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Corporate energy and sustainability in the new decade

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New research explores the state of corporate energy and sustainability in the new decade.

Schneider Electric

This article is sponsored by Schneider Electric.

The changes in energy and sustainability over the past decade were seismic and the new decade — starting with the global response to the current pandemic — holds even more in store 

In the third edition of our Corporate Energy & Sustainability Progress Report, developed in partnership with GreenBiz, we examine the massive progress organizations collectively have made on energy and sustainability over the past 10 years, make sense of the current trends and what must transpire to maintain momentum, and preview the changes we believe are yet to come. Our five key findings build on the results of our two previous reports, providing deeper insights in some areas and highlighting new and emerging trends in others. 

Finding 1: Energy management rises in the ranks

Growing energy market complexity and volatility demands more agility, strategic thinking and innovation than ever, and in 2020, energy managers find themselves core to business operations, with expanding responsibilities and regular interface with — and accountability to — the C-suite.

An overwhelming 87 percent of respondents to our survey agreed that the accelerating pace of change in the energy market has led strategic energy management to rise in the ranks as a core business operation. 

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Top challenges for energy & sustainability professionals; Source: 2020 CORPORATE ENERGY AND SUSTAINABILITY PROGRESS REPORT.

The proliferation of COVID-19 has dramatically reinforced this research finding. In a matter of months, the pandemic has forced organizations to pivot in previously unimaginable ways. This new reality brings great uncertainty and requires rapid, strategic decision-making and enterprise management of portfolio-based solutions. The crisis further has illuminated the importance of corporate energy managers to maintain business continuity, resilient operations and sustainability. Today’s environment serves as a stark reminder that the difference between the right energy purchase and the wrong one could translate into millions of dollars and have ramifications for years to come. 

COVID-19 also has put a spotlight on the electrification and digitization revolution that is driving companies today. Our need for consistent, clean energy supply has never been more important. Yet fewer than half (46.5 percent) of our respondents say their organization is prepared to respond to emerging innovations in energy management, like autonomous grids. As this evolution continues — driven by the need to rapidly decarbonize and develop resiliency — organizations with dedicated energy management roles will be well positioned to capitalize on both the growth of new technologies as well as the increased convergence between conventional and renewable resources.

Finding 2: Digital innovations ease market complexity

Complexity in energy management is driven, in part, by the mountains of energy and sustainability data that our survey respondents say they must manage. The vast majority (86 percent) agreed that the high volume of data is affecting their energy and sustainability programs.  

Respondents using advanced data management solutions and connected devices said that these tools make it easier to manage complexity. The number of respondents reporting use of internet of things (IoT) devices has doubled over last year’s survey results, jumping from just 18 percent in our 2019 report to nearly 37 percent in the 2020 edition. 

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Respondents using IoT devices doubled from 2019 to 2020; Source: 2020 CORPORATE ENERGY AND SUSTAINABILITY PROGRESS REPORT.

Organizations proactively collecting resource data report higher confidence that they are prepared to respond to innovations in energy and resource management. But data alone does not drive outcomes. When paired collectively with human intelligence, data derived from connected and emerging technologies can radically affect decisions. Our survey respondents recognize this growing advantage: 48 percent report that they are adapting their energy or sustainability data management programs based on growth in connected devices, and 24 percent say the same when it comes to growth in artificial intelligence.

COVID-19 also has transformed the importance of digital tools and remote connection. The pandemic has put digitization to the test, with businesses rapidly adapting to virtual interactions and distanced delivery of goods and services. Digital innovations not only help manage everyday data complexities, but in today’s environment they have enabled the continuation of critical business functions that otherwise may have been forced to shut down. Consistent, real-time, enterprise-level management of data will remain a crucial consideration for organizations emerging from the crisis and planning for a resilient future. 

Finding 3: Climate change tops the corporate agenda — or does it?

Momentum on climate action in 2019 was undeniable, with a record number of companies making commitments. Respondents to our survey agreed, ranking environmental concerns as the top driver for energy and sustainability initiatives (51.5 percent) and climate change as the top risk to energy and resource supply (58 percent). Further, in the World Economic Forum’s (WEF) latest long-term risks report, for the first time in its 14-year history, the top five risks are all climate change-related. 

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Top risks to energy & resource supply; Source: 2020 CORPORATE ENERGY AND SUSTAINABILITY PROGRESS REPORT.

From the data in our survey and the qualitative evidence, climate change appears to have cemented its place at the top of the corporate agenda. 

But has it?

The results of the annual Global CEO Survey from PricewaterhouseCoopers (PwC) released in the same week as WEF’s risks report appear to contradict both ours and WEF’s findings. For the second year in a row, climate change/environmental issues did not rate in the top 10 business risks, according to chief executives. 

The disconnect between PwC’s findings and other recent research may point to an underlying skepticism and reluctance among executives when it comes to the actual benefits of climate action, and it remains to be seen how businesses will choose to act coming out of the COVID-19 crisis. Early indicators suggest that efforts to mitigate and adapt to climate change will be redoubled as organizations use disruption as the opportunity to reevaluate their business practices and governments incentivize green recovery. The underlying question remains: Can any business, knowing what we know today, afford to be shortsighted when it comes to climate change?

Finding 4: With commitments comes confidence

In this year’s report. we also assessed corporate confidence on energy and sustainability goals. How confident were respondents that their goals are achievable, and that those achievements ultimately will make a difference? 

Most respondents that have set goals feel confident (50 percent), very confident (17 percent) or extremely confident (15 percent) they will meet them. However, for many, that confidence didn’t translate into optimism that their goals were ambitious enough to affect global warming. Consider that 34 percent of respondents were less than confident that their goals would be effective in helping their organizations meet the 1.5 degrees Celsius warming threshold, and 14 percent were not at all confident.

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Measuring confidence on energy & sustainability goals; Source: 2020 CORPORATE ENERGY AND SUSTAINABILITY PROGRESS REPORT.

However, we discovered an intriguing trend among a subset of our respondents that deviates from the norm. Organizations that have increased their goals over those originally set feel both more confident that they will meet their goals and more confident that those goals will contribute to meeting the 1.5 degrees C threshold. These results were amplified even further if respondents had announced their goals publicly.

This implies that the more ambitious and transparent the energy and sustainability goals, the more confident professionals are about meeting them and that they will be effective. And while the COVID-19 crisis may have slowed down progress on goals, many companies are more bullish than ever, such as our client Faurecia, who aims to achieve Scope 1 and Scope 2 carbon neutrality by 2025.

Finding 5: Fresh funding mechanisms unlock opportunities

Setting and meeting goals is only one potential result when it comes to the value of confidence. We found a relationship between confidence in meeting goals and the mechanisms used to fund energy and sustainability projects — the levers that companies pull to reach their goals. 

Specifically, respondents with higher confidence in meeting their goals are more likely to use innovative mechanisms, such as energy-as-a-service and energy/green bonds, to fund energy and sustainability projects. Respondents that are investing in the use of energy/green bonds are also increasing their goals more than any other participants.

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How respondents typically fund energy & sustainability projects; Source: 2020 CORPORATE ENERGY AND SUSTAINABILITY PROGRESS REPORT.

Despite their effectiveness, innovative funding mechanisms have relatively low adoption rates, with only 26.5 percent of respondents agreeing that innovative funding contributes most to their energy and sustainability programs getting funded and approved. 

Our suspicion is that tried-and-true traditional funding models likely impede energy and sustainability progress because they inhibit the ability or desire to unlock new financial means. Innovative approaches have the potential to unlock funding sources outside of traditional CapEx/OpEx, which is, by definition, limited. 

In a world recovering from the economic implications of COVID-19, innovative funding mechanisms will be essential to getting derailed projects back on track, particularly in circumstances where availability of CapEx/OpEx is constrained. The financial flexibility of new funding mechanisms also allows companies to explore sustainable and resilience-building initiatives to embed in their business for long-term, green recovery, preparing them for future disruptions. 

It is an exciting, challenging, opportunistic time for energy and sustainability professionals. The hurdles they face today may well be the initiatives in the dustbin of tomorrow, and significant factors, including the long-term, downstream effects of COVID-19 and the looming challenges of climate change, could lead to course corrections for us all.

For deeper insights into each finding, as well as a look back at how we got here and a preview of what we believe is yet to come, we invite you to download the full 2020 Corporate Energy & Sustainability Report or join our live webinar at 10 a.m. EDT June 25.

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