Today, we published our 2020 Corporate Energy & Sustainability Progress Report for the third year in a row in partnership with GreenBiz. In the report, we examine the massive progress we have collectively made on energy and sustainability in the past 10 years, make sense of the current trends and what must transpire in 2020 to maintain momentum, and preview the changes that we believe are yet to come.
In this new decade, we find energy and sustainability at a pivotal moment. Amid concerns of economic downturn driven by the novel coronavirus (COVID-19), companies find themselves simultaneously preparing for the energy and sustainability innovations of the future, while also responding to massive disruption.
Despite the current uncertainties, we have chosen to continue with the publication of the report. We recognize that as the world begins to slowly recover, the work of energy and sustainability professionals will be more important than ever. We hope you find our conclusions helpful in the midst of disruption.
What our research reveals
The prevailing opinion of the 260+ organizations we surveyed reflects a new reality. Companies are moving faster, and in more diverse ways, towards Active Energy Management than ever before. They are driven by the need for urgent action in an increasingly complex and volatile environment.
Energy management rises in the ranks
Growing energy market complexity demands more strategic thinking and innovation from traditional corporate energy managers. In 2020, energy managers find themselves core to business operations, with expanding responsibilities and a regular interface with the C-suite.
An overwhelming 87% of respondents to our survey agreed that the changes in energy markets have led energy management to rise in the ranks as a core business operation. Today’s increasingly volatile global energy landscape means strategic energy sourcing is more important than ever. The difference between the right energy purchase and the wrong one could translate into millions of dollars. Click to Tweet
Electrification and digitization are revolutionizing energy management and sustainability. Fewer than half (46.5%) of our respondents say their organization is prepared to respond to emerging innovations in energy management, like autonomous grids. As the energy evolution continues, organizations with dedicated energy management roles will be able to capitalize on both the growth of new technologies as well as the increased convergence between conventional and renewable resources.
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%) agreed that the high volume of data is impacting 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% in our 2019 report to nearly 37% in the 2020 edition.
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 impact decisions. Our survey respondents recognize this growing advantage: 48% report that they are adapting their energy or sustainability data management programs based on growth in connected devices, and 24% say the same when it comes to growth in artificial intelligence.
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%) and climate change as the top risk to energy and resource supply (58%). 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.
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 appears 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.
PwC’s report may point to an underlying skepticism and reluctance among executives when it comes to the actual benefits of climate action. The underlying question is: Can any business afford to be shortsighted when it comes to climate change risk?
With commitments comes confidence
In past years, we examined what goals companies are setting and if they choose to make them public. This year, we asked respondents to assess how confident companies are that they can achieve their goals — and that those achievements will make a difference.
Most respondents that have set goals feel confident (50%), very confident (17%) or extremely confident (15%) 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% 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% were not at all confident.
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 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.
Fresh funding mechanisms unlock opportunities
Setting and meeting goals is only one potential result when it comes to the value of confidence. We found that there was 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.
Despite their effectiveness, innovative funding mechanisms have relatively low adoption rates, with only 26.5% 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. This is an opportunity for organizations to explore in the future, particularly in circumstances where availability of CapEx/OpEx is constrained, such as during the recovery from COVID-19.
It is an dynamic, 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 in time for how we got here, and a preview of what we believe is to come, we invite you to download the full report.
And please, keep in touch. As the market evolves, Schneider Electric experts will be closely monitoring those changes. You can join us by subscribing to our weekly digest for the latest.