Industryweek 1436 25803 John Conover

Public Policy Key to Successful Energy Efficiency, Business Growth

Oct. 14, 2011
Charting a sustainable path to improved business performance.

As governments grapple with the need to balance the world's limited resources against the growing demand for energy and businesses struggle with a down economy, the need for compromise, collaboration and strategic planning is paramount.

That's why, more than ever, businesses and policymakers need to work together to develop effective energy policies that not only address environmental concerns, but also enable businesses to reach their productivity objectives. By embracing this kind of collaborative approach, governments can develop appropriate policies that deliver benefits for consumers, communities and industry.

A recent Economist Intelligence Unit survey of global C-level executives, sponsored by Ingersoll Rand, showed that nearly 80% of executives believe energy efficiency will be more important to their businesses over the next five years. As a result, companies are seeking solutions that will enable them to implement sustainability practices that will improve their bottom lines and help their customers and communities enhance their energy efficiency.

While companies historically have approached energy efficiency and sustainability with an eye toward compliance, there is agreement today among global executives that a more integrated approach is needed and will play an increasingly important role in their business strategies over the next several years.

As a result, a new perspective has emerged that many global organizations are rapidly adopting: that sustainable policy development and driving profit are not mutually exclusive.

According to the EIU/Ingersoll Rand survey, only 22% of executives believe that energy-efficiency regulation is a burden to their businesses.

In fact, the more widely held perception is that energy-efficiency regulation can actually create a level playing field across geographies and drive new business opportunities. In addition, it can help promote the advancement of energy-efficient technologies, decrease fossil-fuel dependence and reduce energy usage.

Aligning the Needs of Private Sector and Government

As today's leading global organizations are now viewing sustainability policies in a different light, governments in both developed and high-growth economies -- such as China, India, and Brazil -- are recognizing the importance of having policies that ensure business competitiveness on the global landscape and that deliver critical environmental benefits for their communities.

By promoting increased dialogue and collaboration with the private sector, governments are able to help drive many economic and environmental benefits, including:

  • Incentivizing investment in new technologies
  • Promoting the broader adoption of existing energy-efficient technologies that can reduce environmental impact
  • Enabling businesses to find new growth markets in which to offer technology and improve their overall profitability.

Collaborative Efforts to Enhance Health Care Facilities in France

An example of policy that can lead to this type of "triple win" is the French government's focus on the health care industry. Public funds were made available in 2010, with a second tranche expected in 2011, for the purpose of promoting service improvement and energy reductions within health care. A portion of the funds were directed to energy audits, which can often lead to significant energy savings that are also attractive financial investments for owners. The public funds were available to subsidize a portion of the energy reducing investments, themselves. In total, 2.2 billion euros, or about $3.1 billion, were made available to fund projects in 640 health care facilities.

John Conover:
Globally, buildings account for one-third of world energy use, and the resulting greenhouse-gas emissions are expected to double by 2030.As this initiative from the French government demonstrates, although funding for energy-efficiency initiatives stem largely from government budgets, the ability to maximize this investment typically will increase when there is synergy between industry and government policy. This alignment can help ensure that business incentives are focused to help end users accelerate the return on their investments.

For example, increasing minimum equipment efficiency standards from a set base position and providing tax credits for building owners who invest in energy-saving building controls encourage participation, adoption and proactive measures from the private sector. As a result, this encourages innovation, which then leads to investment in emerging solutions from the private sector to benefit business and communities.

Chinese Government Leading Sustainability Programs

In China, the government is playing a main role in driving significant initiatives to bolster energy efficiency and reduce water usage. The government believes that it not only is better positioned to invest in these programs, but that these investments will drive the overall economy.

Investing in clean water programs fuels growth because healthy workers are more productive than sick workers. The underlying belief is that practical reasoning should drive environmental decisions, thus benefiting government, the people and business.

According to China's Ministry of Water Resources, the water consumption per GDP was reduced 31.2% in 2009 compared to 2005, which exceeded the target in its five-year plan set in 2005. Beijing exceeded expectations by reducing water consumption by more than 40%.

Bipartisan Bill Aims to Drive Energy Savings

Globally, buildings account for one-third of world energy use, and the resulting greenhouse-gas emissions are expected to double by 2030. That's why many companies and policymakers feel that the biggest opportunity to address energy use and mitigate the associated greenhouse gasses is by raising standards for commercial and residential buildings.

The challenge lies in understanding the infrastructure challenges to each region and determining the process and standards that exist in each country. In more mature markets, such as North America and Europe, the vast majority of energy use comes from existing buildings. In these areas, smart policy should focus on standards and incentives that encourage efficiency in existing buildings.

To address the environmental benefits and costs-savings opportunities that can be derived from updating existing buildings in the United States, Senators Jeanne Shaheen, D-N.H., and Rob Portman, R-Ohio, recently introduced the Energy Savings Act of 2011.

This bipartisan bill aims to enhance the energy efficiency of commercial buildings, manufacturing facilities, utilities and residential homes across the United States.It encourages federal zero-interest loans for rural home energy-efficiency improvements and competitive loans for commercial and industrial manufacturers to invest in advanced process equipment and clean distributed energy systems. In addition, the bill seeks to drive federal building retrofits as part of compliance with advanced building codes.

This bill is an example of how a progressive approach to policy can address energy use in the built environment and ultimately drive improvements in energy efficiency through the use of existing innovative efficiency technologies.

By raising building standards, governments around the world can enhance building efficiency, reduce environmental impact and bring greater productivity for business and greater comfort and safety for both employers and employees.

Looking Forward

Energy efficiency and sustainability are here to stay.

All around the world leading global organizations and governments are increasingly recognizing that sustainable policy development and driving profit are not mutually exclusive.

For companies to be successful, they should identify the unique objectives of the governing bodies in their specific regions and ensure that their business objectives are aligned with those of the government. This is the best way to begin an open dialogue between the private sector and public sector policymakers.

By embracing sustainable practices, a company can gain prestige as a thought leader, open up new growth opportunities and take pride in encouraging others to act for a better industry and a cleaner, more efficient world.

Likewise, by working with leaders in the private sectors, governments can more effectively deliver the economic and environmental benefits that are most essential for their communities.

John Conover is the chairman of the sustainability strategy council for Ingersoll Rand. He also serves as president of Ingersoll Rand Security Technologies.

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