New Bottom Line Volume 3.3 – Light Bulbs, Trade Wars and Shareholder Suits

February 22, 1994

What do light bulbs have to do with trade wars and shareholder suits?

When the US trade deficit was reported last week, the MacNeil/Lehrer report noted that it was sharply higher than last year’s. But they didn’t stop there. In another contribution to the growing tension between these economic superpowers, the commentator pointedly observed that “half that amount is due to trade with Japan.”

One might just as well — and far more usefully — say that “half that amount is due to the US’s continuing oil addiction,” since US imports of energy products approximate half that trade deficit.

This attack on US economic well being doesn’t need a shooting war, like the Gulf War a few years back. It doesn’t need a trade war, like the US apparently risks with Japan this year. It needs a war on waste–starting with energy waste.

The “front line” for this war runs through every business. And the actions required make good sense: for business profitability, for national economic health, for employment development–and for that pesky trade deficit.

Investments in energy efficiency can in many cases provide the highest legal rate of return to be found anywhere in the western world. Replacing standard incandescent lighting with energy-efficient fluorescent bulbs can generate 20-50% per annum returns on investment. Standard fluorescent lighting can be upgraded with more efficient tubes, better reflectors and electronic ballasts for comparable savings. Occupancy sensors can simply turn off lights when no one is in a room. (According to one analysis, relamping can increase a typical restaurant’s profits by five percent.)

Specifying the most efficient heating, ventilating and air conditioning (HVAC) equipment available for new construction can generate significant savings over the operating life of the building — even if the initial expense is somewhat higher. Insisting on architectural design that minimizes demand for HVAC can save even more, since today’s architectural decisions will influence energy use, trade deficits and company profits for decades to come. Proper maintenance of existing equipment can pay off in lower energy bills.

Fleet and vehicle management offers the same opportunities: when purchasing, consider life cycle cost due to energy efficiency and alternative fuels. Proper maintenance during vehicle life can save fuel, reduce pollution and cut operating costs.

Energy efficiency opportunities in production processes include new electronic controls for motors save energy through sophisticated power conditioning, matching power delivery to varying patterns of power demand, as well as pollution prevention and other Design for Environment strategies.

Even office equipment –responsible for some 3% of US commercial energy consumption–offers significant energy saving possibilities. Specify energy efficient products for new purchases, like “Energy Star” rated computers that consumer 60-70% less power, and inkjet printers that use 80-90% less power than laser printers. Turning existing equipment off when not in use–especially at night and on weekends– is a zero-cost method to save both energy and money. The American Council for an Energy Efficiency Economy estimates that a 200 person office can cut its office equipment energy use from $44,050 per year to $1,660 per year– a 96.2% savings!

Effective ROI can be even higher, since utility companies often share the cost of energy efficiency improvements. These “demand side management” programs make sense because it’s more economical for a utility to reduce waste than to build more powerplants to serve that waste. And, according to study after study, these DSM investments are far more job intensive than comparable investment in new generating capacity.

Yet even in the service area of DSM leader Pacific Gas & Electric, only about ten percent of businesses have availed themselves of these programs. No doubt the reason is often ignorance–managers simply unware of the striking returns on investment that are possible, or the familiar lament of “I’m too busy.” In other cases, corporate structure gets in the way; one retail company has missed hundreds of thousands of dollars energy savings in part because the investment would be charged to one department while the savings would accrue to another.

Clearly better marketing and more education, and EPA’s Green Lights, Energy Star, Wave (for water use efficiency) and other programs are helping.

But don’t be surprised if someday a company–perhaps one that’s “been meaning to get to it”–finds itself faced with shareholders suit over energy efficiency. Because a company that uses twice as much energy as it needs is not only affecting the environment, and the national balance of payments. Its leadership may be violating fiduciary responsibility by spending money on avoidable energy expenses that better belongs in the pockets of their shareholders.

(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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