How Can Business Leaders Accept the Challenges of the New Energy Era?

Rocky Mountain Institute

How Can Business Leaders Accept the Challenges of the New Energy Era?

This is the first in a Rocky Mountain Institute series on the steps business leaders can take to seize the economic and competitive opportunities outlined in Reinventing Fire: Bold Business Solutions for the New Energy Era.

If you've have heard about Reinventing Fire, Rocky Mountain Institute's roadmap for a secure, renewable energy future, and are like almost everyone with whom I have talked about it, you wonder where to start. This blog is the first of several by RMI staff to help business leaders identify the steps they can take now to begin seizing the economic and competitive opportunities available by leading in the new energy era.

Since releasing Reinventing Fire back in October, I've been on the road introducing its vision. The majority of my time has been spent with senior business executives, most of whom recognize the risks associated with our aging energy systems but struggle with the magnitude of the challenge and a clear picture for what they can do about it.

A lot of execs are already taking the initial, common sense steps to move their businesses and industries toward a new energy economy. Many others, though, despite their concerns about the consequences of business as usual in our energy system, seem to want that same business as usual to make things better.

Thankfully, Reinventing Fire provides a robust framework to develop solutions that transcend the industrial boundaries and entrenched interests hard-coded into our energy systems over the past century. Our guide to a 2050 energy system that requires no oil, coal or nuclear power includes detailed recommendations for key players within the relevant sectors: transportation, buildings, industry and electricity. These suggestions range from no-regrets actions everyone can take today to truly innovative actions steps for the most progressive leaders.

Yet, faced with such complex and interconnected issues, many readers are still asking: How do I gain traction personally and professionally? Are there other tangible steps to take now, and how can I influence those around me to join in this grand quest? And, maybe most difficult to answer, how do I know if I am making progress? When asked these questions, I have a few suggestions. They include:

Focus on the economics of opportunity vs. the economics of cost. The math may be the same, but people and organizations seem willing to accept a lower potential ROI or assume more investment risk when pursuing an opportunity they are excited about vs. trying to justify a cost they would prefer to avoid. Establish a winner's mindset as winners and losers are sorted out in the shift from fossil fuels to a more efficient, renewable energy base. Accomplish this by focusing your own and your business's attention on the opportunities created by action. Keep in mind the risks associated with inaction and maintaining a business-as-usual attitude toward energy.

Own your role in contributing to the problem -- and pursuing the solution. I recently had a transformational experience at an event hosted by the Pew Center on Global Climate Change. Up on stage, in front of several hundred people, the CFO of UPS opened his presentation with a simple statement: "We are polluters." His point was clear and honest -- that in the execution of its core business, UPS generates a lot of pollution. The CFO said he -- and all of UPS management -- own this as a real business challenge, and have made addressing their environmental impact a top-line priority.

I realized that at some point the energy at UPS must have shifted from denial and obfuscation of the obvious facts to acceptance, so all the energy wasted before that turning point could be redirected to solutions. I was left wondering how many coal-based utilities would openly and honestly acknowledge that they were polluters, and how much energy and resource might be unleashed if they just accepted that fact and owned the responsibility to deal with it.

Become present with the problem and challenges for all stakeholders, and look across boundaries to embrace "coopetition." It's one thing to understand a problem from your own perspective. It's another thing to really experience it -- to internalize the challenges that the problem causes and really commit yourself to being an active, vital part of the solution. Yet, you'll also want to understand the perspective and roles that others will play in the transformation and work in concert with them to achieve progressive alignment across all the powers with a stake in the game.

A great example of this is playing out in the renewable energy space, especially in the solar industry. Ultimately, deep penetration of renewables will require broad acceptance by electric utilities. However, management and engineers within today's utilities often see renewables as a major nuisance with technical and economic hurdles that are not worth overcoming compared with the alternates at hand. While most entrepreneurs and renewables advocates are spending their energy and precious resources lobbying for mandates to force utilities to use renewables, a few are starting to understand they might gain more by working with utility leadership to envision solar and other renewables as a problem-solving asset.

Avoid a too big a focus on quick wins or buzz about the latest and greatest technology. Instead, measure progress one step at a time and in terms of potential scalability. Solutions to messy problems including climate change, national security and economic competitiveness take a long time to develop and rarely take the shape or form expected at the outset, so it's really hard to predict and measure progress.

That's OK, and as such it's essential to see and celebrate small wins and to recognize that in many ways the ultimate scalability of what we are doing today may contribute more than the specific ideas themselves.

For example, many of today's very successful solar business models and products, which work really well under subsidies, are likely not terribly scalable since they are often unintentionally customized for success within an artificial market. Conversely, some of today's more moderately successful solar business models and products are slowly proving themselves in unsubsidized and less solar-friendly markets, likely building on a core set of customer-oriented values, which will serve them well in when all the subsidies fade away.

As visionary business leaders have shown, we can all take immediate actions in this grand effort to transform the biggest and most complex system in modern society. Beyond the first steps, diligent application of tested approaches including systems thinking to look beyond narrow boundaries will, in time, create solutions to some of the most wicked problems of our time.