Energy Management Strategies Should Include Peer Benchmarking
We all do it. We started in middle school comparing sneakers, basketball skills and grades in Algebra; today it’s about whose lawn is greener, car is cleaner or vacations are most fun. Society tells us that comparisons are not productive, but I’m here to tell you otherwise. I’m giving you permission to compare yourself to your neighbor and feel good about it. But this time it’s not about basketball shoes or even financial performance – it’s about comparing energy and sustainability performance.
We’ve talked a lot about how internal benchmarking is an important part of an energy management strategy, and it still is. Internal benchmarking enables energy managers to compare energy use across their portfolio of locations and quickly identify outliers – facilities or operations that are performing above or below the norm in consumption. The ones that fall below the norm are sites that should be reviewed and potentially designated for energy efficiency improvement. This evaluation is one of the first steps in an energy management plan, as it provides a quick and easy way to make sites more efficient and save costs.
On the flip side, peer benchmarking provides a performance gauge for energy efficiency relative to competitors and peers within the same vertical market or geography. While internal benchmarking is a great way to identify areas of inefficiencies within your own portfolio, it does not evaluate against others in your region or sector. Even though you may be performing great compared to your own established baseline, you may be performing poorly when compared to others in your niche.
Here are three reasons why peer benchmarking should be a part of your energy and resource management strategy.
- The ability to compare a portfolio against a true “peer” group and establish metrics for gauging relative performance yields much richer insight and a true energy baseline. At the same time, it also establishes a stronger business case for investing in energy and resource management programs. Knowing the leaders and the laggards in the industry and marking the company’s place on that scale helps with the establishment of goals and the prioritization of projects. It’s particularly important for executive stakeholders to gain this perspective in order to understand their broader position in the market and create benchmarks for achievement.
- There is growing regulatory pressure across the U.S. to benchmark, label and disclose the energy performance of commercial buildings. In just the past year, nine cities and two states have been impacted by new legislation that requires energy reporting for buildings that meet certain qualifications. This trend is only expected to continue, with several additional cities and multiple states expressing interest or considering similar requirements. These regulations create a new set of challenges – if a building is disclosed as having relatively poor energy performance compared to its peers, it can negatively impact that building and that particular site’s financial performance. These new regulations may also result in the scenario where less energy efficient buildings become less competitive and thus require rent discounting to attract prospective tenants.
- Environmental performance is becoming an increasingly important competitive differentiator for companies and a financial driver. Now more than ever, investors are looking at company’s environmental stewardship and comparing it to others in the same industry, which is reflected in the fact that more and more companies are reporting their sustainability initiatives and resource consumption. And it’s not just investors, but consumers too. The Edelman 2012 Good Purpose study shows that when quality and price of a product are deemed equal, social purpose (which includes energy and sustainability initiatives) has consistently been the leading purchase trigger for global consumers. Using peer benchmarking, companies can have further proof that they are doing better than their competitors, providing more incentive for people to invest in them and purchase their products.
Up until this point, external benchmarking has been difficult as available data has been scarce, outdated and self-reported (and therefore not reliable). Luckily, new regulations are making public data more readily available, while new technologies and services are making it easier for companies to quickly benchmark their energy consumption against their peers.
Bob Zak is Senior Vice President of Facility Solutions at Ecova, a total energy and sustainability management company. Bob has more than 20 years of experience in the facility automation and energy management sectors, and he is responsible for helping Ecova’s clients gain the insight they need to make informed decisions about energy and utility usage across their entire portfolio.
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