5 great ways to make energy management appealing to your CFO
In the resource planning battlefield of your company, getting your CFO to grasp the value of energy management is no easy job. When presented as an investment towards reducing costs, the most common answer is that of "maybe some other time" or "there are other priorities right now."
There will always be other projects with a higher priority for the company. Shedding light on the importance of energy management is a matter of understanding and presenting the successive benefits that come from it.
As an energy or facility manager, you understand just how beneficial energy efficiency actions are both for your company's bottom-line and its corporate image. Your CFO, on the other hand, may consider energy costs as fixed costs and simply assume there's not much to do about them.
What the finance department may not be taking into account is that energy prices are increasing and if not controlled, energy consumption won't get any lower. Moreover, they might not be aware of regulations limiting carbon emissions, which if neglected could result in not-so-trivial penalties.
A survey made by Aberdeen Group in 2014 found the most common challenges when justifying energy management initiatives are: measuring the return on investment (ROI) of the initiative; competing with other projects for resources; getting operational-level employees to support the project; and getting approval from senior management.
We at energy management company DEXMA have prepared this guide to help you overcome these challenges and get your CFO on board.
1. Visibility is your greatest weapon
Energy improvements are complex enough without a proper monitoring tool. When undertaking energy efficiency projects, you will find it really useful to have the appropriate instruments to watch where you are going along the way.
Energy management software allows you to visualize your energy data in real-time as well as measure and verify results from improvements. This empowers you greatly when meeting with your CFO, as you will be able to showcase your results and translate energy savings into financial savings.
2. 'Show me the money': Let the numbers captivate
Getting your message through to your CFO requires more than reasoning. He or she will start listening only as soon as you mention numbers and ratios.
Calculating the ROI is not only the starting point, but the most critical part of the negotiation. It must be lower than two years or, even better, lower than one. This is important for your proposal to remain attractive and head the list of feasible projects.
You might want to start off with small energy efficiency projects to guarantee this short-period return. This way you'll be able to open your CFO's eyes to the great outcomes from measures of this kind. Once you have your CFO's attention, you can increase the scope of your projects.
It is important to make your CFO realize that energy management is an investment and not a cost in itself. As Henry Ford put it: "If you need a machine and don't buy it then, you will ultimately find that you have paid for it but don't have it."
The same goes for energy efficiency. If you don't start taking measures to cut energy waste, in the long run, you'll find you paid for energy management and you'll still be wasting energy and money.
3. Appeal to emotions
Energy management is not only about financial savings. Once your CFO is listening, make the case that it entails many more benefits for the entire organization. Hard facts with meaningful implications will have a greater impact over your CFO. Letting him or her know the chain of rewards that arise from efficiency measures will enhance your message.
Emphasize that procuring energy efficiency helps improve the productivity of operations, reduce carbon emissions and gain competitiveness. Gaining differentiation being the ultimate result of these sustainability efforts. Let them know how much those cost reducing actions actually will help the environment. Make them realize as well how reducing energy waste will help your corporate image.
In short, give them more reasons to believe in your project.
4. Give out periodic reports
Besides wanting to know how long it will take to recover the investment, the CFO will want to see energy savings quantified and represented in monetary terms. He probably will ask for periodical reports on the improvements made and the savings achieved.
5. Need some backup? Show your CFO some successful cases
Get examples from other companies in your sector and show your CFO how they have succeeded in implementing energy management measures. Briefly explain what their case was and present the actions they took along with the savings they achieved and their payback period. This will give them a notion of some of the great outcomes they will witness after they give their decisive "yes."
This article first appeared at 2degrees.