INTRODUCTION TO THE GUIDELINES

These Energy Efficiency Guidelines are aimed at providing companies with
practical and easily implementable advice and tools to improve their energy
efficiency and reduce their relative electricity consumption.

The guidelines will focus primarily on behavioural rather than technological
interventions, but where relevant, technological innovations will be included in
the discussion.

The guidelines will also borrow from established methodologies which examine
the behaviour changes that are required to improve energy efficiency at three
levels within organisations:

  • Strategic
  • Managerial
  • Behavioural

Finally, in examining the interventions aimed at improving energy efficiency,
the recommendations provided will be evaluated according to a number of
categories, termed filters, namely

  • Buildings
  • Operations
  • Customers
  • Supply chains
  • Reporting and communication

MATERIAL ISSUES FOR CORPORATE ENERGY EFFICIENCY IN SOUTH AFRICA

Regarded to be meaningful and relatively important
for companies wishing to manage energy efficiency
in the South African context.

There are three issues that companies grapple
with on a daily basis where energy consumption
is concerned. These issues can be managed and
companies can really make a difference to their
energy consumption if they adopt certain basic
polices and principles
Issues:

  1. The rising cost of electricity
  2. Dependence on suppliers and third parties
  3. Reputation and value chain risks associated with energy consumption

These Energy Efficiency Guidelines take a look at each of these
three material issues from three vantage points by presenting
information in three layers

  • Strategic layer
  • Management layer
  • Behavioral layer

Depending on which employees are being targeted these distinctions
are important, for example, it is not possible for junior employees
to have much influence over strategic or even management issues
in the business. Executives should however be familiar with all
three layers.

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MATERIAL ISSUES

Energy and energy efficiency are of course highly topical issues given the current
electricity supply constraints being experienced in South Africa.

The following table identifies a number of material issues related to improving
energy efficiency and reducing electricity consumption that are considered to be
common to all companies included in the Energy Rating Index.

For each of these material issues the table then identifies a number of
interventions that can be implemented at strategic, operational and behavioural
levels. It is therefore assumed that strategic interventions are targeted at the
levels of Boards and executive management, while operational interventions are
designed to take place at mid- to senior management level, and behavioural
changes take place at all levels within a company.

Importantly, however, this is not to say that behavioural changes are not applicable
to Board, executive or management-level representatives – by contrast, within
management, these behavioural interventions should enjoy equal focus alongside
strategic and operational considerations.

MATERIAL ISSUES APPLICATION / INTERVENTIONS
STRATEGIC LEVEL MANAGEMENT LEVEL BEHAVIOUR LEVEL
Rising operational
costs from
municipal electricity
consumption
Company Boards and
executive management
representatives have a legal
financial responsibility to reduce
operational costs. In line with
this responsibility, Boards and
executive management should
as a matter of urgency investigate
all possibilities that exist for
improving energy efficiency and
reducing municipal electricity
consumption. Their effectiveness
in doing so should be included
in performance management
and evaluation systems, and
Management practices
should be aimed at reducing
electricity consumption
and increasing energy
efficiency in all areas of
activity. Management
representatives in various
functional centres should be
evaluated according to the
levels of success achieved
in implementing approved
strategies and measures, and
appropriately incentivised
to ensure maximum savings
in their respective areas of
responsibility
Employees should be aware
of the importance of energy
efficiency and energy
savings, and should be
appropriately incentivised to
promote behaviour change
in this area and ensure
maximum savings.
Dependence
on external
infrastructure and
decision-makers –
suppliers, service
providers,
landlords, property
managers etc
Board and executive
management teams should
develop and implement
appropriate policies and
strategies for dealing with
external actors, so as to maximise
the company’s decision-making
ability in areas related to
electricity supply and energy
efficiency.
Managers should be
appropriately mandated
to engage with external
actors, so as to maximise the
company’s independence and
decision-making ability in the
area of energy supply. They
should also be evaluated and
incentivised according to the
successes they achieve in
securing such independence.
Reputational
impacts from
perceived inefficient
energy use
Boards and executive
management teams should act
decisively to develop policies and
strategies aimed at counteracting
negative perceptions related to
their energy use
Management processes
that assist in positioning
companies as responsible
users of electricity should be
developed and implemented,
while managers should be
evaluated and incentivised
according to their levels of
success in implementing
these.
Employees should be
made aware of the
financial impacts of energy
inefficiency behaviour, and
should be encouraged to
actively counteract these
in their daily operating
environments.

FILTERS:

Filters are themes under which the material issues should ordinarily be considered by companies.
These themes are regarded to be most impactful in a South African context.

BUILDINGS

The area of Buildings is of course central to energy and
energy efficiency, since the majority of any company’s
electricity consumption takes place within the physical
structures that it occupies irrespective of whether these
are owned or rented. As a result, this area should occupy
the majority of any company’s efforts and attention in
this field.

OPERATIONS

In terms of Operations, many companies can realise
significant energy efficiency gains and electricity
consumption reductions through the optimisation of their
operational processes. In many instances companies are
already actively pursuing these efficiency gains as a result of
rising electricity costs. At the same time simple changes
to entrenched habits and operational procedures can result
in significant efficiency improvements, particularly when
these are accompanied by the deployment of new energy
efficiency technologies.

SUPPLY CHAINS

In the field of Supply chains, significant opportunities
exist for the implementation of energy efficiency and
consumption reduction initiatives. In the context of this
Energy Rating Index project, supply chain interventions
might of course not provide a direct benefit in terms
of company ratings. At the same time, however, given
South Africa’s current situation of rising electricity costs
and supply constraints, it is certainly in the strategic
interest of companies to engage with their suppliers
regarding energy efficiency and consumption reduction
initiatives. Furthermore, it is highly likely that the future
development of the ratings tool will include consideration
of supplier energy efficiency performance.

CUSTOMERS

In terms of Customers, energy supply plays a significant
role in ensuring a safe and appealing customer experience.
Any initiatives aimed at promoting energy efficiency or
reducing consumption should also be undertaken with
the objective of enhancing the experience of a company’s
clients or customers and its employees.

REPORTING AND COMMUNICATION

With regard to Reporting and communication, it is in the
interests of any company to communicate effectively with
all stakeholders regarding any initiatives implemented in
the area of energy efficiency and electricity consumption
reduction. This applies to both internal and external
stakeholders and communication processes. Furthermore,
from a financial reporting perspective, the company is
required to report in detail on the financial implications of
any energy efficiency-related initiatives.

RECOMMENDATIONS

MATERIAL ISSUE 1: RISING OPERATIONAL COSTS
1.1 Strategic Interventions

Energy efficiency and reduced electricity consumption should be incorporated into the strategic objectives of
companies with quantifiable targets being progress against these targets should be monitored on an ongoing basis.
The company’s success in meeting its strategic-level consumption reduction targets should form part of performance
evaluation processes and of decision-making regarding performance-based remuneration for senior executives and,
also where possible, for Board members too. This will result in appropriate behaviour change on the part of senior
executives in this area.

In the current South African environment, energy efficiency has to be a key element of any
company’s growth strategy – you need to set a target and measure your progress towards
achieving it.

FILTERS:

Buildings: Any strategic decision made at Board or executive management level regarding buildings, such as,
relocations, renovations, construction activities etc should include energy efficiency and electricity consumption
reduction as significant elements of the decision-making process. The objectives in this regard should be to maximise
consumption reductions associated with buildings and physical infrastructure.

New or refurbished buildings are generally far more energy efficient.

Operations: At a strategic level companies should be mandating and supporting senior executives to identify major
opportunities for efficiency gains. Once such opportunities are identified these executives should be provided with
sufficient authority, including within functional centres outside their own areas of expertise or responsibility, to
ensure that appropriate strategies are developed to realise these efficiency gains.

Supply Chains: Supply chain policies and strategies, as well as executive decisions regarding the conclusion
of (particularly long-term) supplier contracts, should include elements of energy efficiency and electricity
consumption reduction.

Customers: Strategic decisions regarding energy efficiency should be carefully evaluated in terms of their potential
impact on the clients or customers of any particular company. The company’s policies and strategies in this regard
should also be incorporated into its customer relations activities.

Communication: Open and transparent communication regarding strategic decisions in the area of energy efficiency is
of paramount importance to maintain and enhance the credibility of companies in this field. Executive management
should be appropriately empowered and incentivised to undertake such communication on an ongoing basis.

1.2 Management Interventions

Management practices within companies should be developed and revised on an ongoing basis with the objective
of reducing electricity consumption and therefore containing electricity costs. These practices should explicitly
support the achievement of companies’ strategic targets in this area. In this regard, a number of functional areas
within companies are considered to be of particular importance, specifically finance, operations, procurement,
communication and human resources. Each of these functional areas can play a particular role in driving behaviour
change and enhancing energy efficiency performance. Furthermore, appropriate mechanisms for performance
evaluation and incentivising individuals within these functions are vital to the creation and maintenance of
appropriate operational systems and practices that promote energy efficiency and reduce electricity consumption.

Energy efficiency is not simply an operational issue – it also needs to be a key parameter
for the company’s finance, procurement, HR, communications and training functions.

FILTERS:

Buildings: Building management practices and infrastructure will play a significant role in reducing energy costs and
improving efficiencies within the physical spaces occupied by any company. In this regard, the role of management
representatives is to promote both technological innovation and behaviour changes amongst all employees that result
in reduced electricity consumption and increased energy efficiency within the company’s buildings.

Operations: Operational practices, particularly those involving a number of functional areas within a company can
provide a major contribution to improved energy efficiency. For example, effective collaboration between procurement,
finance and operations managers can result in the procurement of certain technological innovations that reduce
electricity consumption, while awareness programmes jointly implemented by the operations, communications and
HR divisions can drive energy efficient behaviour amongst all employees.

Supply Chains: Within any company the functions of operations, finance and procurement all play a major role in
driving energy efficiency of supply chains. Similarly, HR functions must ensure that the achievement of energy
efficiency targets is included in performance evaluation and incentive mechanisms for those individuals involved in
the functions described above.

Communication: The communications function of a company can drive positive messaging both internally
and externally regarding operational interventions and the successes achieved in the area of energy efficiency,
consumption reduction and cost benefits.

1.3 Behavioural Interventions

When designing behavioural interventions aimed at reducing electricity consumption and the associated costs, the
overarching message to all employees should be that “My little bit helps, what are you doing?”. Every effort, no
matter how insignificant it might seem, will contribute towards the company’s performance in this area. Focus on
individual efforts in the company environment should translate into improvements in energy efficiency practices and
corresponding costs savings for employees in their home environments.

Another important consideration in this regard is a highly visible commitment on the part of a company’s senior and
executive management to leading by example in the application of personal behaviour changes.

Once such a commitment is obtained, it will in all likelihood prove necessary for companies to employ various
well-established best-practice methodologies for improving energy efficiency performance. These might include the
appointment of energy efficiency ‘Champions’ within functional divisions, the establishment of inter-departmental
competitions in the area of energy savings or the creation of various divisional or individual incentives to promote
energy efficient behaviour.

Every bit helps, and employees will only do as much as they see senior management being
willing to do.

FILTERS:

Buildings: In terms of the physical spaces occupied by a company, the areas that exhibit the most significant potential
for meaningful behaviour change interventions would be those associated with lighting, water heating and HVAC
(heating, ventilation and air conditioning systems). In certain instances, such as in open-plan offices or factory
environments, control over these systems by individual employees is somewhat limited. Under such circumstances,
the most effective interventions might prove to be technology-related and therefore implemented at an operational
level. In other instances, however, individual behaviour can play a significant role in reducing building-related
electricity consumption through measures such as turning off lights and air conditioners, or the manner in which
employees make use of water heating systems and kitchen appliances. Similarly, personal space heating and/or
cooling, particularly from the use of employee-owned appliances (heaters, cooling fans etc), represents an area of
significant potential for energy efficiency gains, albeit one in which it might prove relatively difficult to implement
meaningful levels of behaviour change.

Communication: Effective and targeted communication is critical to any meaningful levels of behaviour change within
the company. In this regard the operations, HR and communication functions within a company will be required to
collaborate effectively to:

  • firstly identify concrete opportunities for electricity consumption reductions;
  • secondly create an effective internal communications strategy and campaign that promotes the necessary
    behaviour change;
  • thirdly incentivise this behaviour change amongst employees and finally measure the impacts achieved
    by the campaign. Similarly, the company will in its annual reporting processes need to be in a position
    to effectively communicate the collective impacts of its behavioural change interventions in the area of
    energy efficiency to internal and external stakeholders.

 

MATERIAL ISSUE 2: DEPENDENCE ON EXTERNAL FACTORS

 

2.1 Strategic Interventions

In many instances the ability of companies to implement effective energy efficiency solutions particularly those
related to technological innovations or physical infrastructure is constrained by external factors or by relationships
with external stakeholders. An example of such a situation might include limitations on the ability of companies to
implement certain energy efficiency technologies in rented buildings due to resistance from landlords. In order to
overcome such constraints it is necessary for companies to firstly develop policies and strategies aimed at dealing
with external factors or stakeholders, and secondly implement these policies and strategies effectively so as to
maximise the company’s decision-making ability in areas related to electricity consumption and energy efficiency.

FILTERS:

Buildings: This area would appear to be one in which external factors can potentially play the most significant role
in inhibiting energy efficiency and behaviour change initiatives. As mentioned above, in certain instances, the
physical constraints imposed by an office or commercial space in which a company is located, or the attitudes of
landlords, property managers or property developers, can very effectively limit the ability of companies to change the
energy consumption behaviour of their employees. It is therefore necessary to incorporate consideration for energy
efficiency gains and electricity consumption reduction in terms of aquisition, construction, refurbishment or rental
at a strategic level.

Operations: Theoretically, companies should be in a position to limit the influence of external factors within their
operational practices. In reality, however, external stakeholders can often be directly impacted by the operational
practices adopted by companies, and any changes to these practices need to be made with due consideration of
their potential impacts. Examples in this regard might include external environmental or social impacts arising from
changes to production schedules to reduce electricity demand during peak periods.

Suppliers: Supply chains can present companies with a fait accompli regarding the embedded energy consumption
of the products that they are required to procure. It is becoming increasingly the case that companies are presented
with accurate information in this regard and with products and services that use energy efficiency as a selling point.
It is therefore vital that procurement policies and strategies are developed to take such considerations into account.

Customers: In an era of increasing customer awareness and activism, improvements in energy efficiency can provide
an important competitive advantage. As a result, it is vital that a percentage of the financial benefits arising from the
execution of a company’s strategies in this regard be passed on to customers.

Communication: Ongoing communication with stakeholders, both internal and external, of the strategic
considerations that inform the decision-making processes of a company in the area of energy efficiency and
electricity consumption reduction is vital to the successful execution of its strategies in this area. Similarly, the
successful execution of energy efficiency strategies, particularly where these involve a process of effectively
addressing external factors, should be broadly communicated both internally and externally.

2.2 Management Interventions

The impact of external factors on a company is very often far more apparent at a middle management or operational
level than at a strategic level, particularly in circumstances in which strategies are developed with insufficient
understanding or consideration of operational realities. For this reason, it is vital that a process exists for upward
communication from middle management into strategy development processes, for example through the effective
execution of processes related to risk and impact assessment.

Managers should be effectively mandated to execute strategic decisions in their engagement with external actorsin
order to maximise the company’s decision-making ability. They should also be evaluated and incentivised according
to the successes they are able to achieve in securing such independence.

In this regard, functional areas such as finance, operations and procurement are once again key to maximising the
ability of a company to act independently, in its own interest and those of its stakeholders, in the area of energy
efficiency and electricity consumption reduction.

Managers need to be effectively empowered to reduce external influences that could
negatively impact on energy efficiency initiatives. They also need to be evaluated and
incentivised according to their success in doing so.

FILTERS:

Buildings: Buildings are often the area in which the highest potential exists for operations-related energy
efficiency improvements in this area. It is also an area, in which companies are often the most constrained in
their ability to implement these interventions. As a result, it is often in the interest of companies to allocate
significant human and financial resources to realising the energy efficiency potential that exists in this area.
While the interventions themselves may be primarily technological in nature, the behavioural element lies in
effectively empowering and incentivising management representatives to engage with external actors in order
to implement these. Examples in this regard might include engagement on the part of finance, procurement
and operational management with landlords, property managers or developers regarding energy efficiency
improvements that can be made to prospective or existing buildings.

Operations: Changes to operational practices can have a significant impact on the external stakeholders or external
environments of companies. It is therefore important that management representatives concerned with operations
be empowered to engage directly with external stakeholders to minimise such impacts.

Suppliers: Suppliers and service providers are often the external stakeholders that most directly impact the ability
of companies to implement energy efficiency and electricity consumption reductions at an operational level. The
existence of long-term supply contracts or existing relationships with established suppliers can often reduce the
ability of companies to implement effective solutions. It is important that the financial, procurement and operations
functions within companies collaborate effectively on an ongoing basis to limit the potential negative impact of
entrenched bias towards existing or preferred suppliers. This will ensure optimum outcomes in this area.

Communication: Effective communication is vital to driving operational interventions aimed at improving energy
efficiency particularly when these involve external actors or stakeholders. The communication function within the
company will therefore play a critical role in developing and disseminating appropriate messaging to stakeholders
regarding the company’s energy efficiency strategies, programmes and targets.

 

MATERIAL ISSUE 3: REPUTATIONAL IMPACTS

 

3.1 Strategic Interventions

Organisations increasingly run a significant risk of negative perceptions based on their energy consumption
patterns and practices. This certainly appears to be the case for many companies in energy-intensive
economic sectors, but it can equally be the case for companies that are observed or considered to be ‘not
doing their bit’ to save electricity. For this reason, it is critical that the senior management of companies
is aware of the reputational risks attached to such perceptions and that they develop strategic plans and
policies that publicise their energy efficiency initiatives and counteract any negative perceptions related
to their energy use.

FILTERS:

Buildings: Some of the most visible indicators of inefficient and wasteful electricity consumption are those
related to the management of a company’s buildings. Irrespective of the actual levels of electricity that
these buildings consume, the visual spectacle of an empty office block ablaze with lights, or a fully floodlit
plant or factory at which production is shut down for the night, can prove highly detrimental to a company’s
reputation as a responsible corporate citizen. For this reason, relatively simple technological and behavioural
interventions can play a vital strategic role in counteracting these perceptions. It is beneficial that the
implementation of these interventions is recognised and implemented as a strategic imperative.

Operations: It is in the strategic interests of any company that irresponsible electricity usage practices be
eliminated from its operations. Such practices might be related to the less than optimal use of machinery, or
stand-by practices for office and other equipment. While the electricity consumption associated with these
practices might not be particularly high, the reputational impact arising from such sub-optimal practices can
be far more significant.

Suppliers: The most obvious strategic risk arising from negative perceptions regarding irresponsible or
inefficient energy use is that of potential disruptions to essential supply chains. Any risk in this regard should
be assessed in a strategic context and mitigation actions implemented as a strategic imperative.

Customers: Negative perceptions regarding irresponsible energy consumption can certainly impact customer
perceptions of a company and lead directly to a slump in sales, revenue and profitability. The existence of
such potential impacts should of course be considered as a strategic threat and be addressed at a strategic
level by senior management.

Communication: in order to counteract the potential negative perceptions described above, it is vital that companies
clearly communicate, both internally and externally, their energy efficiency strategies, programmes and objectives,
that such communication be considered as a strategic imperative and that it consequently receives sufficient
resources to achieve the company’s identified strategic objectives in this regard.

3.2 Management Interventions

In order to effectively support the strategic emphasis placed on energy efficiency interventions as a means to address
potential reputational impacts, it is necessary that companies implement a variety of management-level interventions
and processes aimed at enhancing their reputation as responsible electricity users. These might include a variety
of technological innovations and measures aimed at impacting the behaviour patterns of middle management
representatives in a number of functional centres such as procurement, operations, HR and communication.

FILTERS:

Buildings: Buildings present a highly visible indicator of responsible or irresponsible electricity use. In terms of the
Energy Efficiency Ratings Index, the inclusion of usable space as a metric against which electricity consumption is
measured, means that the space occupied by companies is directly relevant to their position on the Index and their
performance relative to their competitors. Any and all interventions aimed at reducing electricity consumption in
a company’s buildings will result in a performance improvement in the Index. In this regard, potential behavioural
interventions aimed at middle management representatives within companies might include the promotion of
collaboration between operations and procurement functions in the implementation of various energy efficiency
technologies within company buildings, along with the publicising of these interventions, both internally and
externally, by the company’s communication function.

Operations: Significant opportunities exist for operational managers to enhance the reputation of companies as
responsible consumers of electricity, through the implementation of relatively simple energy efficiency improvements
within standard operating procedures and practices. These operational managers should therefore be encouraged and
incentivised to identify and implement such changes within their respective areas of activity.

Suppliers: In line with the strategic imperatives described above, the procurement function within companies should
be appropriately empowered and incentivised to negotiate with suppliers on the basis of both their own company’s
energy efficiency performance and its expectations of suppliers in this regard.

Communications: The communication of a company’s strategies, targets and achievements in the area of energy
efficiency and electricity consumption reductions are important for to avoiding addressing negative perceptions
regarding electricity use. As a result, communications professionals within a company should be appropriately
informed, empowered and incentivised to communicate effectively regarding these issues.

3.3 Behavioural Interventions

When developing initiatives aimed at protecting or enhancing the reputation of companies as responsible electricity
consumers it is imperative that employees at all levels understand that the responsibility for achieving this objective
rests as much with them personally, as it does with their colleagues or the company’s management. Once this sense
of individual and collective responsibility is in place, it would appear likely that various behavioural interventions will
have a far higher rate of support and uptake and consequently a far higher impact within a company.

Once these factors are in place, companies will be in a position to design and implement an appropriate set of
behavioural interventions aimed at equipping employees to authoritatively promote their energy efficiency and
electricity consumption reduction initiatives. These interventions might include internal and external advertising and
promotional material regarding energy efficiency projects and programmes, or internally focused training initiatives
on the expected and achieved impacts of these initiatives. A high degree of collaboration will be required between
the company’s HR, training and communications functions to achieve the required outcomes.

When it comes to energy efficiency and changing behaviour around energy use, the common
message in any company, from top to bottom, must be that we’re all in it together.

FILTERS:

Buildings: Since this area is often the easiest in which to showcase tangible projects that result in energy efficiency
gains, it should reasonably also be an area in which significant emphasis is placed on providing internal and external
stakeholders with positive examples of successes achieved in reducing electricity consumption. Such examples
might include promotional materials or visual representations of the electricity saved in company buildings through
energy efficiency initiatives.

Operations: Similar to changes that can be made to operational practices and procedures at management level, the
behaviour of employees in various operational functions can often result in significant improvements in internal and
external perceptions regarding electricity use.

Suppliers: It is vital that those employees dealing directly with suppliers are familiar with the energy efficiency
initiatives implemented by their company and that they are equipped to communicate these on a formal or informal
basis. This process can in turn serve to inform and motivate suppliers to improve their own energy efficiency
performance, thereby creating a positive impact within a company’s supply chain. This is particularly the case in
circumstances where supplier engagement is accompanied by an implicit or explicit expectation of improved energy
efficiency within a company’s supply chains.

Customers: Customer-facing employees should be well-versed in the structure and impacts of a company’s energy
efficiency initiatives, enabling them to communicate these to customers and thereby enhancing the company’s profile
and mitigating reputational risk. Employees should also be appropriately incentivised to undertake such reputation
development activities in the course of their daily activities.

Communication: The activities described above all involve some form of communication with employees, or by
employees with various stakeholder groups. Communication must bealigned with the formal communication of the
company regarding its energy efficiency and electricity consumption initiatives. As an example, it would be of very
little value for employees to be communicating with stakeholders in the manner described above, if energy efficiency
initiatives were not comprehensively addressed in the company’s integrated annual report or on its website. It is
equally important that effective communication be undertaken regarding a company’s behaviour change initiatives in
this area, especially since these are often considered as ‘soft’ interventions.