Sustainability: Nina Winham
Tuesday, 22 December 2009
Inefficiency fuels green business opportunities
If you’ve got some time off from the daily grind over the next few weeks, here’s something to ponder: sitting as we are at a moment in time when the incredible boom of the industrial revolution is starting to bang up against the constraints of a single finite planet, how does your company strategically position itself for the economic shifts and adjustments this will bring?
To bring the question down to size, consider just one input: energy. If it hasn’t clicked for you yet that your company can realize significant profit from energy efficiency, meet one of B.C.’s green-economy entrepreneurs – Bryan Slusarchuk. His new company, Greenscape Capital, makes its profits by helping other companies profit from energy efficiency – a niche that’s opening wider as companies realize that energy in the future is unlikely to be as inexpensive, plentiful or easy to access as we’ve been accustomed to.
“Our key business is getting companies to retrofit their operations,” said Slusarchuk. “The payback on this is just immense in terms of bottom-line savings from reduced energy cost.”
Immense indeed. A 2009 McKinsey & Company study, Unlocking Energy Efficiency in the US Economy, identifies US$1.2 trillion in potential energy savings that could be realized with an investment of $520 billion through 2020.
Creating “new” power by reducing current inefficiency also results in big cuts in greenhouse gases (in jurisdictions where fossil fuels are used to generate electricity) and improves energy security.
Closer to home, the 2007 Conservation Potential Review study produced for BC Hydro identified opportunities for efficiencies where more than $10,000 GWh/year of electricity could be saved annually through conservation – enough to power one million homes.
The utility has developed multiple demand-side management programs and financial incentives in an effort to access this motherlode of inefficiently used energy. (You can find programs for your company at BC Hydro’s website, under the Power Smart tab.)
If there’s money to be saved through efficiency, the question is, why have companies been so slow to embrace it? The McKinsey report identifies multiple barriers. Potential energy savings can be hard to measure and verify.
Opportunities for efficiency are fragmented across billions of electrical devices in millions of locations, so “efficiency is the highest priority for virtually no one.” Finally, there is upfront cost – efficiency upgrades pay for themselves over time, but they still require an infusion of cash at the outset.
That’s why Greenscape’s model goes beyond traditional energy consulting. The company provides full-service energy retrofits – including financing.
“We’re able to tell them, ‘Don’t worry about writing the upfront cheque,’” said Slusarchuk. “We finance the retrofit so that most of our revenue model is based on sharing in the energy savings over time.”
Greenscape reinvests profits from its energy retrofitting business into a portfolio of other green companies including, at present, an eco-clothing line and a wholesaler of organic food products.
“The retrofit business is so misunderstood,” said Slusarchuk.
“There’s been a lack of understanding in the business community of just how much increased profitability can be realized through simple energy savings. And this is not a sector-specific opportunity – every business in the world that uses energy is a potential retrofit client.” Greenscape’s list of new clients – $30 million of new business in B.C. over the past month – includes parking facilities, a tourist lodge and an auto dealership.
While it never did make sense to operate inefficiently, the cost of doing so in some industries has been low. With carbon taxes, peak oil and global energy insecurity placing new pressures and potential risks on companies, those costs could rise. All of which makes it a great time to think about getting lean. It just happens that this also means “going green.”
“The context for this discussion has traditionally been that business owners and corporations should do things more efficiently in terms of energy, waste, packaging and so on, because it’s the ‘right’ thing to do,” he said.
“But most corporations don’t act on that. I think the context has to be, ‘What is the return on investment? Can we decrease your energy consumption, decrease packaging costs, decrease your transportation costs and result in enhanced profitability – and the byproduct is good for the environment?’”
Creating markets for waste is certainly one traditional approach to environmental cleanup, and there are other examples of organizations that profit from others’ profligacy.
United We Can, a bottle depot in the Downtown Eastside, makes money from the 20 million returnable containers per year it collects predominantly from trash headed to landfill, for example. Often these require policy frameworks, however – in the case of United We Can, it’s the bottle-deposit system.
As we start to seriously press against the limits of a finite ecosphere, it’s interesting to consider whether the classic economic challenge of externalities – negative environmental and social byproducts of business activities that fall outside individual companies’ own cost structures – may start to fade. As real costs begin to reflect our actual ecological position of interdependence and interconnectedness, real business opportunities will emerge. For those economists out there the question is this: Is there any such thing as an “externality” in a completely closed-loop system?
Slusarchuk states it more simply.
“Cheap resources are becoming more scarce. Businesses that don’t adapt now are going to be faced with massive losses in the future, and, collectively, it’s going to spell a lot of trouble for the North American economy.
“Again, putting the discussion into the context of feel good versus bottom line: the companies that don’t realize that energy retrofitting, becoming leaner and producing less waste means an improved bottom-line performance are going to be devastated down the road.” •
Nina Winham ( nina@newclimate.caThis e-mail address is being protected from spam bots, you need JavaScript enabled to view it ) is principal of New Climate Strategies, helping clients build value through sustainability and communications strategy. She writes regularly on sustainability topics. www.newclimate.ca
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