Whether or not you’re into
environmentalism, saving energy is a smart business strategy.
Consider the fact that small businesses in the US spend more than $60 billion on energy. One survey found that the majority of small and medium-sized firms spend more than 10% of their annual revenue on electricity.
That’s a big slice of your business that you’re paying out just to keep the lights on. So if you can cut those costs by being more energy-efficient, you’ll see the benefit immediately on your bottom line.
In this tutorial, we’re going to look at the benefits of saving energy, and some simple strategies you can use to begin saving today. We’ll also cover how you can decide whether it’s worth making bigger investments like installing solar panels, and show you how to access government grants and tax credits for green businesses. And we’ll talk about how you can use your eco-friendly credentials to win new customers.
Step 1: Why Save Energy?
If you still need some convincing, here’s a quick rundown of the benefits you can enjoy from becoming more energy efficient:
According to the US government’s Energy Star program, small businesses can cut their utility costs by 10-30% “without sacrificing service, quality, style, or comfort.” A few concrete examples:
- Vic's IGA Market in Sacramento, CA, saved more than $48,000 a year by installing brighter, efficient T-8 lamps/electronic ballasts, a new chiller compressor, and new, enclosed freezers to replace old, open multi-deck freezers.
- River Run Bed & Breakfast in Kerrville, TX, saved $2,400 a year by installing efficient lighting, insulation, high-efficiency heat pump units, programmable thermostats, and variable speed drives on air circulating fans.
- Music Mart, Inc. in State College, PA, saved $1,840 a year by upgrading its lighting and replacing two old air conditioners with newer, more efficient models with timers.
We’ll cover the customer benefits in more detail in step 5, but for now we’ll just say that surveys show environmental considerations becoming more and more important in consumers’ spending decisions, particularly among the younger generation. If you can genuinely claim to be a “green” business, you’ll not only see cost savings, but also generate more revenue from environmentally-conscious customers.
“The environment” doesn’t just mean the global environment—it’s also the workplace. When you replace old, clunky air conditioners with newer, more efficient models, or upgrade the lighting, or add insulation, the result is often a much more comfortable working environment for your staff. The new lighting at Music Mart, for example, generated the same amount of light, but much less heat, a big benefit for people working there all day.
A Cleaner Environment
If you use less energy, that means a bit less mining, drilling and transportation of coal, oil and gas, a bit less air pollution from burning these fuels, and a few more resources left for the next generation to play with. We’re focusing more on the direct economic benefits to your business in this tutorial, but the wider benefits are also very real.
Step 2: Simple Savings
So how do you go about saving energy? There are essentially two approaches: you can take a lot of small, low-cost actions, hoping that the small efficiency gain from each one adds up to major savings, or you can go for a more expensive project with higher impact, like overhauling your building’s heating system or installing renewable energy generators.
We’re going to look at the small, low-cost actions first, and then in step 3 we’ll move on to the bigger projects.
Knowledge is Power
Before you dive into making changes to your business, you need to assess your current energy usage. Tools like Energy Star’s free Portfolio Manager enable you to input details about your company’s building or buildings, and see how efficiently you’re using energy. The system will give you a score of between 1 and 100, with a higher score indicating more efficiency.
You might find that your head office scores 75, for example, but your warehouse scores 30, and so you’d focus your efforts on the warehouse first. You can then track the impact of your energy efficiency measures over time.
Also check what your utility company can do for you. Many now offer access to software that shows how you’re using energy, or will provide free or low-cost energy audits to help you identify areas for improvement.
Nearly 75% of all energy upgrades by small businesses are related to lighting. That’s because there are lots of low-cost things you can do to make immediate savings.
If you’re still using traditional “incandescent” light bulbs, for example, you should know that only 5% of the electricity they consume is converted to useful light. Energy-efficient light bulbs cost more up front, but last 10 times as long and are 4 times as efficient. It’s a simple improvement to make.
Occupancy sensors are also relatively cheap, available for between $25 and $80, and are a great option for areas that aren’t used much. In restrooms, for example, they can save up to 75% of energy costs, and in meeting rooms up to 65%.
And think about whether you can reduce the amount of lighting, or make better use of natural light. Hallways and corridors don’t always need bright lighting, and sometimes people working at computers prefer slightly dimmer light to give greater screen contrast.
It sounds simple, but it makes a big difference. Just switching off your computers and photocopiers when they’re not in use can make big savings. Powering a large photocopier down at night can save $660 a year, and doing the same with computers can save $68 a year. Not huge savings, but they’re easy actions to take, and if you’re using a lot of equipment it really adds up. Make sure computers are set to power down automatically when not in use.
Heating and Cooling
This is the biggest energy user, 39% of energy used in US commercial buildings goes on heating, ventilation and air conditioning.
Simply cleaning or replacing air filters regularly (at least quarterly) gives you better energy efficiency, and using a programmable thermostat keeps costs down. Using ceiling fans to help air circulating will reduce your energy usage, and not only in summer—they’re also good in winter, because they push warm air down from the ceiling.
Think about sunlight, too. Blocking direct sunlight from the windows in summer keeps down air conditioning costs, while letting it in during winter gives you some free heating. The impact of each of these small actions may be minor, but together they can add up to significant cost savings.
Step 3: Major Investments
So what if you’ve already picked all the low-hanging fruit? You’re monitoring your energy usage, and you’re being as efficient as possible in major areas like heating and cooling, lighting and office equipment.
The next step is to look at major projects to upgrade your facilities. Examples would be putting solar panels on the roof, overhauling the heating system, re-insulating all your buildings, or investing in brand new, energy-efficient equipment.
This type of project often requires major upfront investment, however, and you want to make sure you get a reasonable payoff. So how do you calculate the expected savings, and decide which project is worth implementing?
Let’s say that you plan to buy a new air-conditioning system for your office building. The new system costs $600, but you’re currently spending $800 a year on air conditioning, and the new system is 25% more efficient, meaning that you’ll save $200 a year. Is it worth it?
To calculate how long it will take for the new system to pay for itself, simply divide the cost of the improvement by the annual energy savings. In this case:
Payback period = 600 / 200 = 3 years
This looks like a good investment. The new equipment will pay for itself in 3 years, and after that you’re in the money for as long as the equipment lasts.
This is a simple example, but you’d use the same method for more complex installations like solar panels. Estimate the energy savings you can expect, and then divide the initial cost by the annual energy savings. Generally a payback in 3 or 4 years is worthwhile; longer than that, and you’ll be waiting a long time before you start to see the benefits.
Step 4: Get Government Assistance
There are many government programs to encourage businesses to embrace energy efficiency. So as well as the cost savings from the improvements you make, you can access tax credits, grants, loan programs and other government assistance. We’re focusing on US programs here, but similar programs exist in many other countries.
You can get a federal tax credit for 30% of the cost of installing solar energy systems or other renewable energy measures, for example. State and local governments also have a huge number of programs. You can search for them by using this Department of Energy online search tool. Simply put in your state, and it will give you all the energy-efficiency tax credits and deductions available to you. In New York, for example, there are 132 different programs aimed at particular areas, towns or business types.
Also search Grants.gov for special energy efficiency grants you could access. Right now, for example, the Renewable Energy for America Program is offering anywhere from $5,000 to $500,000 to rural small businesses and farms that are making energy efficiency improvements. The closing date for applications is July 7, 2014. The opportunities change all the time, so keep going back to see if there’s something that applies to your business.
There are also special Department of Energy loan programs, EPA grants, Small Business Innovation Grants and more. You can get more details at the Small Business Administration website.
Step 5: The Power of Green Marketing
A recent survey found that 71% of US consumers consider the environment when they’re making purchases. Separate research found that 88% of American self-identify as “conscious consumers” and 86% as “environmentally-friendly.”
That means that a high proportion of your customers are likely concerned about the environment to some degree, and will think more highly of your business if you make them aware of the energy-saving measures you’ve taken.
If you’ve made big improvements, it could be a newsworthy story that local media outlets would pick up, giving your company free publicity and spreading the image of your company as environmentally conscious.
You can also highlight your firm’s green credentials in your marketing. Be careful, though, because consumers have become wary of “greenwashing,” or companies making unsubstantiated environmental claims. If you’ve saved energy in your buildings, but are still running a fleet of gas-guzzling delivery trucks or manufacturing non-recyclable products, attempts to present yourself as a green firm could backfire.
So it’s best to avoid making sweeping claims, unless environmental sustainability truly is at the heart of your whole business. Stick to specific facts that you can back up, for example mentioning in your marketing brochure that you cut energy usage by 30% and are committed to making further improvements.
Also think beyond individual consumers. Green credentials can give you an advantage in the B2B (“business to business”) space too. Many large companies, organizations and government departments have their own environmental objectives. If they can do business with an eco-friendly supplier (i.e. you), then that helps them meet their goals too.
A Smart Business Decision
In this tutorial, you’ve seen how your business could cut costs by taking steps to save energy. You’ve learned the benefits of saving energy, how to put it into practice both through small steps and major projects, how to access government grants, tax credits and other assistance, and how to get extra benefits by communicating the changes to your customers.
As you can see, “going green” isn’t about
making sacrifices or spending more money. It’s actually a smart business
decision that can cut your costs, make you eligible for government perks, and
boost your popularity with employees and customers. You need to evaluate each
investment, of course, to make sure it pays off, but if you invest wisely, you
could see a significant impact not just on the environment, but also on your
company’s bottom line.