As the annual budgeting process begins once more and the firm’s executives renew their demand to reduce operating expenses, the groans of exhausted operational leaders echo through deserted offices well into the night. But there’s only so far the dials can be turned before cost-cutting impacts the end-product or service.
More often than not, the solution lies in focusing on a cost that is rarely tracked in much detail: energy.
What does it mean to truly understand energy spend?
There is no target set and no success evaluated without reference to a baseline. When it comes to energy consumption, that means being able to collect accurate, real-time energy-usage data. It enables a business to analyze performance and identify opportunities to improve and benchmark its efficiency.
Perhaps even more importantly, having the data—and the right platform to analyze it—gives a firm the chance to accurately check what they have been charged for energy. Even at the individual account level—where just a single bill is issued—understanding how the cost has been calculated is no easy task. When you throw several thousand more into the mix, and a business can quickly find itself lost in a fog of complexity.
That’s why many turn to solutions like Bill Identity’s Utility Bill Management platform, which is backed by robotic process automation. It frees up accounts payable staff from endless data entry and enables them to find significant savings. It’s a technology that streamlines the utility bill management process by validating usage and identifying bill errors. To date, our records show that approximately 10% of all bills we manage on behalf of other firms have some sort of issue that needs to be resolved. Food for thought, right?
Why understanding energy spend matters
Whether a business is seeking to reduce costs, lower energy consumption, or produce sustainability reporting, understanding the amount spent on energy is essential to improving the overall business model.
Managing energy effectively doesn’t just have a positive impact on the bottom line, it enables businesses to plan for the future. Wall Street Journal reported that for more than a decade, Cisco Systems has used the data on its energy spend to prioritize sustainability initiatives. Such insight has helped inform the firm’s strategic choices and is one of the drivers behind its shift away from energy-intensive data centers and towards more energy-efficient cloud services.
These are the kind of decisions that can only be made once a firm understands its energy data, and Cisco is by no means alone; other Fortune 500 businesses have developed a similar focus. Harvard Business review -Energy Strategy for the C-Suite reports how Kellogg, for example, has also been able to use utility data to reduce its energy use by 8% and has set an aggressive target for greenhouse gas emission management.
Centralized ownership of energy strategy
For a firm’s energy strategy to be effective, efforts need to be coordinated across the organization. Centralizing energy decisions across large organizations allows them to benefit from economies of scale and create real value from what was once thought of as just another expense.
Typically, firms that successfully manage to reduce their energy spend do so with executive sponsorship and more often than not have direct reporting lines into the C-Suite. At Microsoft, President Brad Smith announced that the company will be carbon negative in just ten years’ time, was made jointly by the president and CEO. A clear demonstration of commitment—right from the top.
Global Reporting Org’s independent research on Sustainability and Reporting trends predict over the next five years, companies will be held more accountable than ever before for ensuring sustainability is considered in the business decisions they make. Having both the data and the platform to unlock the insights it can provide, is therefore crucial to managing sustainability compliance under—what is likely to be—ever-increasing scrutiny.
Giving energy a seat at the executive table is a must if firms are to take control of their energy category now and into the future. In the short term, a solid energy plan should lead to lower consumption and reduce costs.
Over the medium term, companies will need to make decisions on how they source the energy their business needs. The rise in renewable generation and energy storage represents an opportunity to invest in assets that are likely to deliver future cost savings and, crucially, lower emissions.
But these opportunities only present themselves to companies that understand their energy spending. And that means mastering the data.