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New Bottom Line Volume 3.23 – Two Benefits for the Price of One

November 29, 1994

Cutting waste is good business. That’s been widely understood through approaches as varied as Taylorism and TQM. But there’s a new environmental dimension. Companies in widely varied industries are discovering generous profit opportunities in energy efficiency and pollution prevention. Well-targeted investments in retrofits, new technologies and process change can yield reduced expenditures on both inputs of energy and materials, and on processing costs–and potential liabilities–for wastes. In many cases these investments yield rates of return far higher than the companies’ core business, and higher than any financial instruments they could buy.

But that’s not what this column is about. This column is about an unexpected dimension of that quest for environmental efficiency–productivity.

A report just released by the Rocky Mountain Institute (RMI) “document[s] several cases in which efficient lighting, heating and cooling have measurably increased worker productivity, decreased absenteeism, and/or improved the quality of work performed.” It’s a fascinating survey, because the benefits reported are substantial, unintended (and so, in a sense, free), and replicable in nearly every business–including, dear reader, yours.

  • A retrofit of the Reno, Nevada, Main Post Office aimed at improved energy efficiency through improved lighting and lower ceilings. The energy and maintenance savings of $50,000 per year that resulted were enough to yield a six-year payback on the $300,000 investment. The productivity gains–6% higher throughput, and “the lowest error rate in the entire western region”–were worth $400,000 to $500,000 per year.
  • Hyde Tools, a machine tools manufacturer in Massachusetts, gained $48,000 per year in energy savings from a $98,000 lighting retrofit ; better lighting resulted in increased product quality, worth $25,000 per year, which in turn resulted in $250,000 in increased sale
  • Pennsylvania Power and Light cut lighting energy use by two-thirds with a lighting retrofit in their drafting department–good enough for a 24% return on investment. Productivity improved 13.2% with the improved lighting–which pushed the ROI to 540%, or a 69 day payback
  • Lockheed Missile and Space Company cut the projected energy use of a new office building in half; the efficiency improvements added four percent to the cost of the building, which the energy savings would repay in four years. The real prize: absenteeism down 15%, productivity up 15%–and those benefits “paid 100% of the extra cost of the building in the first year.”
  • Nederlandsche Middenstandsbank (NMB) spent an incremental $700,000 on energy efficiency improvements in a new headquarters building that uses one-tenth the energy of their former headquarters, and saves $2.6 million in energy expenditures. The human factor: 15% lower absenteeism.

As the report notes, “These measures were not undertaken for energy _conservation_, but rather to increase energy _efficiency_. Both activities lower energy consumption. However, conservation implies a decrease in service; energy efficiency must meet or exceed the quality of service that it replaces.” This higher design standard resulted in improved lighting quality that enabled workers to better catch errors and defects, and more comfortable space conditioning that evidently reduced stress, lowered absenteeism, and contributed to sustained productivity increases.

Can you apply these benefits to your own business? The diversity of these examples suggests that the answer is yes. Each building was different, yet key design elements were common: more efficient, longer lasting lighting that provides “more pleasing” light; better use of daylighting and indirect lighting, with supplementary task lighting; better fixtures, to reduce glare; local controls for lighting, (and in some cases, for heating and ventilation); occupancy sensors that automatically turn off lights in unused spaces; reduced air conditioning (since less cooling capacity is needed to cool the waste heat from lighting); passive solar heating and cooling; cogeneration and heat recovery systems. Integrate these elements wherever possible for maximum benefit, and minimize “lowest common denominator” compromises by keeping your standards high.

Many financial managers insist on a two year payback for energy efficiency investments, even though they will often accept slower payback on other investments. These productivity bonuses can help energy efficiency improvements exceed even those stringent hurdle rates. As the report notes, “An increase of 1 percent in productivity can provide savings to a company that exceed its entire energy bill. Efficient design practices are cost-effective just from their energy savings; the resulting productivity gains make them indispensable.”

[“Greening the Building and the Bottom Line: Increasing Productivity Through Energy-Efficient Design,” by Joseph J. Romm of the US Department of Energy and William D. Browning of RMI, is available for $5 from RMI, 1739 Snowmass Creek Road, Snowmass CO 81654-9199.]

(c) 1994 Gil Friend. All rights reserved.

New Bottom Line is published periodically by Natural Logic, offering decision support software and strategic consulting that help companies and communities prosper by embedding the laws of nature at the heart of enterprise.

Gil Friend, systems ecologist and business strategist, is President and CEO of Natural Logic, Inc.

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