Companies control majority of US energy use, but most lack efficiency goals

Blog Post | November 21, 2019 - 12:38 pm
By Lowell Ungar, Senior Policy Advisor

As companies and even the US Chamber of Commerce embrace efforts to address climate change, new ACEEE research finds that companies directly control about three-fourths of US energy use and the associated emissions and do some reporting on efficiency. But most do not set energy-saving targets or have comprehensive efficiency plans.

In a striking but quiet reversal, the US Chamber of Commerce changed its position on climate change earlier this month to support US participation in the Paris Accords. That followed a reversal by the Business Roundtable in August, when the group of 181 of the nation’s leading corporate CEOs changed its statement of a corporation’s purpose to put serving customers, employees, suppliers, and communities—including the environment—on par with serving shareholders.

Despite these reversals, the two major associations still lag behind many of their members on corporate sustainability and climate change. Companies are setting sustainability goals, taking steps to reduce emissions, and reporting progress in corporate sustainability reports and financial disclosures.

Companies are key

They have plenty of opportunities. In our issue brief released today, we find that companies directly control about three-fourths of US energy use and the associated carbon dioxide emissions. They own office buildings, manufacturing plants, power plants, and trucks. We know that significant cost-effective energy and carbon savings are available throughout their value chains from lighting retrofits, building energy management systems, smart manufacturing, multi-modal freight systems, and many more efficiency measures (our recent report found half of projected energy use and carbon emissions could be saved by 2050).

Companies can also reduce indirect or “scope 3” emissions by making their products more efficient, giving their employees cleaner commuting options, and helping their suppliers reduce waste in their operations.

Given its large and cost-effective potential, energy efficiency should be the foundation for achieving corporate climate and sustainability goals. For example, last year, FedEx achieved almost 2 million tons of carbon emissions reductions (the equivalent of taking 400,000 cars and SUVs off the road) from more-efficient aircraft and flight operations, while also saving $394 million.

How do 30 companies stack up?

Our issue brief reviews how much companies are using efficiency in their sustainability efforts and how they can do so more effectively. It builds on a set of case studies we wrote last year.

The good news: Companies recognize that energy efficiency contributes to sustainability. We reviewed the sustainability or corporate social responsibility reports of 30 Fortune 500 companies to see how they talk about efficiency in four areas: in their buildings and plants, in their transportation and distribution, among their suppliers, and in their products.

Each report mentions efficiency in at least one area, and most track some company-wide energy use or efficiency metric. Often companies focus on areas of particular importance to them (e.g., Alcoa on smelters, UPS on its transportation fleet). But few companies talk about each of the four areas, and there is no consistency in the metrics companies use.

More companies need specific efficiency goals

Our review and other, more extensive reviews also find that well under half of companies set energy efficiency targets, an important tool to focus attention on energy-saving opportunities, help efficiency projects compete for limited capital investments, and ensure management visibility. Companies can set these goals based on an evaluation of potential savings or aligned with science-based targets for greenhouse gas emissions reductions.

These goals can take different forms, such as Bank of America’s goal to reduce the energy use of its buildings by 40%, Caterpillar’s goal to reduce its energy intensity per dollar of revenue by 50%, or multiple airlines’ fuel-savings goals.

Increased financial reporting on climate risks

There is increasing focus on financial reporting to address large investors’ concerns about climate risks, including CDP’s broad collection of climate-related information from companies and multiple environmental, social, and corporate governance ratings of companies, as well as official filings. These also lack common metrics for efficiency and in some cases lack transparency.

The international Task Force on Climate Related Financial Disclosures, however, has created a broad framework for reporting, and the US-based Sustainable Accounting Standards Board has created prescriptive disclosure standards for 79 industries, many of which include efficiency metrics. It is too soon to know how much these guidelines will improve energy-efficiency and climate reporting and, ultimately, progress.

Energy efficiency measures can provide large cost-effective savings to meet sustainability goals, and sustainability goals and reporting can provide motivation to improve efficiency. We recommend that companies set energy efficiency targets, pursue efficiency across their value chains, set up systems for continuous improvement, and report on overall progress. We also recommend that reporting organizations and investors seek to standardize disclosure (by industry) while also consolidating reporting to reduce needed effort. With efficiency, companies can improve both their bottom lines and the world’s climate.