One good definition of culture according to the interpretative perspective on .... positively influences organizations' energy consumption (Beard, 2009; Seo, ..... The first case is company N° 28, a small business ( 45 people) specialized in the ...
Energy-efficiency investments An interpretative perspective
and
energy
management:
Catherine Cooremans Eco'Diagnostic, Geneva Abstract "Strategicity" (which we define as an investment's contribution to a firm’s competitive advantage) is the main driver of capital investment decision-making, and is even more important than profitability. This finding is based on an extensive review of different streams of literature, and is confirmed by our own research. Yet investments are not (only) strategic for objective reasons. They are interpreted as such. Strategic issue diagnosis assesses new issues and categorizes some of them as decision events, more or less strategic. Individual and organizational filters influence issue diagnosis. At the individual level, information is distorted by the use of heuristics, by cognitive biases, and by managers' personal knowledge systems. At the organizational level, three major organizational filters influence how decision-makers interpret issues: strategy, culture and structure. Structure includes management systems and routines, which frame and control actors' behavior. The meaning attributed to the same event, and the type of reaction to this event, will therefore be different from one organization to another. Based on this theoretical framework, our research, conducted by thirty-five major electricity consumers (more than 1 GWh/year) in various commercial and industrial sectors, has investigated the link between energy-efficiency investments and energy management, an element of organizational energy-efficiency culture and of the general management system. Results highlight a relation between the level of energy management and the [perceived] strategicity of energy-efficiency investments. Yet, results show huge behavior diversity between firms, even those with similar characteristics and activity. These findings help better understand how and why companies make energy-efficiency investment decisions.
Introduction Financial logic is not the first driver of investment decision-making. Investment decision-making is the result of a decision-making process. This process is influenced by organizational and external contexts, the actors involved, and characteristics of the investment to be made. Among investment characteristics, strategic character is a key factor influencing decision-making (Cooremans, 2011 and forthcoming). Yet strategic character is not given, it is interpreted. Investments projects are interpreted as strategic, 1 by actors and by organizations, as are interpreted all data and decision events. At the beginning of the decision-making process, issue diagnosis assesses and categorizes new data and events which are "infused with meaning" (Dutton and Jackson, 1987) at the individual and organizational levels. During the issue diagnosis process, information is distorted or interpreted, both at the individual and at the organizational levels. At the individual level, information is distorted by the use of heuristics— rules of thumb, shortcuts, and routines which decision-makers use to simplify complex problems—and by cognitive biases, these "hidden decision traps" (Hammond, Keeney, & Raiffa, 2001) common to all 2 individuals. Moreover managers' personal pre-existing knowledge systems act as filters of 1
In the field of organization behavior, "actors" mean individuals and groups. "Executives' experiences, values, and personalities affect their field of vision (the directions they look and listen), selective perception (what they actually see and hear), and interpretation (how they attach meaning to what they see and hear)" (Hambrick, 2007: 337).
2
organizational events. Filters also operate at the organizational level, since the organizational context influences how decision-makers understand and interpret issues. The meaning attributed to the same event, and the type of reaction to this event is therefore different from one organization to another. As a result, the same investment project may be perceived as more or less strategic by different decision-makers and organizations. There are interactions and mutual influences between individual and organizational levels: organizational context controls managers, but managers influence organizational context. Organizational context comprises structure, routines, strategy and organization culture. Organizational culture is one of the most powerful filters, or interpretative schemes, influencing organizations’ behavior. One good definition of culture according to the interpretative perspective on organizations is proposed by Cossette (2004:121): "Culture is an organizational scheme, mainly composed of values which are more or less shared, more or less consciously, by organization members. It is a normative system of ideas, ultimately shaped by the actors involved themselves; thus culture is created, maintained and transformed by individuals who, themselves, have schemes, some of those being of a normative nature, i.e. composed of these individuals' personal values. This organizational scheme of culture is in close relationship with other organizational schemes, even if the influence of one scheme on another goes through individuals… The concept of culture almost always refers to 3 values, defined as what is desirable in a given spatio-temporal context." In the field of energy efficiency, the influence of organizational culture on energy-efficiency investment decisions and/or on the level of energy efficiency in organizations was noticed by several researchers, but none of them proposed a precise definition of the concept. For instance, Sorrel et al. (2000, p. xvii) briefly indicate that culture includes "values, standards and routines," and that "organizational culture makes reference to environmental values incorporated into the routines and the customs of the organization" (idem, p. 13). As noted by Stern and Aronson: “...organizations have energy-related values that affect their actions" (Stern et Aronson, 1984, p. 184). Three organizational values are mentioned by research as positively influencing energy efficiency: an orientation towards technical 4 innovation (Kulakowski, 1999; Hennicke et al., 1998, p. 38), employees' welfare (Kulakowski, 1999), and environmental commitment (Christoffersen et al., 2006; Hennicke et al., 1998; Sorrell et al., 2000). However, regarding the latter value, Sorrell et al. (2000:178) indicate that: "generally, environmental commitments do not seem to be a significant variable in explaining the energy efficiency performance of organizations and promotion of environmental management systems does not seem a priority measure for improving energy efficiency." The concept of "energy efficiency culture" is little used. One definition is given by the electricity producer Hydro Québec: "energy-efficiency culture affects all aspects of the organizational life. Carried by a global vision, it goes beyond a better energy performance of equipments or processes. It encompasses a stream of actions which, encouraged by all the members of a company, quickly 5 become work habits." This definition emphasizes the human dimension of energy use as opposed to 3
Freely translated by me from: " La culture est un schème de niveau organisationnel constitué essentiellement de valeurs qui sont partagées dans une mesure plus ou moins grande et de façon plus ou moins consciente par les membres d'une organisation. Elle est un système d'idées à caractère normatif, façonné ultimement par les acteurs concernés; la culture est donc créée, maintenue et transformée par des individus possédant eux-mêmes des schèmes, certains de nature normative, c'est-à-dire formés par les valeurs personnelles des individus. Ce schème organisationnel qu'est la culture est en relation étroite avec d'autres schèmes organisationnels, même si l'influence de l'un sur l'autre passe forcément par les individus … La notion de culture renvoie donc presque toujours à des valeurs, c'est-à-dire à ce qui est jugé comme souhaitable ou désirable dans un contexte spatio-temporel donné." 4 "…a corporate culture that values innovation, "technology" in general, and has consistently supported improvements to the working environment" (Kulakowski, 1999, p. 11). 5 Hydro Québec, Mieux consommer pour mieux performer, Sept. 2008, http://www.hydroquebec.com/grandesentreprises/ee/initiatives_batiments/pdf/programme_complet.pd f.Freely translated by me from: "Une culture de l’efficacité énergétique touche tous les aspects de la
its technical dimension and the fact that energy efficiency culture affects all aspects of how an organization functions. However it does not give indications of the values related to an organizational culture of energy efficiency. Another mention of energy efficiency culture is made by Hennicke, et al. (1998:118). These researchers do not define the concept but simply indicate that "energy efficiency culture in SME… starts with simple measures and continues with rather complex activities such as eco-management" (Hennicke, et al., 1998, p. 118). According to this description, energy-efficiency culture may be more or less strong. This brief review illustrates the need for a better conceptualization of organizational energy-efficiency culture and of the values related to it, as well as the need for a better understanding of how cultural factors play a role in energy-efficiency decision-making. Within this context, our research aimed at highlighting a link between the importance of energyefficiency in corporate culture and the perception of the strategic character of energy-efficiency investments. The goal of this paper is to describe our research findings. To address this, the paper is organized into three parts. The first part describes our theoretical framework, the second part describes our research methodology and results, and the third part discusses the results. The conclusion briefly indicates the implications of our findings in the field of energy-efficiency.
Theoretical framework Organizational culture Edgar Schein's theory of organizational culture (1985) provides a useful framework to better understand how culture plays a role in organizations’ behavior and decision-making. Schein, one of the most important theoreticians of organizational culture, distinguishes between three major levels of culture—or levels of cultural analysis—defined as the "degree to which the cultural phenomenon is visible to the observer" (Schein, 2004:25; first published in 1985). These levels range from the less to the most visible or tangible. At the deepest, least visible level, are the basic assumptions, deeply embedded and subconscious, which Schein defines as "the essence of culture" Basic assumptions comprise beliefs, perceptions, thoughts and feelings. They are "taken for granted by group members and are treated as nonnegotiable." At the most visible and tangible level, are the artifacts, the "overt manifestations that one can see and feel." In between these two levels, and underlain by the basic assumptions, are the "espoused beliefs, values, norms, and rules of behavior" (idem). These in turn influence attitude (people’s ideas, convictions or tastes) and behavior (what people are doing).” (Schneider & Barsoux 2003:22). Schein’s levels of culture are represented in figure 1 on the next page.
vie organisationnelle. Portée par une vision globale, elle va au-delà d’une meilleure performance énergétique des équipements ou des processus. Elle comporte une kyrielle d’actions qui, encouragées auprès de tous les membres d’une entreprise, deviennent rapidement des habitudes de travail."
Visible
Artifacts
Espoused Beliefs and Values
Invisible
Underlying Assumptions
Figure 1 – Levels of culture. Adapted from Schein (2004:26) and Kluckholn et Strodtbeck (1961).
The most important point regarding artifacts, as emphasized by Schein, is that they are both easy to observe and difficult to decipher because artifacts are "manifestations of culture… but not the essence of what we mean by culture" (2004:14). Artifacts include "all the phenomena that one can sees, hears, and feels when one encounters a new group with an unfamiliar culture, such as the architecture of its physical environment, its language, its technology and products, its artistic creations; its style, as embodied in clothing, manners of address, emotional displays, and myths and stories told about the organization; its published lists of values; its observable rituals and ceremonies; and so on (idem, p. 26). Artifacts also include structural elements, such as charters, as well as organization processes, procedures, routines, and reward and control systems. Energy management: an artifact of energy-efficiency culture Control systems of an organization can be considered as artifacts of its culture (Johnson, 1989; Schein, 2004). Control systems include management systems. Energy management can therefore be regarded as an artifact of organizational culture, as a manifestation of a company's energy-efficiency culture. If energy management is a manifestation of energy-efficiency culture, then energy management should act as a filter, positively influencing the perception of energy-efficiency investment strategicity, through creating a more favorable organizational context to these investments. Therefore we can emit the following hypothesis: The level of energy management influences companies' perception of energy-efficiency investment strategicity. In other words, the higher the energy-efficiency management, the higher the perceived strategicity of these investments. This hypothesis is also justified by the fact that several works or public programs have shown how energy management positively influences organizations' energy consumption (Beard, 2009; Seo, 2009 ; McKane, et al., 2007 ; Tunnessen, 2004). In this regard, we don't know if the energy consumption reduction observed in relation with a high level of energy management is due to a better use of existing equipment (i.e. optimization best practices), and/or to a positive influence on energyefficiency investment decision-making. This point is not discussed in the literature. To assess the validity of our hypothesis, we must first assess the level of energy management in organizations and, secondly, compare energy management level to the perceived strategicity of energy-efficiency investments. Based on the theoretical framework described above, our empirical study was conducted in Geneva, Switzerland, from 2006 to 2007.
Empirical research Methodology The research was made in collaboration with the University of Geneva Business School (HEC) and the Geneva Energy Office (ScanE), and based on interviews and questionnaires submitted, from June 2006 to June 2007, to major electricity consumers of the Geneva canton (sites consuming more than 1GWh of electricity per year), participating in a peak demand-side management program. Thirty-five companies supervising sixty-one buildings or industrial sites participated in the survey, nineteen of which are active in the secondary sector (metalworking, clock- and watch-making, chemical and pharmaceutical industries) and the rest of which are active in the tertiary sector (chain stores, parking lots, shopping malls, conference/exhibition centers). Energy Management. To assess the level of energy management in the companies of our sample, we 6 7 formulated eighteen questions (based on NL Agency "Energy Management Checklist" and on Mc Kane, et al., 2004, framework), which compose a simplified audit of energy management in organizations. The questions concern the following elements: diagnosis of current consumption, energy policy, presence of an energy manager in the organization, key performance indicators, measurable objectives and monitoring of energy consumption reduction, resources allocated to achieve energy saving measures, evaluation and revision of energy saving goals, and staff training and rewards. Fourteen questions out of eighteen were worth one point and four questions were worth two points. Thus the maximum score attainable was twenty-two points. Our energy management questionnaire is represented in annex 3. The higher the score obtained by the organization questioned, the higher the level of its energy management. According to our theoretical framework (see the section on organizational culture on page 3), since energy management is an artifact, or a manifestation, of energy-efficiency culture, we can admit that the higher the energy management of an organization, the higher its energy-efficiency culture. Our energy management audit questionnaire was filled in on the occasion of a semi-directive interview with the manager responsible for energy issues (usually the facility or technical manager) in the thirty-five companies of our sample. Energy management and strategicity. To analyze the influence of organizational energy management on the perception of energy-efficiency investment strategicity, we have to analyze the relationship between the level of energy management (a manifestation of energy-efficiency culture) and the strategic character of energy-efficiency investments (or, more exactly, energy managers' perception of strategic character). In order to do so, we have to examine the strength of the relationship between two groups of variables: on the one hand, the eighteen variables (independent variables) which define a company's energy management level and, on the other hand, the three (dependent) variables which make up the strategic character of energy-efficiency investments. According to our definition, the more an investment contributes to create or to strengthen a company's competitive advantage, the more strategic it is (or, in other words, the higher its strategicity). Competitive advantage is a three-dimensional concept, composed of three interrelated constituents: costs, value, and risks. Figure 2 on the next page very simply represents these three dimensions of competitive advantage.
6
Deutsch energy agency, previously called "SenterNovem". http://www.senternovem.nl/english/ http://www.senternovem.nl/mmfiles/3MJAF04.15%20%20Energy%20Management%20Checklist%20-%20June%202004_tcm24-122945.pdf 7
Figure 2 – The three dimensions of competitive advantage8
Value
Costs
Risks
9
Based on the measurement tool defined , energy managers were asked to rate—from 1 to 5—the contribution of energy-efficiency investments to decreasing risks, decreasing costs and increasing product value in their company. Therefore, on a scale ranging from 0 to 15, the highest possible score for energy-efficiency investments strategicity was 15 points. The average score for energy managers’ answers was 9,1 out of 15, which means that these investments are perceived as non- to moderately strategic by our respondents. Again this average score hides a wide variety in the answers. Results Energy management. With regard to energy management, the most striking results are the following: energy management in the companies of our sample is low, with an average score of 8.9 points out of a maximum achievable of 22. The average score is slightly higher (9.6 out of 22) in the 15 tertiary sector companies having answered than in the 18 secondary sector companies (8.3 out of 22). However average results hide a huge variety of situations between companies within the same industry. Out of the thirty-five companies questioned, only two had a manager exclusively dedicated to energy. Strategicity of energy-efficiency investments. On average, energy-efficiency investments are considered “not strategic” to “moderately strategic” for their company by the respondent managers. Again, a variety of interpretations is observed. Generally speaking, investments in energy efficiency obtain a higher score in the three dimensions of competitive advantage ("risks," "costs," and "value") with managers of the tertiary sector than with those of the secondary sector. Table 3 on the next page shows the results for the two dimensions combined for each company of our sample. The table shows that, at first sight the relationship between the two dimensions follows very diverse scenarios: sometimes strategicity is quite high while energy management is quite low, sometimes it is the opposite. Sometimes both strategicity and management levels are high, sometimes both levels are low. A statistical analysis of energy managers' answers confirm these initial conclusions: simple correlation between both groups of variables—energy management level and strategicity—is very low at 0,14. However, we notice six "extreme cases" made up, on the one hand, of three companies having a very high level of energy management and a very low perception of energy-efficiency investment strategicity and, on the other hand, of three companies having, on the contrary, a rather high perception of investment strategic character and almost non-existent energy management. If we remove these six extreme cases, we obtain a simple correlation which is higher, at 0,62.
8
Cooremans, 2012, forthcoming, p. 12. Methodology to measure strategicity is described in details in Cooremans (forthcoming). For more details regarding strategicity measurement please see Annexes 1 and 2. Detailed results are presented in Annex 3.
9
Table 3 – Energy management and strategicity levels Com pany no.
Business industry
Strategicity score /15
Energy m gt score /22
1 Chain store
13
2 Chain store
10
8.0
3 Chain store
10
20.0
4 Chain store
7
19.0
7
7.0
5 Chain store
17.5
6 Furniture chain store
10
--
7 Space renting /event mgt
11
7.5
8 Space renting / shopping mall
8
6.0
13
8.5
10 Bank
12
6.0
11 Finance news
10
3.0
12 Hotel
10
20.0
13 Hotel
10
8.0
14 Hotel
8
0.5
10 9
6.0
158
143.5
9.9
9.6
sur 15 8
/22 7
18 Chemical
4
19.5
19 Chemical
13 7
13 8
9 Parking lot
15 Services b2b 16 Services b2b
16
Tertiary sector 16 entities - 36 sites
17 Chemical
20 Food production 21 Pharmaceutical
6.5
--
--
22 Metals
13
19
23 Metals
11.5
14
24 Metals
5
17.5
25 Metals
8
8
26 Metals
10
2
27 Metals
8
4
28 Metals
10
0
29 Metals
7 8.5
2 9
31 Electronics
7
8.5
32 Watchmaker
5
0
33 Watchmaker
9
9.5
34 Watchmaker
8
0
35 Food transformation
9
8
151
149
8.4
8.3
30 Metals
19
35
Secondary Sector 19 entities - 24 sites
Total sample 35 entities - 60 sites
/15
/22
309
292.5
9.1
8.9
/15
/22
Discussion Regarding the cultural dimension of energy-efficiency investments, three important conclusions can be deduced from the findings: 1) the link between the level of energy management of a company and its perception of the strategic character of energy-efficiency investments in energy efficiency is not clearly established and our hypothesis is not validated; 2) cultural influences play, nevertheless, an indisputably important role on the perceptions of energy managers regarding these investments; 3) organizational culture plays a more important role than business industry culture. Let us discuss these three conclusions in detail. Another important finding, although not discussed in this paper, is the low level of energy management in the majority of the companies in our sample. The first important conclusion is that our findings do not confirm our hypothesis. Indeed, research results do not highlight a strong link between the level of energy management—which is considered in the research as a manifestation (artifact) of the level of energy-efficiency culture—and the strategic character of energy-efficiency investments. However the cloud of points in the graph below shows a relation between the perception of the energy-efficiency investment strategic character (in abscissa) and the level of energy management (in ordinate) for a majority of companies in the sample. Figure 3 below illustrates the correlation between the level of energy management and the level of strategicity of energy-efficiency investments. It shows a trend toward a correlation between these two values for the majority of the companies of the sample, to the exception of the six extreme cases. If we remove these six extreme cases from the analysis, simple correlation jumps from 0,14 to 0,6264, a result which shows a relation between both groups of variables.
WGestion_Energie 10 15
20
Companies no. 18 – 24 – 4
0
5
Companies no. 11 26 28 4
6
8
10
12
14
Wstrategie
Figure 3 – Correlation between energy-efficiency investment perceived Strategicity and energy management level in 33 companies of the sample. The correlation between the two groups of variables must be analyzed by examining the extreme cases more closely. As already mentioned, these fall into two groups: one group includes three companies, which see energy efficiency investments as strategically low and yet have a very high level of energy management (greater than or equal to 17.5 out of 22) . The second group encompasses three companies, which perceive investments as moderately strategic, and yet have a level of almost nonexistent energy management (less than or equal to 3 out of 22). Both groups are
represented in table 2 below. They are also surrounded in the graph above. Companies whose points are circled in the graph are discussed in further detail in the following pages. Table 2 – "Extreme cases" energy management - strategicity
Company. No.
Business industry
Energy management Max score = 22
Strategicity Max score = 15 Risks
18 Chemical
4
24 Metals
5
4 Chain store
7
28 Chemical
10
26 Metals
10
11 Finance news
10
Costs
1 1 1
2
2 4 1
Value
19.5
3
1 1
4
2
19.0
5
0.0
4
3 2
5
4
3.0
17.5
2.0
The first group—low strategicity and high energy management—include companies N° 18 (fine chemicals), N° 24 (steel) and N° 4 (retail). The most extreme case is that of company N° 18 (Swi ss, fine chemicals, 1'895 employees in 2006, of which 780 in Geneva). The manager in charge of energy (head of infrastructure, in the business for 22 years, who reports to the Technical Director) considers as very low (score 4 out of 15) the strategic character of energy-efficiency investments, while the level of energy management is very high (19.5 out of 22). But the energy-efficiency culture of the company has developed over many years (three energy audits were conducted between 1996 and 2006), it is deeply rooted in the company, and it corresponds, firstly, to a tradition of monitoring of technological development and, secondly, to a high sense of corporate social responsibility. The result of this configuration is that, although energy efficiency is not perceived as a strategic issue by the company, many energy savings measures have been implemented. In the second case, firm N° 24 (second point from t he left at the top of the chart, a Swiss company, metal accessories, energy costs 0.8% of sales, 1.2% before the appointment of an energy manager, 250 employees, of which 200 in Geneva), the energy manager is the company's technical and industrial manager, responsible for quality, safety and environment, directly reporting to senior management. For him, trained as a metallurgical engineer, fighting against waste of resources is "a matter of honor." In the company since 2001, he has developed a real passion to bringing energy management to a high level (17.5 out of 22). But his achievements are not representative of the strategic dimension of energy (5 out of 15) for the company's owner, an investment fund based in the German side of Switzerland, which bought the company in 2005. The last case, more difficult to interpret, is company N° 4, a huge Swiss retail chain (3.800 employee s in Geneva), third point from the left in the top of the table. Here, we argue that the low strategicity of energy-efficiency investments does not have to be interpreted literally. The energy manager mentions in the interview (June 9, 2006) that "technical services are serving the sales department, which is the client and pays." There are often disagreements between the two services that pursue different objectives: the sales department wants to sell, the technical department wants to improve customer comfort and to reduce energy consumption. Employees of the technical department are therefore considered as a source of trouble by employees of the sales department. This situation could explain why the energy manager perceives the contribution of energy-efficiency investments as small compared to the value of the company's offer. A second reason suggests that energy-efficiency investments’ strategic value is higher for the company than is perceived by the Geneva energy manager: it is the fact that, as stated in the sustainability report, energy is one of the "key action areas where the company marks its difference." In this search for strategic differentiation, the first "Minergie
10
store" was opened in Geneva in 2009 and, generally, the company has defined a very active and ambitious policy for its facilities and infrastructure. The second group of extreme cases—i.e. the group with (moderately) high strategicity but with almost nonexistent energy management—includes companies N° 28 (steel), N° 26 (steel) and N° 11 (financial news). Let us also analyze these cases. The first case is company N° 28, a small business ( 45 people) specialized in the manufacturing of highly technical screws, the world leader for this product which is used in space aviation, turnover grows annually by 12%, and sales have quadrupled in ten years. The company has only recently become concerned with energy efficiency, but with rather high motivation, according to the production manager (also in charge of energy; interview of 23 March 2007) concerning four strategic goals: "cost reduction; pollution reduction, a better corporate image and increased productivity thanks to a more 11 comfortable and stable building." Manufacturing entails heat production which is not recovered and 12 spreads through the huge spaces of the badly insulated building; this causes discomfort for staff and high energy consumption due to the air conditioning necessary to cool down the building. A fifth strategic motivation is to respond to customer requests because the company "is moving increasingly towards high technology sectors that attach more importance to these issues." In this case perception of energy-efficiency investment strategicity clearly precedes implementation of energy management, which is completely nonexistent in the company. In the second case of the second group, is company N° 26, also a small business (25 people), niche market, activity of surface treatment of metal pieces. Electricity costs amounted to 5% of 2006 turnover, of which 75-80% for production. Energy costs reduction is a strategic necessity for the company confronted to a low-cost competition (i.e. production costs in Germany for this type of activity are 40% lower than those in Switzerland). Despite this strategic concern, there is a "lack of time for energy efficiency" and "energy for us, it's a commodity" as stated by the company's owner (interviews of February 21 and March 8, 2007). This perception of energy as a commodity (as well as the very small size of the business) probably explains why, although energy-efficiency investment strategicity looks high, energy management is virtually nonexistent in the company. The last case of (relatively) high strategicity and very low energy management is company N° 11, specialized in financial information to businesses and individuals, with 15,000 employees, of which 550 are located in Geneva. The company headquarters are based in London and its CEO is a jurist by training. The person in charge of energy in Geneva is an electronics engineer by training, with no management skills. Decisions regarding energy-efficiency investments are made in London. Sustainable use of resources is described as a strategic goal for this company, but the energy manager considers as unimportant the contribution of energy-efficiency investments to risks reduction. And yet, as he himself pointed out during the interview (October 6, 2006), electricity use is a problem in the company's building (which dates from 1997). As stated by the energy manager: "electricity is a bane, because of the many failures." The building heating and air conditioning do not work well, while the 8,000 data center servers have a vital need for a quality power supply and for a stable temperature. Greater efficiency and better management would increase energy security and reliability of facilities, which are at the core of the company's business. A lack of real understanding of energy-efficiency investments, as well as of the procedures and benefits of a sound energy management probably explain why, in this context where energy efficiency is in all respects a strategic imperative, energy management is almost nonexistent. These examples show that the level of energy management is not always strictly related to the strategic nature of investments in energy efficiency; but this does not mean that energy management is not a relevant indicator of perceived strategicity of these investments in many cases. These examples also show that the relationship between the strategic nature of the investment and the level of energy management actually works both ways: sometimes it is energy efficiency strategic character which influences the level of energy management. In this case, the top management of the 10
A Swiss label for very low energy consumption buildings. Because the better the working conditions and "the more stable the temperature, the greater the productivity gains." 12 The building was built in 1982. 11
company, convinced of the importance of energy, sets up a high level of energy management 13 (sometimes with the help of external actors). In other, contrasting, cases, energy management comes first and contributes to increase energy-efficiency investments strategicity by creating a favorable organizational context to these investments. These descriptions show that a better understanding of companies, making the link with their core business, their history and their culture, is essential to successfully promote energy efficiency. This points out to the need for a customized approach to businesses. Thanks to sound technical assistance (both in terms of energy efficiency projects and in terms of management procedures), the integration of energy issues in companies' strategic concerns and control systems can be much improved, leading to a more efficient use of energy. Indeed, energy management improves the organizational context of energy-efficiency investment decision-making process. It provides a framework for analysis and control, which allows the investment project to be positively categorized in the diagnostic phase of decision-making as a project interesting enough to be adopted. The second conclusion of our research is that, even if our hypothesis is not confirmed, the influence of the cultural dimension is obvious in energy and finance managers' responses (see annex 2 for detailed results). Professional and functional cultures influence managers' perceptions. Indeed, energy managers regard the strategic advantages "cost reduction" and "increasing value" of energyefficiency investments as most important, whereas for finance managers, risk reduction is more 14 important. Finance managers' answers also show that they consider their company's infrastructure 15 as more efficient and energy costs as less important than do their colleagues in charge of energy. Finance managers are also more uncertain about the choice and quality of energy-efficient technologies in which their company could invest. For all these reasons, financial managers may not be favorably disposed towards energy-efficiency investment projects, a situation which heavily penalizes this investment category in so far as finance managers are generally more powerful than energy managers. The third important conclusion of our research is that the diversity of behaviors between companies, even within the same industry, rules out a priority influence of business sectors logic on investment decisions. This generalization must be understood with some exceptions: for example, as mentioned, low costs are a strategic imperative for certain sectors. Overall, however, each company has its own logic of choice and action. In this regard, corporate culture plays an important role as filter in weighting events and solutions and, ultimately in making decisions. Yet, in the field of energy efficiency, this role has been very little studied. We have not tried to systematically identify, in the research, values attached to energy-efficiency culture—or to energy conservation. However references to values were spontaneously made by interviewees. They can be tentatively grouped into six categories: • • • • • •
13
Efficient resources management and cost savings; Integration with Quality and Safety; Technological innovation ("pioneer spirit"); Environmental protection and corporate social responsibility; Improvement of working conditions; Autonomy (a point related to security of energy supply).
This logic is underlying PowerSmart, a demand-side management program of the Canadian electricity producer BC Hydro. PowerSmart first step is a two-hour interview with an applicant company top management to assess the level of energy strategicity and the one of energy management (Seo, 2009). 14 See Annexes 1 and 2 for the detailed figures. 15 Indeed, the fact that they consider energy costs as not important enough is the first barrier to energy-efficiency investments for finance managers of our sample.
Conclusion Our hypothesis postulated that the level of energy management influences companies' perception of energy-efficiency investments’ strategicity. In other words, the higher the level of energy management, the more strategic these investments would be considered by businesses. As discussed above, this hypothesis is not validated by the research. However, our findings show that organizational culture and professional (or functional) cultures influence companies' and decisionmakers' perceptions of the strategic character (or strategicity) of investments. Our findings also importantly show that organizational culture plays a much more important role than business industry culture. This contributes to explaining the diversity observed in companies' behavior regarding energy management and energy-efficiency investment decision-making. It also entails a customized approach to influence companies' decisions. A secondary objective of the research was to highlight the influence of functional (sub)cultures on the perception of investments strategicity. Regarding energy efficiency investments, we can assume, for example, that the members of an organization performing technical functions (including the functions of production, infrastructure management, facility management) have a different perception of energyefficiency investments than their colleagues in charge of finance, sales or marketing departments. To evaluate possible differences in perceptions, both managers in charge of energy and financial managers were asked several identical questions. This is an original approach, as this research is the first attempt to identify differences in perceptions by managers of different functions within companies. Indeed, with very few exceptions, research on investment decision-making does not mention the function of the respondents in companies. The importance and the modalities of cultural influences on organizations’ behavior have to be further investigated by future research. Yet the cultural dimension of energy-efficiency investments would have to be better taken into account by policy makers when framing energy-efficiency public programs.
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Annexes Annex 1 - Measurement of strategicity
2-5
Do you think that the adoption of energy-efficient technologies is important
References [for your company] for the following reasons?
Classify in ascending order (1 = the least important – 5 = the most important)
Annexes • 2_5_3 Risks reduction • •
Please specify which ones _________________________________ 2_5_4 Costs reduction Please specify which ones _________________________________ 2_5_5 Products value increase Please specify which ones _________________________________
___________ ___________ ___________
Annex 2 – Strategic character of energy-efficiency investments for energy and finance managers
Value
Value
2,7
1,9
Costs
Risks
Costs
Risks
4,4
2,1
4,0
2,7
"Strategicity" for energy managers: 9,1 on 15
"Strategicity" for finance managers: 8,6 on 15
Annex 3 – Simplified energy management audit
3.2 Energy intensity: which percentage do your energy consumption total costs represent ? 2 points (if at least one answer) - Percentage of your general expenses ? __________ % O Not calculated - Percentage of your turnover __________ % O Not calculated - Percentage of your profit? __________ % O Not calculated 3.5 Did your company make a commitment of a continuous reduction of its energy consumption ? O Yes O No 2 points 3.6 Did your company undertake any of the following tasks in relation with energy use? (please mark appropriate cases) 8 points O Evaluation of energy performance (benchmarking) O Definition of a baseline O Definition of key performance indicators O Definition of energy policy O Setting of measurable goals regarding energy consumption reduction O Data collection regarding goals achievement O Definition and setting of measures to reach the goals defined 3.7 Which resources have been allocated to energy-efficiency measures implementation? (please mark the appropriate cases) O Human resources (i.e. project team) O Technical resources (i,e meters) O Electronic resources (i.e. software) 3.8 Does the company have an energy manager ?
O Yes
3 points
O No 2 points
3.9 Does the energy manager perform other functions in your company? O Yes O No If yes, which one ? _______________________________________
-1 point
3.10 Does your company establish an internal communication on energy issues (i.e. report)? O Yes O No 1 point 3.11 Did your company organize the following systems and procedures in relation with its energy policy: (please mark the appropriate cases) 4 points O training system for staff O reward system O monitoring system of the results in goals reaching O revising goals procedure ? 1 point by positive answer, 2 points by positive answer to questions 3.2, 3.5, 3.6.3 et 3.8 (but 1 point is deducted in case of a positive answer to question 3.9). Maximum score: 22 points.
