Will energy costs break your business?

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I just got back from holiday when I saw something wrong in my local shopping centre. There it was: another empty shop. A business that had run smack into the wall. It was the video shop. Now, video stores have been under threat for a number of years. A whole chain went under administration in the UK recently (528 stores employing 4,000 people). But I’m not here to talk about the reasons why video shops are collapsing (hint: the rise of e-commerce) and retail chains going under (50 folded last year in the UK alone).

Ever-rocketing energy costs didn’t force that business to close. But not caring about it may have been just one of the many indicators of laxness in the business. For example, I never once saw the owner ever in his store. Says something, doesn’t it?

Now, let’s move on to a more extreme case. I met a farmer the other day, an organic farmer, who is producing healthy foods on his farm just outside of Johannesburg. Among his challenges are the costs of these products. Just take this for example: he is selling his free range eggs at double the price of those in the supermarket chains. But he should be charging three times what supermarkets charge to make a profit. This is just one of his products in his range of organically produced fresh foods.

You think this small business person is concerned about energy costs? Electricity prices have increased threefold over the past three years. The fuel price has shot up. He’s had to become an expert. He’s got all sorts of things going to reduce electricity. He’s looking at ways to reduce use of electricity and petroleum products for the farm and deliveries.

When energy is a raw material input into your small-scale farming business or small manufacturing operation then reducing energy costs really matters.

I’ve been involved in energy efficiency projects for a number of years and have attended so many training courses to keep up to date I’ve lost count. Just last week I attended two-days on a UNIDO ISO 50001 system implementation seminar. If there’s one thing I’ve learned it’s that the secret to reducing costs is not a piecemeal, clutching-at-straws approach or merely telling employees to switch things off.

It starts with an assessment of costs. You first need to identify and monitor your energy costs. Even if you can’t reduce these costs right away, you can start thinking of innovative ways to reduce them.

Then you can look at the major ways to reduce energy which includes behaviour change (not sustainable because you have to remind and motivate people every day to think about switching equipment off when it’s not being used), new energy-saving technologies and total system change (with some investment).

But even this doesn’t go far enough. You need an energy management system (EMS). It doesn’t matter whether this is an informal system or certified through some certification body like the ISO (the energy efficiency standard is the ISO 50001). Just by documenting and developing a system you’ll learn a lot about energy use.

Identifying big energy users in your business will give you a strong indication of where to start. Forget clichés like “low hanging fruit”. This is parrot-like consultant-speak for merely finding obvious low-cost opportunities to reduce energy costs (to entice you). Instead, dive deep into your business processes and identify energy costs that are ripping away your profits.

All this talk boils down to:

Identify your energy-guzzling activities, find innovative ways to reduce your energy costs and then keep reducing through an energy management system.

Talking about costs may give you a warm feeling but only action will make the necessary changes you need to survive and thrive in your business.

PS If you can’t stand the pain of higher energy costs any longer, shoot me an email now and I’ll get back to you right away.


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