.. panies have already begun to implement some programmes to reduce GHGs emissions, by investing in more Energy Efficiency programmes and Green Power. Indeed, energy efficiency in business can lead to many competitive advantages. Measures can be implemented in several areas: building and facilities; production processes; end-use products; and transportation. These sectors provide many opportunities for cutting costs, increasing profits and enhancing the image of companies.
Some ways to save energy include installing efficient lighting, capturing and reusing waste heat, insulating buildings and computerising heating and cooling systems. These kinds of programmes are almost risk-free and can provide high returns. Moreover, benefits can be easily measured, calculated and forecasted. In fact, energy efficiency is one of the most effective means to reduce costs and add value to a firm. There are several examples of benefits in taking energy-efficiency initiatives.
First, it reduces direct costs: for some industries, gas and electricity represent a large share of operating costs, reducing energy consumption can therefore greatly diminish expenses. Even for companies that do not consume much energy, any energy savings influence directly their bottom line. Second, it improves utility rate negotiation: Indeed, electricity rates are often higher during peak periods. Thus, if a company uses less electricity during peak periods, it obtains more bargaining power to negotiate a lower unit price per kilowatt-hour. Third, it improves worker productivity: Energy-efficient building design can often produce great benefits in higher worker productivity, lower absenteeism and few errors. For instance, it has been demonstrated that daylighting can have a significant impact on productivity, increasing worker effectiveness. Green power, such as wind or solar energy, which is emerging as a viable energy source for businesses, provides also benefits that are complementary to energy efficiency.
First, it provides an incentive for saving energy: Even though green power might be still more expensive, in some areas, than traditional power, if a company couples it with energy efficiency measures, it can diminish its total energy consumption and therefore drives the price of green power down by stimulating the green power market. Second, it provides a competitive advantage: The companies that choose to buy green power differentiate themselves in a competitive market, and thus set or raise the environmental standard for other firms. Third, using green power enhances corporate reputation: Purchasing green power is a way to retain customers concerned by environmental matters, and it also enhances a company’s reputation as an environmental leader. A good mean to enhance reputation is also to install an on-site power generation system, as it is a visible statement of the company’s environmental commitment. Gilette is one of these companies that have managed to reduce energy consumption without affecting its economic performance.
The Gillette Company today is the global market leader in nearly a dozen major consumer products categories, principally in the grooming, portable power and oral care businesses. During the period 1994-1997, the energy consumption of Gilette increased by an average of 4% per year whereas the business had grown by 10% per year. When Gilette built a new administrative building in Argentina, they regarded energy efficiency as a major factor in its design. They put an automation system in place that controls the air volume, conditioned air and lighting. They also used advanced-design building materials, including sun visors that neutralise the solar impact.
Aware of the issue of Global Warming, Gilette has taken action through its Worldwide Energy and Water Conservation Programs. Although the GHG emissions of the company’s manufacturing operations were 122,000 metric tons in 1997 and 7,000 tons higher than the 1990 levels, it is estimated that it would have been 137,000 metric tons without the conservation program. In 1997, Gilette wanted to go further and became a partner in the Climate Wise Program. The purpose of this program is to help companies to identify and implement cost-effective projects to reduce GHG emissions. Then, Gilette submitted a Climate Wise Action Plan focusing on energy efficiency programs, supply chain conservation initiatives, co-generation projects, fuel switching, and transportation. The goal was a reduction of the company’s GHG emissions by 23,000 metric tons by the year 2000.
A good example of this is the actions taken by Gilette in Mexico. Indeed, Gilette has important manufacturing and sales operations in Mexico City, where it recently completed a multi-faceted program of warehouse consolidation, shipping route analysis and redesign, truck fleet changes, and revamped operations procedures. The company analysed the environmental impact of these changes and found a 20% average savings in fuel consumption. The fuel savings translated into an estimated 2.5 million-pound reduction of CO2 emissions from Gilette trucks. As we saw, the industry is widely responsible for climate change. Some of them have already taken action to reduce their direct or indirect GHG emissions and found competitive advantages by doing so.
Nonetheless, these companies are not numerous. Thus, the solution to the problem is to give companies incentives to reduce their emission level. These incentives can come from international regulations, but we saw that they have not been very effective and rather slow so far. The problem is a political problem about global governance. It is thought that the creation of a World Environmental Organisation (WEO), as a par to the World Trade Organisation (WTO) might be beneficial to the international regulation process.
However, it is not done yet, and the Kyoto Protocol is currently threatened. It has been even more endangered with the recent declaration of George W. Bush, saying that the United States will not ratify the treaty. And we know that the US plays an important role in global warming as they emit 25% of worldwide GHGs whereas they only count for 4% of the population on Earth. The second way to give incentives to companies to reduce their emission is through customer demand for ‘green’ products. In fact, Bush was so odious that the international community condemned its position and since, global concern about environmental issues has never been so strong. Thus, the non-ratification of the Kyoto Protocol by the US will perhaps have an opposite effect of what Bush was expecting for the American economy, as consumers might demand greener products in the near future.
If Bush had taken basic marketing courses, he would know that today, customers are kings and companies are very focused at providing them exactly what they want. Companies are more concerned about customers than politics. By the way, reducing GHG emission might not be as harmful for the economy as Bush thinks, considering examples like Gilette. Thus the solution of the climate change issue might come rather from consumers than politics. That is why NGOs have to play an important role today by publicising the issue to the global community in accord with the famous slogan ‘think globally act locally’.
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