The Corporate Energy Strategist's Handbook

Frameworks to Achieve Environmental Sustainability and Competitive Advantage

Jimmy Y. Jia

• Publisher: Palgrave Macmillan
• Year: 2020
• ISBN:
  9783030368388
• Topic: Business
• Subtopic: Management
• Index: Business

In an era in which scientists say we are approaching a point of no return in terms of climate change, companies are looking for ways to improve productivity of innovations that reduce environmental footprints. Among the questions they are looking to answer are: How can financial tools be leveraged for positive energy outcomes? How can the energy strategy be integrated into board responsibility? This book provides answers to these questions and more, presenting a selection of decision-making frameworks for strategy and sustainability management. Comprehensive in scope, its 120 frameworks—some well-known while others are original—provide a thorough, practical guide to inform the sustainability strategy of your organization. In addition to learning how to green your organizational strategy, you will also learn how to communicate your strategy to your teams. An essential source for executives desiring to be more responsible in energy performance and to decarbonizetheir operations, this book will prove useful in your day-to-day organizational work.

© The Author(s) 2020

J. Y. JiaThe Corporate Energy Strategist’s Handbookhttps://doi.org/10.1007/978-3-030-36838-8_1

Begin Abstract

1. Prologue: Why Create a Toolkit of Frameworks?

Jimmy Y. Jia¹

(1)

George Washington University, Washington, DC, USA

Jimmy Y. Jia

End Abstract

After teaching classes in sustainable energy, climate change, and strategy at MBA programs for a few years, I noticed my students struggling to choose which frameworks to use under what circumstances. I noticed a similar problem in the professional world as well, where the business field swarms with books, each teaching their own frameworks and retelling case studies of others through their lens. Unfortunately, this means a leader has to read entire bookshelves to learn a set of tools, and is still left with the challenge of figuring out which framework is applicable to their situation.

This problem is especially acute in energy and sustainability management, disciplines that require holistic approaches. Energy is a critical resource for an entire organization, yet the tools were developed by a myriad of stakeholders, each managing the issue from their point of view. Energy management lacked organization-wide tools to approach organization-wide problems.

This book addresses the problem in several ways. First, as a collection of frameworks, it provides a tapestry of tools available across an organization to manage energy. Although not an exhaustive collection, it includes critical concepts and content gathered from over a decade of working in energy and sustainability management. Second, the brief explanations, examples, and diagrams are an aid to diagnose whether a framework is applicable to the situation at hand. A leader can then do their own research into a framework to gain further familiarity and understanding. Lastly, the review shows where there are gaps in our techniques for energy management. Some of the frameworks presented are my own—developed to fill these gaps by combining others to create new frames of reference. The reader may notice other gaps and is encouraged to develop their own tools.

For readers who are acquainted with the tools, please use this book as a reference book and jump to the part or chapter most relevant to you. For those who are at the beginning of their journey, the concepts in each chapter are arranged to build upon each other. Words in Bolded Small Caps are references to other frameworks in the book. Look in the Index or the Table of Contents for their page numbers and Fig. 1.1 for a visual depiction of the chapters.

• Part I—Energy as Strategy: discusses fundamentals in strategy, finance, and energy before merging the individual concepts into carbon mitigation strategies.
• Part II—On System Properties: examines system dynamics and how to use them to create new frameworks to tackle new situations never encountered before.
• Part III—On Leadership: reviews a selection of organizational, decision-making, and communication tools so a leader can convey certainty during times of ambiguity.
• Part IV—On Innovation: suggests how to create environments to encourage the formation of ideas and how to recognize innovations when they emerge.
• Part V—Non-Financial Indicators for Corporate Governance: observes how energy and other non-financial indicators are analyzed and reported for strategy, corporate governance, and investor decision-making.

Fig. 1.1

Diagram of chapters. (Source: Author’s creation)

Who Should Use This Handbook?

This book is written for the Energy Strategist, an emerging role for companies that wish to improve productivity through innovations that reduce environmental footprints. These companies usually face at least one of the following problems: high energy intensity of production, a supply chain that is being disrupted by climate change, increased pressure for fiscal discipline and cost certainty, changes in consumer buying patterns, or activist investors keen on environmental disclosures. As these challenges converge, leading companies are implementing processes for wiser allocation of environmental resources to gain a competitive advantage.

Many individuals can engage with an organization’s energy strategy. After all, who can function without energy? Nearly every role is enabled, directly or indirectly, by the availability and accessibility of energy. This could be the technical experts selecting equipment, investment analysts forecasting fuel options, policy advisors advocating for risk mitigation practices, executives responding to a board’s environmental concerns, a student studying industry best practices, or an employee simply commuting to work.

Many organizations can benefit. After all, which organization can survive without consuming energy? For sure, energy providers need to anticipate changing consumer preferences for cleaner fuels. Energy consumers also need to be better stewards of the resources available to them. Solution providers need to sell products and services that deliver positive impacts. Government entities need to build century-long resilient infrastructure in the face of decade-long cycles of climate change.

No longer are companies buying energy just by paying the bills. As we see from Fig. 1.2, we have already shifted from this transactional domain of energy management to the managerial domain. Companies are investing in energy efficiency, solar, renewable energy credits, broad resource sustainability initiatives, and so on. Some companies, such as Microsoft, have even moved to the strategic domain by procuring their own renewable power as a way to remove the carbon liabilities that are within their local electric utility’s fuel mix.

Fig. 1.2

The Evolution of the Chief Utility Officer . (Source: Author’s creation)

The role of a Corporate Utility Office is to manage the convergence of energy, water, transportation, and many other supply-side infrastructures and balance it with the integrated needs of a corporation. Utilities span far beyond the flow of energy. A company depends on many critical utility resources—water, gas, diesel, trash collection, recycling, sewage, stormwater, and so on. Each resource has its associated capital equipment, operational processes, maintenance cycles, and best practices.

As an example of this decision-making convergence: consider a hot water heater which consumes electricity, water, and sewage utilities. It has a capital replacement cycle of a decade that is managed by the finance department and a daily heating cycle that is controlled by the end user. The facility department may be evaluating an incentive being offered by the utility to upgrade to a more energy efficient heater. Purchasing may need to negotiate the best price from a vendor. Disposal of an old heater may require a special pickup or a trip to the local metal recycler.

It is not uncommon for the C-Suite to be the first place where all of these decisions converge. Organizations need a leader to manage this holistic energy strategy. I call it a Chief Utility Officer (CUO) (Jia 2016). You may have other names for the same set of responsibilities. This person views energy and resource flows as a unifying indicator of corporate operations, from upstream and downstream supply chain to internal infrastructure investments to product development and competitive advantage.

The evolution of this position is analogous to that of the Chief Information Officer (CIO) when the information technologies (IT) sector underwent dramatic changes in the 1970s. When there was only one supplier, IBM, and purchases were infrequent, a company needed a technical expert who could determine the best option. As the number of suppliers of computers grew and costs dropped, departments started making their own choices. The Director of IT evolved to help coordinate and integrate purchases. Today, with the proliferation of devices and websites in the Internet of Things (IoT), the CIOs need to manage a company’s digital assets as an integral part of corporate strategy, such as top-line growth (marketing via social media), expense management (procuring cloud services vs. managing one’s own data center), or risk management (cybersecurity).

A CUO or equivalent is an organizational change approach to energy management to identify, streamline, and improve corporate decision-making. Having someone in this role is a valuable indicator of the maturity of an organization’s leadership capabilities in identifying and mitigating short-term and long-term risks. It is a means to evaluating sustainability approaches and reducing financial, energy, and environmental impacts simultaneously while increasing resilience of an organization. In effect, this role is to use energy and its managerial tools as a strategic indicator to improve competitive advantage.

What Are Frameworks Used For?

Frameworks are a collection of experiences and represent a way of thinking that has been developed into analytical and decision-making shortcuts. In this book, we use frameworks in a general sense to include models, methods, philosophies, equations, processes, approaches, or any system and their boundaries. An intractable problem from one lens may be easily solved when viewed from a different angle. Given the comp...

Table of contents

• Cover
• Front Matter
• 1. Prologue: Why Create a Toolkit of Frameworks?
• Part I. Energy as Strategy
• Part II. On System Properties
• Part III. On Leadership
• Part IV. On Innovation
• Part V. Non-Financial Indicators for Corporate Governance
• Part VI. Epilogue
• Back Matter