Beginning in 2011, the EPA requires organizations emitting 25,000 tons per year of CO2 to report their greenhouse gas emissions. While the government has yet to assess fees or penalties, this monitoring is widely considered the first step toward a major transformation of American business.
Most companies dread change, regarding it as disruptive, difficult to effect and expensive. And they have reason — large organizations can’t even change their phone numbers without spending hundreds of thousands of dollars to print new stationary and change the website, not to mention losing business when longtime customers inadvertently dial the wrong number.
But a comprehensive change, such as that precipitated by the environmental crisis and government measures to remedy it, also poses unprecedented opportunities. Companies that exhibit foresight and aggressively pursue ways to reduce energy consumption, thereby reducing CO2 emissions, will put themselves in a more competitive position.
By rethinking their energy use, companies can save money, improve their environmental stewardship, improve the safety and quality of their employees – all while complying with regulations that many feel are inevitable.
And, since many of their rivals will reflexively shrink from change, the vanguard will be even farther ahead.
Rarely do opportunities present themselves with such force. The environmental mandate is a textbook example of a challenge that calls for change management — embracing change to create a unique advantage.
Consider this scenario: A typical company responds to new government regulations by asking its environmental manager to determine the company’s carbon footprint and report the findings to someone higher up. The environmental manager relies on historic energy consumption and emissions data to make the calculation and reports it to a supervisor. The supervisor, in turn, applies various carbon cost estimates to determine the economic impact of compliance. It’s at this point that supervisors will realize the immensity of the challenge.
Experts suggest that many businesses could face a compliance cost as high as 10 to 15 percent of total operating expenses. With typical manufacturing margins at less than 10 percent, senior managers will begin to get concerned about the impact of environmental legislation on their bottom line. Sensing the end is near, a supervisor asks the environmental manager to reduce carbon emissions.
This sense of urgency is just what is needed at this point. As proponents of change management point out, it’s the first requisite for an effective response. But the poor environmental manager is too burdened to move. No matter how brilliant and capable that manager is, this is not a one-person solution. The change required necessitates a high-level, strategic solution that involves the entire corporation.
Today’s energy crisis is not unlike the industry crises of the recent past: deregulation of banking, competition from foreign steel companies, the break-up of telecommunications. But this crisis is of incomparable scope, affecting virtually every sector of the economy.
Einstein got it right: “We can’t solve problems by using the same kind of thinking we used when we created them.” And the new thinking that’s needed is change management.
Change management was the tool that Proctor and Gamble adopted to improve its product design process. As Jeneanne Rae recounted in a July 2008 Business Week article, the president of P&G wanted to make design part of the company’s “DNA.” To do so, the company embraced a variety of activities that ranged from training and workshops to process re-engineering and outside hiring.
Formerly, P&G managers considered design “the last decoration station on the way to market” — not a force for driving sales, capturing market share, increasing profits, or changing an industry. But P&G found that incorporating design into the beginning of the development process led to better products and, ultimately, more loyal customers.
P&G’s former attitude toward design is not unlike the begrudging attitude of many companies toward energy purchases and use: It’s something that has to happen, but the process is delegated to the operational level, rather than adopted as a strategic tool for enhancing productivity, reducing costs and creating competitive advantages.
Opportunities abound to use change management tools to reduce a company’s carbon footprint, while simultaneously reducing costs and managing liabilities. As Al Gore says, there is no silver bullet for reducing the carbon footprint of the nation; nor is there a single method for reducing the carbon footprint of individual businesses. What’s more, solutions are not going to be obvious to any one individual within an organization.
Rather, the best opportunities for carbon footprint reduction are buried within several processes and can be mined only by a diligent, multi-disciplined team. Digging through these processes will reveal layers of unexpected benefits such as greater operational reliability, improved product quality, reduced water consumption, increased environmental stewardship and lower costs.
This chart illustrates the effects of embracing change through cross-department integration and elevating energy decisions to the executive level.
Most companies fall into the status quo block in the lower left-hand side of the chart. But pending legislation, if enacted as written, will force companies into another quadrant. The automatic, unthinking response of most will be a jump into the reactive quadrant, where attention is directed toward the best means of complying. Large organizations are likely to move here because of proposed legislation’s overarching implications for multi-facility organization’s bottom line. Typically, a functional department or team will be charged with compliance, not with creating a strategic advantage.
Other companies will end up in the strong plant leader quadrant. These organizations can achieve cost reductions through bringing together decentralized finance, legal IT and environmental compliance functions and placing them under the purview of the plant manager. One- or two-plant organizations often move from status quo to the strong plant leader quadrant when functions are consolidated.
The key move for most organizations is from the reactive or strong plant leader quadrants to the game-changer zone. While this transition requires significant effort, the rewards are huge. To get there, companies must exercise foresight and adopt the following philosophies as part of their own corporate DNA.
Integrate, don’t isolate.
In many facilities, residual energy from one process can be harnessed and re-used in another process. Such energy conversion requires creative thinking, knowledge of the processes and an understanding of available technologies. For the most part, all three of these requirements don’t exist in any one person’s molecular makeup. It takes a team effort to be effective. Don’t isolate those individuals with the pieces to the puzzle; bring them together in a team environment focused on carbon footprint reduction.
Don’t shrug off new vendors or new equipment.
New vendors bring new ideas, new technology and new people to bear on energy issues. Change management requires change. Give consideration to the array of new and redesigned equipment that has been developed by smaller, more nimble companies. Although the equipment may not be widely deployed yet, it could still be the answer — or part of the answer — for your company. But do let caveat emptor be your guiding motto. Not everything is going to work for you.
Alternative fuels could be your salvation.
An alternative fuel is any hydrocarbon that can be used in place of conventional oil, coa, or natural gas. Ordinarily, accessing local alternative fuel sources is not as easy as turning on the valve installed by your local natural gas provider; trying to maintain a local fuel supply chain takes a lot of effort. So don’t try to do this yourself. Establish a relationship with a reputable firm that can coordinate technology, fuel supply and financing to launch your project and keep it running. Relieved of this responsibility, you can focus on your core operations.
Reconsider ideas you’ve rejected under different economic conditions.
Everything has changed over the past several years. There are new rules, new economic conditions, new cost structures and new regulations and incentives. It’s time to reconsider ideas that once were too expensive or didn’t meet corporate hurdle rates.
Take advantage of new funding sources.
Federal and state funds are available for many projects. It’s hard work identifying the programs and departments from which to solicit government funding, but it’s worth it. There are more dollars available now than ever before. In addition, there are alternative funding sources and energy companies that will finance your project and sell you energy at a reduced cost. Your company need not spend any cash up front to reap energy savings every month.
Use technology to drive change.
This is the time to implement software and data management tools that drive increased efficiency and productivity. New technology can enable you to monitor equipment efficiency and energy consumption immediately and over time.
Buckeye Technologies is a great example of a company that has embraced the pending change and moved directly into the game-changer quadrant. Buckeye produces cellulose-based specialty fibers used in the manufacturing of such products as diapers, filters, LCDs and cleaning products; its own manufacturing process is energy-intensive and a large portion of its costs are energy related. In 2002, Buckeye Technologies began using more of the treetops and limbs that previously went to waste when it harvested the premium pulp in pine tree trunks. By employing a new process developed by a University of Alabama researcher, Buckeye soon was reducing its energy costs and boosting its income. Buckeye even secured funding for the new project from the state of Florida.
Energy prices and environmental compliance are changing the way companies buy and use energy. Embracing this change can create new opportunities and breathe life into operations that have feared the future. Those who embrace this change as a strategic advantage will outstrip their competitors. For those who move directly to the game- changer zone, today’s uncertainty is the genesis of a more prosperous tomorrow.