14 July 2022
Disrupted supply chains, over dependencies, inflation, volatility, uncertainties; recent events have taken a financial toll on the global economy and on companies profitability prospects
Beyond uncertain financial models, trajectories to net zero are equally as challenging. Coping with an ever-increasing demand for electricity in the
current geopolitical environment leads some countries – such as Germany – to ponder restarting coal firepower plants to power industries and regain some short-term energy autonomy.
Against this backdrop, energy sobriety will be a key lever to achieve profitability on the road to net zero. Whilst companies may not change or adapt to save the planet, they will change and adapt to survive. Historically, these Darwinist dynamics have initiated the biggest economic turnarounds and led to the implementation of major innovations. This could ultimately realign fundamental economic, financial and environmental objectives.
Supply chain autonomy, profitability and net zero could all be achieved through more discipline in applying simple energy efficiency solutions, and integrating this sobriety as a key design principle in product and business developments.
The best energy is the energy we save Up to 40% of the trajectory to net zero can be achieved with energy efficiency measures according to the International Energy Agency (IEA). In its recent 'Value of urgent action on energy efficiency' report, the IEA found that by 2030, a third of avoided energy demand could come simply from the deployment of better technically efficiency equipment.
From an impact perspective, these energy efficiency measures are powerful. In fact, action on an array of energy efficiency measures and related avoided energy demand could reduce global household energy bills by up to USD 650 billion per year by 2030. In economic growth terms, this could also result in an extra 10 million jobs by 2030 through the deployment of energy efficiency related technologies and accelerated investment.
Investing in energy efficiency
Energy efficiency solutions exist for virtually all usages: lighting, charging, manufacturing and beyond. The cost is marginal compared to the benefits, with short pay-backs. Implementing these solutions at scale can be financed within companies' operating expenditures, or through new financing models including leasing solutions, such as the ones provided by BNP Paribas.
So what is preventing large-scale implementation? There are a few challenges including a lack of prioritization within organisations, resources constraints, and perceived complexity to manage several (albeit small) initiatives.
But with a new generation of staff looking for greater purpose, autonomy and responsibilities, energy efficiency projects leveraging on a set of preselected solutions can be a way to turn efficiencies into a driver of staff motivation, engagement and pride. Typically manufacturing companies have used internal challenges and appointing energy champions to encourage the adoption of Energy Efficiency best practices and foster concrete behavioral changes.
Beyond energy towards design and materials sobriety
From a practical business perspective, IKEA was a pioneer in applying sobriety principles by design, which have become a cornerstone of their environmental objectives and their company purpose.
In an inflation-driven world where many consumption choices such as buying a more expensive house or product become tougher, revisiting product design processes will need to integrate future-proof criteria. This includes targeting shorter supply chains, locally sourced abundant and environmentally- friendly materials, assessing compactness for cost, storage and shipping efficiency, energy efficiency (or even autonomy), and critically, durability.
Realigning companies and consumers interests with Net Zero trajectories
In most traditional business models, companies strive to increase their revenues, incentivizing in many ways consumers to consume more. But in our current context, realigning the two P&Ls across financial and environmental lenses will be key.
Interesting examples already exist such as flat free subscription environmentally-friendly plans, food waste avoidance sharing platforms, and leasing models based on Circular Economy principles. This includes BNP Paribas 3-Step IT, a Leasing service of IT devices with relevant reuse and recycling scheme – thus reducing significantly the carbon footprint.
On a mass scale for sector wide shifts, the best models are yet to be re-invented: a model where individuals can use long-lasting efficient solutions and companies are rewarded for managing efficiently their two P&Ls to eliminate waste and over-consumption. KPI- linked Sustainable Finance solutions can be a lever to enable these transformations, and to support a wider shift towards circular economy, and sobriety across energy and materials.
At BNP Paribas, we have been an early advocate of energy efficiency and committed to support the acceleration of energy efficiency deployment across sectors and regions. For stories on best practices to realign profitability ambitions with sustainable goals, visit cib.bnpparibas.com