Making Business Sense of Energy Efficiency and Pollution Prevention

By: Miriam Pye

April, 1998

Introduction

"Far from being a soft issue grounded in emotion or ethics, sustainable development involves cold, rational business logic."

— Robert Shapiro, CEO, Monsanto (HBR 1997)

Sustainable development is just one of the many names given to the concept of growing the economy while protecting the environment. Industrial ecology is another name for using resources efficiently as part of good business practices. Energy efficiency and pollution prevention involve the efficient use of resources, which is key to sustainable development and industrial ecology. Companies not only prevent pollution but can also enhance profits by reducing energy and material use. Companies save the direct costs of these resources, as well as reducing disposal costs, avoiding fines, and minimizing bad publicity. In addition, resource efficiency often enhances productivity, streamlines production, and improves workplace conditions. Com-panies come out ahead by helping the environment, their employees, and their bottom line. This paper presents a number of examples of projects that have successfully combined energy efficiency and pollution prevention technologies and strategies to enhance the environment, productivity, and the bottom line. The box at right lists types of environmental and business achievements realized in the case studies summarized in this paper.  (This paper will be posted on the web at aceee.org/p2. The web site will be expanded to include additional case studies as they become available.)

E2/P2 Project achievements reduce, reuse, recycle, re-sell waste recover usable materials from wastes reduce solvent evaporation reduce emissions eliminate solvents use eliminate release of hazardous sludge reduce energy use produce a renewable source of energy reduce transportation increase production efficiency reduce operations downtime increase productivity reduce failure rates reduce operating expenses reduce water usage reduce disposal costs reduce chemical treatment liability reduce sewage expenses increase sales reduce capital costs improve product quality increase plant capacity reduce space requirements preserve and increase jobs reduce noise level "re-use" brownfield site free capacity at municipal treatment plants

This paper also discusses the role of energy efficiency in preventing pollution and reducing global warming gases, including energy savings potential and economic benefits. Barriers to energy efficiency are also discussed along with strategies to overcome barriers, including the integrated P2/E2 approach. This paper also discusses how to make a compelling case to business management by understanding the financial analysis of energy efficiency and pollution prevention.

Some believe that protecting the environment will hurt the U.S. economy and put us at a disadvantage with foreign competitors who have less rigorous environmental standards. This may have been true years ago when "tailpipe" technologies were the primary solution to minimizing pollution. Today, however, we know how to protect the environment by using resources more efficiently: through energy efficiency (E2) and pollution prevention (P2). E2 and P2 are just two types of efficiency, and efficiency has always been recognized as being good for business. As more businesses begin to realize the profitability of resource efficiency, E2/P2 will grow in importance as a strategy to stay competitive and maximize shareholder value.

For many years, efforts to promote energy efficiency and pollution prevention traveled on separate, parallel paths. Many energy efficiency proponents considered only energy savings aspects of their projects, and many P2 proponents did not include energy as a pollution source. More and more, however, the synergies between energy efficiency and P2 have become more apparent. Energy efficiency projects often have non-energy P2 benefits and P2 projects often save energy. In addition, both E2 and P2 projects often have benefits that extend to include enhanced productivity and improved product quality. When looking at E2/P2 projects from a business perspective, all benefits — direct and indirect — must be taken into account to show how such projects impact the bottom line.