Whether or not you’re into
environmentalism, saving energy is a smart business strategy.
Consider the fact that small businesses in
the US spend more
than $60 billion on energy. One survey
found that the majority of small and medium-sized firms spend more than 10% of their
annual revenue on electricity.
That’s a big slice of your business that
you’re paying out just to keep the lights on. So if you can cut those costs by
being more energy-efficient, you’ll see the benefit immediately on your bottom
line.
In this tutorial, we’re going to look at
the benefits of saving energy, and some simple strategies you can use to begin
saving today. We’ll also cover how you can decide whether it’s worth making
bigger investments like installing solar panels, and show you how to access
government grants and tax credits for green businesses. And we’ll talk about
how you can use your eco-friendly credentials to win new customers.
Step 1: Why Save Energy?
If you still need some convincing, here’s a
quick rundown of the benefits you can enjoy from becoming more energy efficient:
Cut Costs
According to the US government’s Energy
Star program, small businesses can cut their utility costs by 10-30% “without
sacrificing service, quality, style, or comfort.” A few concrete examples:
Vic's IGA Market in Sacramento,
CA, saved more than $48,000 a year by installing brighter, efficient T-8
lamps/electronic ballasts, a new chiller compressor, and new, enclosed freezers
to replace old, open multi-deck freezers.
River Run Bed & Breakfast
in Kerrville, TX, saved $2,400 a year
by installing efficient lighting, insulation, high-efficiency heat pump units,
programmable thermostats, and variable speed drives on air circulating fans.
Music Mart, Inc. in State
College, PA, saved $1,840 a year by
upgrading its lighting and replacing two old air conditioners with newer, more
efficient models with timers.
Happy Customers
We’ll cover the customer benefits in more
detail in step 5, but for now we’ll just say that surveys show environmental
considerations becoming more and more important in consumers’ spending
decisions, particularly among the younger generation. If you can genuinely
claim to be a “green” business, you’ll not only see cost savings, but also
generate more revenue from environmentally-conscious customers.
Happy Employees
“The environment” doesn’t just mean the
global environment—it’s also the workplace. When you replace old, clunky air
conditioners with newer, more efficient models, or upgrade the lighting, or add
insulation, the result is often a much more comfortable working environment for
your staff. The new lighting at Music Mart, for example, generated the same
amount of light, but much less heat, a big benefit for people working there all
day.
A Cleaner Environment
If you use less energy, that means a bit
less mining, drilling and transportation of coal, oil and gas, a bit less air
pollution from burning these fuels, and a few more resources left for the next
generation to play with. We’re focusing more on the direct economic benefits to
your business in this tutorial, but the wider benefits are also very real.
Step 2: Simple Savings
So how do you go about saving energy? There
are essentially two approaches: you can take a lot of small, low-cost actions,
hoping that the small efficiency gain from each one adds up to major savings,
or you can go for a more expensive project with higher impact, like overhauling
your building’s heating system or installing renewable energy generators.
We’re going to look at the small, low-cost
actions first, and then in step 3 we’ll move on to the bigger projects.
Knowledge is Power
Before you dive into making changes to your
business, you need to assess your current energy usage. Tools like Energy
Star’s free Portfolio
Manager enable you to input details about your company’s building or
buildings, and see how efficiently you’re using energy. The system will give
you a score of between 1 and 100, with a higher score indicating more
efficiency.
You might find that your head office scores
75, for example, but your warehouse scores 30, and so you’d focus your efforts
on the warehouse first. You can then track the impact of your energy efficiency
measures over time.
Also check what your utility company can do
for you. Many now offer access to software that shows how you’re using energy,
or will provide free or low-cost energy audits to help you identify areas for
improvement.
Lighting
Nearly 75% of
all energy upgrades by small businesses are related to lighting. That’s because
there are lots of low-cost things you can do to make immediate savings.
If you’re still using traditional
“incandescent” light bulbs, for example, you should know that only 5% of the
electricity they consume is converted to useful light. Energy-efficient light
bulbs cost more up front, but last 10 times as long and are 4 times as
efficient. It’s a simple improvement to make.
Occupancy sensors are also relatively
cheap, available for between $25 and $80, and are a great option for areas that
aren’t used much. In restrooms, for example, they can save up to 75% of energy
costs, and in meeting rooms up to 65%.
And think about whether you can reduce the
amount of lighting, or make better use of natural light. Hallways and corridors
don’t always need bright lighting, and sometimes people working at computers
prefer slightly dimmer light to give greater screen contrast.
Office Equipment
It sounds simple, but it makes a big
difference. Just switching off your computers and photocopiers when they’re not
in use can make big savings. Powering a large photocopier down at night can save $660 a year, and doing the same with computers can save $68 a year. Not huge
savings, but they’re easy actions to take, and if you’re using a lot of
equipment it really adds up. Make sure computers are set to power down
automatically when not in use.
Heating and Cooling
This is the biggest energy user, 39% of
energy used in US commercial buildings goes on heating, ventilation and air
conditioning.
Simply cleaning or replacing air filters
regularly (at least quarterly) gives you better energy efficiency, and using a
programmable thermostat keeps costs down. Using ceiling fans to help air
circulating will reduce your energy usage, and not only in summer—they’re also
good in winter, because they push warm air down from the ceiling.
Think about sunlight, too. Blocking direct
sunlight from the windows in summer keeps down air conditioning costs, while
letting it in during winter gives you some free heating. The impact of each
of these small actions may be minor, but together they can add up to
significant cost savings.
Step 3: Major Investments
So what if you’ve already picked all the
low-hanging fruit? You’re monitoring your energy usage, and you’re being as
efficient as possible in major areas like heating and cooling, lighting and
office equipment.
The next step is to look at major projects
to upgrade your facilities. Examples would be putting solar panels on the roof,
overhauling the heating system, re-insulating all your buildings, or investing
in brand new, energy-efficient equipment.
This type of project often requires major
upfront investment, however, and you want to make sure you get a reasonable
payoff. So how do you calculate the expected savings, and decide which project
is worth implementing?
Let’s say that you plan to buy a new
air-conditioning system for your office building. The new system costs $600,
but you’re currently spending $800 a year on air conditioning, and the new
system is 25% more efficient, meaning that you’ll save $200 a year. Is it worth
it?
To calculate how long it will take for the
new system to pay for itself, simply
divide the cost of the improvement by the annual energy savings. In this
case:
Payback period = 600 / 200 = 3 years
This looks like a good investment. The new
equipment will pay for itself in 3 years, and after that you’re in the money
for as long as the equipment lasts.
This is a simple example, but you’d use the
same method for more complex installations like solar panels. Estimate the
energy savings you can expect, and then divide the initial cost by the annual
energy savings. Generally a payback in 3 or 4 years is worthwhile; longer than
that, and you’ll be waiting a long time before you start to see the benefits.
Step 4: Get Government Assistance
There are many government programs to
encourage businesses to embrace energy efficiency. So as well as the cost
savings from the improvements you make, you can access tax credits, grants,
loan programs and other government assistance. We’re focusing on US programs
here, but similar programs exist in many other countries.
You can get a federal tax
credit for 30% of the cost of installing solar energy systems or other
renewable energy measures, for example. State and local governments also have a
huge number of programs. You can search for them by using this Department of
Energy online search tool. Simply put in your state, and it will give you
all the energy-efficiency tax credits and deductions available to you. In New
York, for example, there are 132 different programs aimed at particular areas,
towns or business types.
Also search Grants.gov for special energy
efficiency grants you could access. Right now, for example, the Renewable
Energy for America Program is offering anywhere from $5,000 to $500,000 to
rural small businesses and farms that are making energy efficiency
improvements. The closing date for applications is July 7, 2014. The
opportunities change all the time, so keep going back to see if there’s
something that applies to your business.
There are also special Department of Energy
loan programs, EPA grants, Small Business Innovation Grants and more. You can
get more details at the Small Business
Administration website.
Step 5: The Power of Green Marketing
A recent survey
found that 71% of US consumers consider the environment when they’re making
purchases. Separate research
found that 88% of American self-identify as “conscious consumers” and 86% as
“environmentally-friendly.”
That means that a high proportion of your
customers are likely concerned about the environment to some degree, and will
think more highly of your business if you make them aware of the energy-saving
measures you’ve taken.
If you’ve made big improvements, it could
be a newsworthy story that local media outlets would pick up, giving your
company free publicity and spreading the image of your company as
environmentally conscious.
You can also highlight your firm’s green
credentials in your marketing. Be careful, though, because consumers have
become wary of “greenwashing,” or companies making unsubstantiated environmental
claims. If you’ve saved energy in your buildings, but are still running a fleet
of gas-guzzling delivery trucks or manufacturing non-recyclable products,
attempts to present yourself as a green firm could backfire.
So it’s best to avoid making sweeping
claims, unless environmental sustainability truly is at the heart of your whole
business. Stick to specific facts that you can back up, for example mentioning
in your marketing brochure that you cut energy usage by 30% and are committed
to making further improvements.
Also think beyond individual consumers.
Green credentials can give you an advantage in the B2B (“business to business”)
space too. Many large companies, organizations and government departments have
their own environmental objectives. If they can do business with an
eco-friendly supplier (i.e. you), then that helps them meet their goals too.
A Smart Business Decision
In this tutorial, you’ve seen how your
business could cut costs by taking steps to save energy. You’ve learned the
benefits of saving energy, how to put it into practice both through small steps
and major projects, how to access government grants, tax credits and other
assistance, and how to get extra benefits by communicating the changes to your
customers.
As you can see, “going green” isn’t about
making sacrifices or spending more money. It’s actually a smart business
decision that can cut your costs, make you eligible for government perks, and
boost your popularity with employees and customers. You need to evaluate each
investment, of course, to make sure it pays off, but if you invest wisely, you
could see a significant impact not just on the environment, but also on your
company’s bottom line.
Resources
Graphic Credit: Solar-Panel designed by Modik from the Noun Project.