How to Sell Your CFO on Energy Efficiency Projects
Many CFOs see energy as a necessary drain on the budget that they are powerless to slow down or plug up, and oftentimes the capital needed for facility upgrades are put on the back burner in place of more pressing initiatives.
Selling the value of efficiency, especially when in competition for precious capital, can be a real challenge. Demonstrating the potential return on the investment through the long-term cost reduction is the key – not to mention the ancillary benefits, such as fewer maintenance costs with upgraded equipment or the need to use less air conditioning with tighter seal windows. In addition to the potential ROI, make sure you articulate the available payment options as well – even if the limited available capital is allocated elsewhere, energy efficiency projects can still be executed without it.
If you’re trying to sell your CFO on energy management, here are a few tips to make the conversation a little easier.
Focus on Cost Savings, Not Energy Savings
CFOs think in terms of dollars, cents and bottom-line benefits. They have to maximize their returns on every investment, and if the costs of a project appear to outweigh its savings, it could be next to impossible to get their approval.
To make the benefits of energy management more clear, steer the conversation towards financial metrics. Your CFO may not care much how many kilowatt-hours you’ll save, or even that a more sustainable business will garner greater public support. They will, however, care how much money they can save per month, what long-term expenses they can avoid and how this investment stacks up to others in terms of long-term ROI. Don’t forget the indirect benefits as well – replacing the boiler may be expensive, but how much are you spending today in maintenance on the old equipment?
Communicate the Business Benefits
Energy management offers a variety of other far-reaching benefits that will ultimately cut costs. The tools that allow for automation and control also help organizations collect data on energy consumption and pinpoint areas for further savings. Ultimately, better visibility of energy use (and waste) is critical for continuity in a market where more and more companies are prioritizing efficiency.
Highlight the Competitive Advantage
Speaking of continuity, energy management is becoming critical for staying on top of competitors. Again, your CFO may not care specifically about the energy you stand to save, but they will care about the betterment of your core business. When selling them on the use of energy intelligence software, highlight productivity increases, waste reduction and growth in asset values. Learn the metrics most important to their goals, and explain the specifics with clear stats and visuals. It’s easy for energy professionals to take their knowledge for granted, but even top executives don’t always understand how much they really stand to gain from energy management.
Remind the CFO of the Costs of Inaction
Inaction can be just as costly as action – if not more so. The status quo often “feels” cheaper than change, but in an environment of rising energy prices and sustainability-minded competitors, a lack of energy management could be far more costly than an investment in new infrastructure. Remind your CFO that without in-depth insights into your company’s energy use, you won’t be able to analyze historical performance, predict demands or accurately estimate future costs. The explosion of Big Data and enterprise-level energy management software is shifting most industries towards three, five and even ten-year plans, and those plans are only possible with accurate cost predictions.
Offer Alternatives for Funding Energy Efficiency Projects
Finally, don’t leave your CFO to figure out funding alone. The energy savings you discuss should eventually balance out your costs, but there are also ways to minimize or even eliminate the need for upfront investment. Constellation offers a number of solutions to fund sustainability initiatives and energy efficiency upgrades, including:
- Performance Contracting: A particularly popular choice among government customers – but also available to private organizations – performance contracting allows customers to fund building improvements with no upfront capital costs. Instead, the projects are supported entirely by the guaranteed energy savings over time, giving customers an avenue for payment and an immediate justification of their investment.
- Capacity Load Response: At times of an electrical grid imbalance, grid operators may need to call for additional capacity to supply the increase in customer demand. By participating in capacity programs, business customers earn financial incentives to reduce their energy usage during high-demand events. Sign up in advance to curtail electricity usage to earn revenue on a monthly or quarterly basis.
- Bidding Program: Based on real-time or day-ahead market costs for electricity, businesses can bid in their proposed energy reductions, committing to curtail usage when hourly prices are high. They benefit by avoiding the cost of usage during peak hours, and they receive additional financial incentives from operators. Your company will ultimately receive payments based on the wholesale price.
Implementing new energy efficiency initiatives—even on a small scale—can initially sound overwhelming to your CFO, who most likely pictures stacks of cash piling up while you see reductions in waste, better operations and a lower carbon footprint.
But it doesn’t have to be this way. When you take the time to see things from your CFO’s perspective—and invite him or her into your vision of the future—you can bridge the gap and accomplish something that helps you both achieve your goals.
To learn more about how our innovative solutions can help you cut costs, mitigate risks and use energy more efficiently, contact us today.
Published: June 2, 2016
- Energy Efficiency