'Leadership & Change for Energy Efficiency in Accounting & Management' to CIMA Members on 3 November 2011 (with Guest Speaker Bruce Precious, Sustainability Manager - Office and Industrial / Business Parks, The GPT Group)

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  • These materials will be referenced to: Benn, S., Brown, P., Brown, D., Crittenden, P., and Krithinakis, A., 2011. Leadership & Change for Energy Efficiency in Accounting & Management: Educators Interactive Seminar. 27 October 2011. Project funded by the Office of Environment & Heritage, Department of Prime Minister & Cabinet NSW. Benn, S. 2011. Leadership & Change for Energy Efficiency in Accounting & Management: Educators Interactive Seminar , Version 1.0, September 2011, Report for NSW Office of Environment & Heritage.
  • Accountants and business managers can contribute – but they can’t do it alone Communication and influencing skills can be as important as technical skills
  • 'Leadership & Change for Energy Efficiency in Accounting & Management' to CIMA Members on 3 November 2011 (with Guest Speaker Bruce Precious, Sustainability Manager - Office and Industrial / Business Parks, The GPT Group)

    1. 1. CIMA Event 3 November 2011 Leadership & Change for Energy Efficiency in Accounting & Management
    2. 2. Disclaimer <ul><li>This presentation presents the views of the authors, and not the views of UTS, or any other party. </li></ul><ul><li>This presentation is for educational purposes only and does not contain specific or general advice. </li></ul><ul><li>Please seek appropriate advice before making any financial decisions. </li></ul><ul><li>Reference list is provided at the end of the presentation </li></ul>
    3. 3. Referencing this material <ul><li>This material has been developed by UTS Business School as part of a project funded by the Office of Environment & Heritage NSW under the Energy Efficiency Training Program. </li></ul><ul><li>If using this material please acknowledge as follows: </li></ul><ul><ul><li>Benn, S., Brown, D., Brown, P., Crittenden, P., and Krithinakis, A., 2011. Leadership & Change for Energy Efficiency in Accounting & Management, Chartered Institute of Management Accountants NSW Branch Interactive Seminar. 3 November 2011. Project funded by the Office of Environment & Heritage, Department of Prime Minister & Cabinet NSW. </li></ul></ul>
    4. 4. Welcome & introductions Professor Suzanne Benn UTS Business School
    5. 5. Interactive Seminar - Aim <ul><li>Highlight the role that you can play in managing risk and delivering opportunities through energy efficiency </li></ul><ul><li>Encourage you to get more involved with energy efficiency in your organisation! </li></ul>
    6. 6. Interactive seminar - outline <ul><li>Energy efficiency – the business context </li></ul><ul><li>Case Study – The GPT Group </li></ul><ul><li>The role of the management accountant </li></ul><ul><li>Group discussion </li></ul><ul><li>Panel session </li></ul>
    7. 7. Project funding <ul><li>Office of Environment and Heritage </li></ul><ul><li>Energy Efficiency Training Program </li></ul><ul><ul><li>‘ supports the development and delivery of higher education courses that enhance energy efficiency knowledge and practice’. </li></ul></ul>
    8. 8. Key Project Partners <ul><li>UTS Business School </li></ul><ul><li>Ernst & Young </li></ul><ul><li>Chartered Institute of Management Accountants (CIMA) </li></ul><ul><li>Westpac </li></ul><ul><li>TAFE NSW, Sydney Institute </li></ul>
    9. 9. Project Overview
    10. 10. Introductions <ul><li>Introduce yourself to a few people around you … </li></ul><ul><ul><li>Your organisation </li></ul></ul><ul><ul><li>Your role </li></ul></ul><ul><ul><li>Why energy efficiency is relevant to you and your work </li></ul></ul>
    11. 11. Energy Efficiency – the business context Patrick Crittenden Sustainable Business P/L
    12. 12. What is Energy Efficiency? <ul><li>Energy efficiency primarily refers to end-use efficiency. </li></ul><ul><li>It involves delivering equal or greater levels of “energy services” with less energy supply. </li></ul><ul><li>Energy services include cooling, heating, lighting, driving motors, operating equipment and appliances. </li></ul>Dunstan et al. 2011, p.10
    13. 13. Electricity generation by fuel type in Australia Source: Geoscience Australia 2010 p34
    14. 14. The boundary The electricity supply chain 2 units of light energy delivered 100 units of energy input
    15. 15. The boundary The electricity supply chain 62 units lost 2 units lost 34 units lost 2 units of light energy delivered 100 units of energy input
    16. 16. The boundary Energy efficiency example 80% saving in energy end use delivers benefits across the electricity supply chain
    17. 17. ClimateWorks 2010 “Low Carbon Growth Plan for Australia” Many cost-effective energy efficiency projects exist but are not being taken up
    18. 18. International Energy Agency – 450 scenario Source: IEA (2011) World Energy Outlook Efficiency measures account for 59% of abatement in 2020 26 28 30 32 34 36 38 40 42 2007 2015 2020 2025 2030 Gt 2010 Efficiency 65 57 End-use 59 52 Power plants 6 5 Renewables 18 20 Biofuels 1 3 Nuclear 13 10 CCS 3 10 Share of abatement % 2020 2030 3.8 Gt 13.8 Gt Reference Scenario 450 Scenario
    19. 20. Key reasons for management accountants to get involved with energy efficiency <ul><li>Rising and fluctuating energy costs </li></ul><ul><li>Carbon pricing </li></ul><ul><li>Compliance with legislation </li></ul><ul><li>Licence to operate </li></ul><ul><li>Your competitors are doing it </li></ul><ul><li>Ethical considerations </li></ul>
    20. 21. Rising Cost <ul><li>Electricity prices are rising </li></ul><ul><li>Oil price highly variable </li></ul>Energy efficiency is effective in delivering cost savings
    21. 22. Source: Geoscience Australia, 2010 p18
    22. 23. Source: Geoscience Australia, 2010 p28
    23. 24. Business Risk: Carbon pricing <ul><li>From July 2012 - carbon price of </li></ul><ul><li>$23 a tonne, 2.5% increase p.a </li></ul><ul><li>Fixed for 3 years then market-based </li></ul><ul><li>Direct liability = Direct costs </li></ul><ul><li>Increased costs in the supply chain </li></ul><ul><li>= flow through impact on your business </li></ul>Energy efficiency is the most cost- effective way of reducing the impact of a price on carbon
    24. 25. Business Risk: Compliance with legislation <ul><li>Some relevant current legislation: </li></ul><ul><ul><li>National Greenhouse and Energy Reporting Act 2007 </li></ul></ul><ul><ul><li>Energy Efficiency Opportunities Act 2006 </li></ul></ul><ul><ul><li>Renewable Energy (Electricity) Bill 2009 </li></ul></ul><ul><ul><li>Building Energy Efficiency Disclosure Act 2010 </li></ul></ul><ul><ul><li>Energy and Utilities Administration Act 1987 No 103 </li></ul></ul><ul><ul><li>NSW Water and Energy Savings Action Plans </li></ul></ul><ul><ul><li>And other accounting, reporting, and auditing standards </li></ul></ul>
    25. 26. Business Risk: Compliance with legislation <ul><li>Exposure draft ISAE 3410 Assurance Engagements on Greenhouse Gas Statements </li></ul><ul><li>Environmental Claims in Advertising and Marketing Code </li></ul><ul><li>ISO and other quality assurance guidelines </li></ul>Legislative compliance associated with energy efficiency and greenhouse related issues is increasingly complex
    26. 27. Business Risk: Licence to Operate <ul><li>Some stakeholder perspectives: </li></ul><ul><li>Investors – Can energy efficiency provide a proxy indicator of good management? </li></ul><ul><li>Community – Why isn’t this organisation acting on cost effective opportunities to reduce greenhouse gas emissions? </li></ul><ul><li>Regulators – Perceived market failures justify intervention </li></ul>Organisational stakeholders are increasingly aware that energy efficiency has important business, environmental and social benefits.
    27. 28. Other business drivers and opportunities <ul><li>Your competitors are doing it! </li></ul><ul><li> See public reports from companies in the Energy Efficiency Opportunities program to compare your performance www.energyefficiencyopportunities.gov.au </li></ul><ul><li> See the Carbon Disclosure Project </li></ul><ul><li>www.cdproject.net </li></ul>
    28. 29. Energy Efficiency Opportunities - results <ul><li>207 corporations (end 2010 public reports) </li></ul><ul><li>identified opportunities with a better than 4 year payback </li></ul><ul><li>have the potential to reduce their energy use by an average of 9.8 per cent </li></ul><ul><li>Energy reduction of 141.9 PJ of energy per year = 2.5 per cent of Australia’s total energy use </li></ul><ul><li>financial benefit around $1.2 billion per year. </li></ul>
    29. 30. Ethical Considerations (Greenhouse Gas Emissions) Source: Garnaut Climate Change Review 2008, p 88
    30. 31. Barriers to energy efficiency improvement in business Dunstan et al. 2011, p.10
    31. 32. The GPT Group – Case Study Bruce Precious National Sustainability Manager The GPT Group
    32. 33. Energy efficiency – an important role for management accountants Dr. Paul Brown UTS Business School
    33. 34. Training Needs Analysis – Key Themes <ul><li>Organisational response to energy efficiency needs to be cross-disciplinary </li></ul><ul><ul><li>Accountant as business partner </li></ul></ul><ul><li>There is demand for Energy Efficiency training and training materials for accountants and business managers </li></ul><ul><li>Soft skills as well as analytical/ technical skills are important </li></ul>
    34. 35. Training Needs Analysis – Key Themes (cont.) <ul><li>The rationale for action/ importance of Energy Efficiency is a fundamental starting point </li></ul><ul><li>Application/ approach will vary across: </li></ul><ul><ul><li>Public and private sector </li></ul></ul><ul><ul><li>Type of industry sector </li></ul></ul><ul><ul><li>Firm strategy </li></ul></ul><ul><ul><li>Firm culture </li></ul></ul>
    35. 36. Training Needs Analysis - Skills
    36. 37. Energy Efficiency Fundamentals - Establish your energy base case <ul><li>Not just the level of energy </li></ul><ul><li>It is the expected level of energy, for an expected level of activity </li></ul><ul><li>Expected Energy = Fixed energy + Variable Energy * Activity </li></ul><ul><li>How is this different from estimating ‘pre-determined overhead rates’? </li></ul><ul><ul><li>Units are different ($ and kilowatt-hours or Giga Joules) </li></ul></ul><ul><ul><li>Energy complies with the laws of thermodynamics (unlike people) </li></ul></ul>
    37. 38. Establish your energy base case <ul><li>Estimation methods are similar to cost accounting: </li></ul><ul><ul><li>Regression Analysis </li></ul></ul><ul><ul><li>Modelling / simulation (like input /output analysis) </li></ul></ul><ul><ul><li>Short term metering </li></ul></ul><ul><ul><li>Long term metering </li></ul></ul><ul><li>Engineering models and equipment are used, so work with a specialist </li></ul><ul><ul><li>E.g.. Consider the effect of weather on demand for energy </li></ul></ul>
    38. 39. For example: <ul><li>A building in NT implemented a range of EE projects </li></ul><ul><li>Total Annual Consumption for 04/05 in kWh: 1,605,138 </li></ul><ul><li>Total Annual Consumption for 05/06 in kWh: 1,597,135 </li></ul><ul><li>Naive Energy Saving in kWh: 8,003 </li></ul><ul><li>Linear regression was used to control for differences in weather (the base year had a cool summer) </li></ul><ul><li>Total Annual Consumption for 04/05 in kWh: 1,775,546 </li></ul><ul><li>Total Annual Consumption for 05/06 in kWh: 1,597,135 </li></ul><ul><li>Energy Saving in kWh: 178,411 </li></ul><ul><li>Difference is a 10% saving, vs a 0.5% saving in energy </li></ul>
    39. 40. It is important to clearly identify organisational activities, and boundaries <ul><li>We are familiar with the value chain approach, and the benefits of linking resources consumption with activities </li></ul><ul><li>Figure of Generic value chain (Porter, 1985) sourced from Cooremans (2011) </li></ul>
    40. 41. It is important to clearly identify organisational activities, and boundaries <ul><li>Information ‘should’ link with existing accounting structures </li></ul><ul><li>Base line review is likely to reveal opportunities, which will justify further expenditure as opportunities become known </li></ul>Source: RET 2008
    41. 42. Energy Base case information <ul><li>Here are some examples of the type of information useful for identifying EE opportunities </li></ul>Source: RET 2008
    42. 43. Hints: <ul><li>Start simply, and do something: </li></ul><ul><ul><li>Find out what is happening in your organisation </li></ul></ul><ul><ul><li>Review electricity statements for different facilities </li></ul></ul><ul><ul><li>Review energy supply contracts </li></ul></ul>
    43. 44. Some suggested places to start: <ul><li>Revisit your energy accounting system </li></ul><ul><ul><li>http://www.ret.gov.au/energy/efficiency/eeo/resmaterial/esmg/Pages/default.aspx </li></ul></ul><ul><li>Set up a register and systems to identify and manage energy efficiency opportunities </li></ul><ul><ul><ul><li>http://www.ret.gov.au/energy/efficiency/eeo/resmaterial/csm/Pages/default.aspx </li></ul></ul></ul><ul><li>Obtain subsidised energy audits (for some NSW firms) </li></ul><ul><ul><li>http://www.environment.nsw.gov.au/sustainbus/energyauditing.htm </li></ul></ul><ul><li>Visit our website: </li></ul><ul><li> http://www.business.uts.edu.au/energyefficiency </li></ul>
    44. 45. Hints: <ul><li>Organise data to match current reporting systems </li></ul><ul><ul><li>Eg. Batch vs process costing; KPIs </li></ul></ul><ul><li>Let people know what you are doing, and make data transparent </li></ul>
    45. 46. Hints: <ul><li>Conduct an energy information audit: </li></ul><ul><ul><li>Ensures your organisation captures new knowledge </li></ul></ul><ul><li>Find champions in each major facility and department and let them loose with some decision making rights </li></ul>
    46. 47. Developing the business case for an energy efficiency project <ul><li>Clear identification of the costs and benefit </li></ul><ul><ul><li>Translated into NPV, IRR, Payback etc </li></ul></ul><ul><ul><li>Opportunity cost </li></ul></ul><ul><li>Identifying direct costs and cost savings may rely on engineering analysis, as well as cost analysis </li></ul><ul><ul><li>E.g. A process change effect on your base case and on demand for labour </li></ul></ul><ul><li>All costs and benefits should be included </li></ul><ul><ul><li>Information value, strategic value </li></ul></ul>
    47. 48. Information useful in preparing the business case <ul><li>Costs are easier to identify than benefits </li></ul><ul><ul><li>Labour, equipment, consultants etc </li></ul></ul><ul><li>To assist in the identification of benefits, we have provided a checklist: </li></ul><ul><ul><li>The 6 key drivers of EE discussed in the beginning of the presentation </li></ul></ul><ul><ul><li>a list of benefits identified in reviews of the literature ( Worrell et al 2003; Cooremans, 2011) </li></ul></ul>
    48. 49. Developing the business case for an energy efficiency project <ul><li>Reduced Cost </li></ul><ul><li>Improved temperature control </li></ul><ul><li>Increased reliability in production </li></ul><ul><li>Improved product quality </li></ul><ul><li>Reduced Risk </li></ul><ul><li>Greenhouse gas reductions </li></ul><ul><li>Improved reputation </li></ul><ul><li>Safety </li></ul>Include all business costs and benefits to increase the chance of success
    49. 50. Cost savings from EEO programs <ul><li>Source: Continuing Opportunities Energy Efficiency Opportunities (EEO) Program – 2010 Report, A look at results for the Energy Efficiency Opportunities Program 2006-2010, Taken from public reports of assessments undertaken during the period July 2006-June 2010 </li></ul><ul><li>Energy Savings identified by EEO program firms: </li></ul><ul><ul><li><5% of energy use: 38% of firms </li></ul></ul><ul><ul><li>5 to 20% of energy use: 44% of firms </li></ul></ul><ul><ul><li>20% of energy use: 18% of firms </li></ul></ul><ul><li>Energy savings are equivalent to: </li></ul><ul><li>• emission reductions of 6.0 million tonnes per annum or 1 per cent of Australia’s total greenhouse gas emissions; and </li></ul><ul><li>• financial benefits worth an estimated $700 million per annum. </li></ul><ul><li>The above savings represent an average net financial benefit of approximately $117 per tonne of CO2-e reduced. </li></ul>
    50. 51. Source: Continuing Opportunities Energy Efficiency Opportunities (EEO) Program – 2010 Report, A look at results for the Energy Efficiency Opportunities Program 2006-2010, Taken from public reports of assessments undertaken during the period July 2006-June 2010
    51. 52. Some sources of competitive advantage from EE: REDUCED RISKS (from Worrell et al 2003 and Cooremans, 2011) <ul><li>Reduced hazardous waste </li></ul><ul><li>Reduced dust emissions </li></ul><ul><li>Reduced CO, CO2, NOx, Sox emissions </li></ul><ul><li>Increased facility reliability </li></ul><ul><li>Reduced wear and tear on equipment /machinery </li></ul><ul><li>Decreased liability </li></ul><ul><li>Legal risks </li></ul><ul><li>Carbon & energy price risks </li></ul><ul><li>Disruption of energy supply </li></ul><ul><li>Commercial risk </li></ul>
    52. 53. Some sources of competitive advantage from EE: REDUCED COSTS (from Worrell et al 2003 and Cooremans, 2011) <ul><li>Use of waste fuels </li></ul><ul><li>Reduced product waste </li></ul><ul><li>Reduced waste water </li></ul><ul><li>Materials reduction </li></ul><ul><li>Increased product yield </li></ul><ul><li>Improved equipment performance </li></ul><ul><li>Shorter process cycle time </li></ul><ul><li>Reduced dust emissions </li></ul><ul><li>Reduced CO, CO2, NOx, SOx emissions </li></ul><ul><li>Reduced wear and tear on equipment machinery </li></ul>
    53. 54. Some sources of competitive advantage from EE: REDUCED COSTS (from Worrell et al 2003 and Cooremans, 2011) <ul><li>Decreased liability </li></ul><ul><li>Reduced need for personal protective equipment </li></ul><ul><li>Improved lighting </li></ul><ul><li>Reduced turnover, absenteeism and health costs (improved worker morale, reduced noise, improved air quality and temperature control) </li></ul><ul><li>Reduced needs for engineering controls </li></ul><ul><li>Lowered cooling requirements </li></ul><ul><li>Reductions for labor requirements </li></ul><ul><li>Delaying or Reducing capital expenditures </li></ul><ul><li>Additional space </li></ul>
    54. 55. Soft Skills <ul><li>Soft skills </li></ul><ul><ul><li>Communication </li></ul></ul><ul><ul><li>Influencing others </li></ul></ul><ul><ul><li>Partnering </li></ul></ul><ul><ul><li>Change management </li></ul></ul><ul><ul><li>Team building </li></ul></ul><ul><ul><li>Problem solving </li></ul></ul>
    55. 56. Where to find helpful information about energy efficiency <ul><li>NSW and Federal Government provide training and education materials. </li></ul><ul><ul><li>For example, see: </li></ul></ul><ul><li>www.environment.nsw.gov.au/ www.energyefficiencyopportunities.gov.au </li></ul>
    56. 57. Opportunity to work with UTS as we develop some case studies <ul><li>Some potential topics include: </li></ul><ul><ul><li>Nuts and bolts example of accounting for energy, including data management </li></ul></ul><ul><ul><li>Example of ‘business case’ proposal, including the ranking of projects using abatement curve type analysis </li></ul></ul><ul><ul><li>How to address the ‘rebound effect’ </li></ul></ul><ul><ul><li>Strategies to enhancing employee engagement </li></ul></ul><ul><ul><li>Strategies to enhance behaviour change </li></ul></ul><ul><ul><li>How to construct a sensible hurdle rate </li></ul></ul>
    57. 58. Small group discussion
    58. 59. Questions <ul><li>What role do you play in progressing your company’s energy efficiency performance? (Qu 2) </li></ul><ul><li>How else might you contribute towards progressing your company’s energy efficiency performance? </li></ul><ul><li>(Qu 7) </li></ul>
    59. 60. Panel Discussion
    60. 61. Summary and next steps Professor Suzanne Benn UTS Business School
    61. 62. Thank you <ul><li>Thankyou for sharing your insights </li></ul><ul><li>Please complete the evaluation form. Consider: </li></ul><ul><ul><li>Are there any ‘energy efficiency’ related actions you plan to take following this seminar? </li></ul></ul><ul><ul><li>Can we follow up with you next year as part of our evaluation? </li></ul></ul><ul><ul><li>Please discuss with us any further ideas you have about the project </li></ul></ul>
    62. 63. Contact Details <ul><li>Professor Suzanne Benn </li></ul><ul><li>Professor of Sustainable Enterprise </li></ul><ul><li>UTS Business School </li></ul><ul><li>Suzanne.Benn@uts.edu.au  </li></ul><ul><li>Ph +61 2 9514 3621 </li></ul><ul><li>For further information and updates on the Leadership & Change for Energy Efficiency in Accounting & Management project go to: </li></ul><ul><li>http://www.business.uts.edu.au/energyefficiency </li></ul><ul><li>  </li></ul>
    63. 64. References <ul><li>Bureau of Meteorology & CSIRO. 2010. &quot;State of the Climate &quot;. </li></ul><ul><li>Cooremans, C, 2011, Make it strategic! Financial investment logic is not enough, Energy Efficiency. </li></ul><ul><li>Dunstan, Chris, Katie Ross, and Nicole Ghiotto. 2011. &quot;Barriers to Demand Management: A Survey of Stakeholder Perceptions.&quot; Prepared for the Australian Alliance to Save Energy by the Institute for Sustainable Futures, University of Technology, Sydney. </li></ul><ul><li>Geoscience Australia. 2010. &quot;Australian Energy Resource Assessment.&quot; Commonwealth of Australia. </li></ul><ul><li>International Energy Agency. 2011. &quot;World Energy Outlook ”. </li></ul><ul><li>Linfox Energy Efficiency Opportunities Public Report 2010. Accessed from www.linfox.com/~/media/Documents/PDF/Linfox_EEO%20Act%20PR%202010%20Appendix%20small.ashx </li></ul><ul><li>Porter, M. E., 1985, Competitive advantage. New York: Free. </li></ul><ul><li>Department of Resources, Energy and Tourism (RET). 2011. &quot;Continuing opportunities. Energy Efficiency Opportunities program - 2010 report. A look at results for the EEO program 2006 - 2010.&quot; Australian Government Department of Resources, Energy & Tourism (RET) . </li></ul><ul><li>Department of Resources, Energy and Tourism (RET). 2008. Energy Savings Measurement Guide. </li></ul><ul><li>Sustainability Victoria. 2010. &quot;Energy Efficiency Best Practice Guide Lighting.” </li></ul><ul><li>The GPT Group Sustainability Report. Accessed 6/9/11 www.gpt.com.au/content.aspx?urlkey=Energy </li></ul><ul><li>Total Environment Centre. 2010. &quot;Demand management and energy policy development: A case study of New South Wales.” </li></ul><ul><li>World Business Council for Sustainable Development (WBCSD). 2004. &quot;Facts and trends to 2050.” </li></ul><ul><li>World Business Council for Sustainable Development (WBCSD). 2009. “Transforming the Market: Energy Efficiency in Buildings.” </li></ul><ul><li>World Economic Forum. 2010. &quot;Energy Vision Update 2010. Towards a more energy efficiency world.&quot;. </li></ul><ul><li>Worrell, E., Laitner, J., Ruth, M., & Finman, H., 2003, Productivity benefits of industrial energy efficiency measures, Energy, 28(11), 1081–1098. </li></ul>

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