by 20 per cent by 2012, compared with 2004. While the company's water use is expected to increase, it says the target would eliminate about 50bn litres of that increase in 2012 and avoid $150m in water acquisition, treatment and discharge costs between 2008 and 2011.
Resource efficiency programmes, however, can be difficult to implement. The first challenge is identifying measures that will make the most impact. This means careful auditing of what resources are being used and seeking areas to target for reductions.
Another difficulty is a human one. "The single-most barrier is poor leadership," says Sophia Tickell, director of research, communications and advocacy at SustainAbility.
"Most companies underestimate the power that a clear strategy can play in incentivising enterprise-wide reductions in natural resource use - especially if used in performance management."
Where companies have highly-decentralised structures, enterprise-wide strategies on resource efficiency can be tough to implement. "We often see examples where a capital investment in one department would be paid back through savings in a different department," says Ms Ruta. "This can be very tricky for a company to negotiate."
Another difficulty is applying environmental programmes in the operations of supply chain partners. In 2007, about 79 per cent of Coca-Cola's unit cases were produced and distributed by bottling partners in which it had no ownership interest or had a non-controlling equity interest.
"This means that we do not dictate global sustainability goals," says Lisa Manley, director of environmental communications at the company.
"Instead we work to align our global system around integrated strategies with hard, real performance targets. This takes time and a good bit of internal diplomacy."
It also means clearly making the business case for resource efficiency and communicating that message throughout the enterprise.
Mr Hawkins at Dow Chemical argues that it is crucial for companies to acknowledge the impact of environmental programmes on the bottom line, rather than treating them as add-ons. "They must deliver real, tangible value," he says. "Business value is business value - in good times or bad."
Copyright The Financial Times Limited 2009