EDF Supply Chain Energy Efficiency Report

Engaging Small & Medium Entities in Global Production Systems

// AUGUST 2013 //

SUPPLY CHAIN ENERGY EFFICIENCY

New governmental incentives are pushing for increased industrial energy efficiency, most specifically China and its explicit mandate to extend energy efficiency much deeper into supply chains. An increase in corporate responsibility has meant that large down-stream customer firms are formalizing energy management and carbon reduction incentives and pushing these activities upstream. Finally, growing customer awareness about climate change and corporate supply chains underpins both increasing corporate responsibility and new governmental incentives, necessitating

further transparency and standardization. These conditions suggest that sup-

ply chains may hold key opportunities for promoting energy efficiency, reducing costs and decreasing the environmental footprint of consumer goods. Even though the promise is strong, the benefits still prove to be elusive for most companies. Scale and efficiency are difficult to unlock, as is the coordination of multiple organizations spanning complex geographies. Nowhere is this truer than for

AUGUST 1, 2013 // On October 22-24, 2012 the NorthStar Initiative for Sustainable Enterprise (NiSE) and the Environmental Defense Fund (EDF) co-hosted a symposium on Supply Chain Coordination and Energy Efficiency in Racine, WI at the Johnson Foun-dation at Wingspread campus. The sympo-sium addressed the issues of industrial energy efficiency and the role supply chains can have in facilitating project implementation. Thirty-one participants attended, representing many of the actors in the energy efficiency supply chain, including energy service companies,

financers, retailers, nongovernmental organi-zations, government and academia. This small, yet influential group joined together to pres-ent, discuss and brainstorm barriers to energy efficiency, the role of small and medium en-terprises, and using supply chains to organize and promote project implementation.

The viability of energy efficiency as an effective cost and carbon saving measure is couched in larger energy markets, which are currently characterized by rising energy prices.

small and medium enterprises across the globe. However, many organizations across the energy efficiency supply chain are beginning to make progress. Financial institutions, utili-ties, energy service companies, brand owners, retail giants and factories are all beginning to connect the dots and understand how clear communication, innovative finance mod-els and improved transparency can lead to streamlined supplier relations, smaller carbon footprints and lower cost of goods.

The Supply Chain Coordination and Energy Efficiency Symposium brought together key

leaders and innova-tors across the energy efficiency supply chain to discuss these key drivers and opportuni-ties. We focused on how to accelerate indus-trial energy efficiency initiatives in small and medium enterprises, sharing lessons learned about obstacles encoun-tered, success achieved and innovations in the works to unlock the full potential of supply chain efficiency. Emerg-ing from the symposium is this report outlining a systemic perspective on the role supply chain actors can play (both in commercial and energy efficiency supply chains) in improving industrial energy efficiency, along with four key recom-mendations based on

participant discussions. These recommenda-tions include:

1. Engage leading companies (manufac-turer/retail brand owners) to identify high-quality suppliers for pilot supply chain energy efficiency improvements.

2. Create one or more sector-based col-laborations for improving supply chain energy efficiency by assembling groups of peer manufacturers within a supply chain

1

MAKING PROGRESS

and using benchmarking, process capa-bility analysis and best practice sharing to identify and improve energy efficiency and industry competitiveness.

3. Increase transparency and standardiza-tion of energy use, audits and supply chain information.

4. Create finance and credit risk approaches and models for portfolio-level energy ef-ficiency and energy management projects.

Although the recommendations coming out of the Supply Chain Coordination and Energy Efficiency Symposium are ambitious, their attainment is critical to unlocking the full carbon savings and investment poten-tial embedded in current industrial energy systems. As the following report describes, large leading companies can provide motiva-tion and resources upstream to their suppliers for energy efficiency improvements. More information, transparency and standardization can reduce the high transaction costs that exist in current energy efficiency financing and investments. As the world wrestles with the upcoming global environmental challenges in the 21st century, we suspect that a more comprehensive view of current and potential efforts targeting supply chain energy efficiency will illuminate very different paths forward. These paths must focus on collaborative, trans-parent and creative solutions for progressing global industrial energy efficiency.

Sincerely,

TIM SMITHNorthStar Initiative

for Sustainable Enterprise

ANDREW HUTSONEnvironmental Defense Fund

THIS REPORT WOULD NOT HAVE BEEN POSSIBLE without the energy and enthu-siasm of our partners. First, we would like to thank the 31 participants who contributed their time, thoughtfulness and patience to the Supply Chain Coordination and Energy Efficiency Symposium. We extend thanks to Andrew Hutson, Environmental Defense Fund (EDF), for his leadership in creating and supporting the symposium and develop-ment of this report. We would also like to thank Tom Carnac (Carbon Disclosure Project), Clay Nesler (Johnson Controls), Mark Hopkins (UN Foundation), Roger Dower (The Johnson Foundation at Wingspread), Namrita Kakpur (EDF), Jake Hiller (EDF) and John Ehrmann (Meridian Institute),who also contributed their time and insight to planning the symposium and encouraging symposium attendance.

We are grateful to EDF for providing the funds to host the symposium and write this report. A special thanks to Barbara Suprak for local leadership and logistical support for the symposium, and to the Johnson Foundation at Wingspread for hosting. Finally, we would like to thank Michelle Linhoff and Mary Hoff at the Institute on the Environment, University of Minnesota, for their assistance throughout the project.

The authors of this report are Jennifer Schmitt (NorthStar Initiative for Sustainable Enterprise - NiSE) and Timothy M. Smith (NiSE). This report was edited by Samantha Steinbring (NiSE) and benefitted from the initial work of previous NiSE staff including Miriam Fischlein, Terry Foecke, and Cindy McComas. The graphics and layout were designed by Sarah Karnas (Institute on the Environment).

THE SUPPLY CHAIN COORDINATION AND ENERGY EFFICIENCY SYMPOSIUM occurred October 22–24, 2012 in Racine, Wis. Thirty-one participants representing key actors of the industrial energy efficiency supply chain, from product development com-panies and manufacturers to energy service companies, financing institutions, insurance providers, retailers, nongovernmental organizations, government and academia, came together to discuss the state of the art of global energy efficiency implementation, barriers associated with engaging small and medium enterprises and the role of large downstream brand owners in incentivizing and enhancing upstream energy efficiency.

This symposium is part of a broader research proj¬ect aimed at better understanding the role of demand-side management in sustainable energy systems. The research is funded through a grant from the Institute on the Environment and the Initiative for Renewable Energy and the Environment at the University of Minnesota. Supplemental funding for this symposium was provided by the Environmental Defense Fund, along with in-kind support from the Johnson Foundation at Wingspread.

3 Introduction

5 Energy Systems & Markets:

Energy efficiency in small and medium-size enterprises

7 Supply Chain Energy Management: A nested energy services network

9 Data, Metrics & Analytics: Improvement measures

10 Regional Collaboration & Implementation: Global policy and financing

15 Conclusions

16 References

2

ACKNOWLEDGMENTS

SYMPOSIUM

TABLE OF CONTENTS

3

the world was aimed at jump-starting the green economy; 30% of these green stimulus funds went toward energy efficiency, for a total of $56 billion (UNEP 2010).

Yet these programs and funds have not provided sufficient incentive for companies to take action on energy efficiency investments at a seemingly justifiable scale. It is estimated that energy use can vary by a factor of two to three between the most and least energy efficient firms in a sector (de Beer 2000) and that the average firm implements less than two-thirds of recommended and economically viable projects (Anderson & Newell 2004; DeWahl et al. 2010). Although $43 billion was spent on energy efficiency improvements

in the United States alone in 2004, amount-ing to 1.7 quads of energy savings (Ehrhardt-Martinez & Laitner 2008), the market potential is much larger, according to analysts. Energy cost savings could amount to $900 billion by the year 2020. Therefore, much of the literature on energy efficiency has sought to understand decision-making, and, at the risk of oversimplification, identify the degree

RISING ENERGY PRICES, new govern-mental regulations and incentives, increases in corporate environmental responsibility and customers’ increasing ecological awareness have pushed energy-efficient manufacturing and production into the spotlight. Industrial energy plays an important role in a govern-ment’s national CO2 emissions as well as a product’s supply chain CO2 emissions; thus, both governments and companies are striv-ing to identify the most effective measures to increase industrial energy efficiency. The industrial sector is one of the main consum-ers of energy and emitters of CO2, consum-ing nearly one-third of total global primary energy supply and causing 36% of energy-related CO2 emissions (IEA 2009). Opportunities for improved efficiencies are substantial. It is estimated that potential primary energy savings in the industrial sector, through the adoption of available best-practice commercial technologies, could reach 18–26% of industrial consumption or 5.4–8.0% of total global energy con-sumption (IEA 1007).

From an individual firm perspective, these en-ergy efficiency investments are often a no- or low-cost proposition. Particularly in the industrial and commer-cial sectors, many energy efficiency projects carry the promise of substantial financial returns within only a few years. Overall, McKinsey and Company estimate the global invest-ment potential for energy efficiency at $170 billion annually through 2020 with average annual returns of 17 % (Farrell et al. 2008). In addition, incentive programs to increase adoption of energy efficiency practices are numerous, with most government funded or run by utilities in the context of demand-side management. Following the 2008 financial crisis, a proportion of stimulus funds across

to which market and behavioral failures lead to suboptimal adoption rates and where policy interventions might correct them (Gillingham et al. 2009).

While this body of work has done much to illuminate what has come to be known as the “energy efficiency gap,” scant research is available addressing the interorganiza-tional supply chain responsible for a “saved kilowatt hour” or the emerging role of large downstream customers and creative financial approaches in bundling and commoditizing global energy efficiency assets across small- to medium-size enterprises (SMEs). Only recently have management and policy scholars begun to evaluate the role of private sector

companies in delivering cost-effective energy savings to end users across the supply chain (Satchwell et al. 2010). As such, energy service companies (ESCOs) are devising innovative methods to deliver complete packages of tech-nologies, operational support and financing to clients. Financial institutions, in search of new markets, are beginning to explore financial mechanisms targeting energy efficiency. Large

INTRODUCTION

manufacturing and retail brand owners (Walmart, Ikea, Tesco, Herman Miller, Pep-si, etc.) are investing in supply-chain energy efficiency programs both within their own operations and in upstream suppliers to address corporate-level sustainability targets. Non-governmental organizations, or NGOs [Environmental Defense Fund (EDF), World Resources Institute (WRI), CDP (formally Carbon Disclosure Project), etc.] and transnational organizations (the United Nations, World Bank, International Finance Corporation, etc.) are increas-ingly engaging industrial energy efficiency implementation and financing among smaller, less sophisticated and less capital-ized enterprises. Furthermore, governments are focusing new energy efficiency policies at SMEs. Achieving national or corporate environmental and energy targets must include SMEs, and large, enlightened, sup-ply chain actors might be an effective lever toward motivating and scaling SME energy efficiency projects.

While the size of the problem and the importance of reaching further upstream into industrial supply chains have sparked countless pilot projects and experimental programs, little evidence of successful outcomes has been found to exist – leaving companies, governments and NGOs with little knowledge toward effective strategies or policies for supply chain energy ef-ficiency targeting SMEs. A recent Institute for Industrial Productivity (IIP) report summarizes the on-the-ground energy efficiency landscape in China largely as “an interconnected web of barriers” (Dreessen & Wang 2012). Structuring efficiency proj-ects is difficult and unconventional, as no generally accepted measurement and veri-fication standard exists for energy savings; energy efficiency projects are often small and scattered; financial institutions do not understand energy-saving technologies or trust savings projections; banks are risk-averse and reluctant to change their existing procedural frameworks for energy efficiency projects; ESCOs are themselves often small with limited technical and credit histories and host enterprises in rapidly growing economies prioritize sales growth over cost/

ENERGY SYSTEMS & MARKETS (UTILITIES, AGGREGATORS, OPERATORS

Desired Price, CO2,

Water, Local Emissions, etc.

Desired Aggregate Load, Ancillary Services, etc.

Supply Chain Energy Management

Industry Sector Benchmarking

Standardized Facility Audits

Supply Chain Savings

Financing ESCO Certification Policy

Data, Metrics & Analytics

Regional Collaboration & Implementation

Supplier 1 Supplier 2

Supplier 3

Supplier NSupplier

N-1

Industry Sector 1

Brand Owner

LLC

Industry Sector J

Industry Sector J-1

Industry Sector 2

Industry Sector LLC

FIGURE 1 // IMPLEMENTING SUPPLY CHAIN ENERGY EFFICIENCY

Large-Scale implementation of supply chain energy efficiency (SCEE) requires

significant market and institutional coordination. At the center is thought to be

large leading companies with significant interests in managing operational and

reputational aspects of their brand. Economic and sustainability valuation is largely

dependent on the supply chain’s participation in broader energy markets. For

example, the value of SCEE is the avoided price and carbon emissions of power no

longer consumed, largely determined by a utility or regional operator. Management

of energy across organizations, industry sectors, supply chains and regions will re-

quire significant new and increasingly more transparent data, common metrics and

analytics. Finally, public and private collaboration is required to reduce the transac-

tion costs of implementing SCEE, particularly with regard to credit enhancement,

technology provider accreditation and governmental policies.

4

symposium. It suggests that a more compre-hensive view of current and potential efforts targeting supply chain energy efficiency may illuminate very different paths forward from the largely facility-level adoption or sector-level energy savings opportunity studies so pervasive in the literature.

Specifically, recommendations emanating from the symposium are as follows:

1. Engage leading companies (manufac-turer/retail brand owners) to identify high-quality suppliers to pilot supply chain energy efficiency improvements.

2. Create one or more sector-based col-laborations for improving supply chain energy efficiency by assembling groups of peer manufacturers within a supply chain and using benchmarking, process capa-bility analysis and best practice sharing to identify and improve energy efficiency and industry competitiveness.



Accomplishing greater rates of adoption of energy efficiency technologies among SMEs is a difficult, but attainable, challenge. This report provides initial insight into the role of large leading companies near the end of supply chains in providing motivation and resources to upstream SME supply chain partners. It lays out a framework toward the development of, and resources required for, lowering the high transaction costs of performance-based energy efficiency imple-mentation approaches (audits, savings calcula-tions, opportunity identification, technology assessment, financing, etc.). The discussion and approach for implementing supply chain energy efficiency is based on a systemic perspective (Figure 1) with the four recom-mendations emanating from the expert panel convened at the Supply Chain Coordination and Energy Efficiency Symposium in October 2012. Each of the following four sections corresponds to the four high-level systemic areas (Figure 1), providing background, key

energy efficiency. In short, success, where it has emerged, has largely been concentrated in a very limited number of credible large clients.

Yet, the local and greenhouse gas (GHG) emissions reductions associated with overcom-ing these obstacles in the very near term are tremendous. In China alone, energy efficiency investment to meet new policies imple-mented under the 12th Five Year Plan (FYP) (2011–2016), expanding objectives beyond the largest energy users to the top 10,000 emitters, is estimated at nearly $189 billion with resulting energy savings of 400 mtce1 (Dreessen & Wang 2012) – roughly the total electricity and natural gas consumption of California over the same five years. The total potential for GHG emission mitigation in the global industrial sector by 2030 is estimated to be 9–37% (1,500-6,100 MtCO2-eq/year)2 (Worrell et al. 2009).

In an attempt to surface vital enablers for increased supply chain energy efficiency implementation, the Supply Chain Coordina-tion and Energy Efficiency Symposium was held to obtain expert opinion on a set of key questions:

1. How might the inclusion of SMEs alter approaches taken by governments and companies working toward energy ef-ficiency investments?

2. What additional risks and opportunities exist for governments and supply chains by increasing focus on SME energy efficiency?

3. How might increased supply chain coordination facilitate energy efficiency improvements in SMEs?

4. How does the development and effective-ness of the energy efficiency supply chain impact the stability of material / product supply relationships?

5. Where do leverage points exist in the industrial energy efficiency system, if new information from coordinated research, data infrastructure and demonstration were available?

This document summarizes a select subset of the energy efficiency literature in an effort to provide context to the findings emanating from the multistakeholder discussions at the

information and when relevant to our sym-posium discussions, recommendations. These recommendations require an unprecedented ability to characterize and benchmark sector-level and facility-level energy savings opportu-nities, share knowledge in ways that allow for the flexible application of technological and organizational information in a supply chain environment, and coordinate resources across regions and across public and private actors.

ENERGY SYSTEMS & MARKETS:Energy efficiency in small and medium-size enterprises

ENERGY EFFICIENCY and conservation have long been posited as a cost-effective means of addressing issues of climate change, energy security and firm or individual social/environmental responsibility. The potential for cost-effective energy efficiency investments in the United States is on the order of $200 billion a year. But, after decades of public and private support, current energy efficiency financing is only one-tenth its potential

— about $20 billion per year (Kats 2011). Globally, McKinsey and Company estimate the investment potential for energy efficiency at $170 billion annually through 2020 with average annual returns of 17 % (Farrell et al. 2008). These returns are dependent on the larger global energy systems and markets. For example, the savings for energy efficiency are the avoided energy costs and carbon emissions. Energy costs are largely determined by region-al utilities, and for the majority of the world there is no price to carbon emissions. Should energy costs change (due to factors relating to input supplies, governmental regulations, etc.)

1 Mtce (metric tons of standard coal equivalent) is an energy equivalency metric.2 MtCO2-eq (metric tons of carbon dioxide equivalent) is a global warming potential metric. 5

the optimization function from cost reduc-tion or profit maximization to a multi-criteria approach.

At the heart of a “saved kilowatt hour” are the industrial facilities using energy to meet the consumption demands of almost 7 billion people. The industrial sector is the world’s largest energy consumer, using about 37% of delivered energy worldwide (Abdelaziz et al. 2011). At the base of the industrial sector are primarily SMEs. For example, 93.5% of the suppliers in the Korean automobile industry are SMEs (Choi 2003), and China’s 2.4 mil-lion SMEs make up 99% of all enterprises in that country, accounting for more than half of all of China’s GHG emissions and pollutants (Teng & Gu 2007). Efforts to achieve national or corporate environmental targets must include SME suppliers (Holt et al. 2001).

Substantial informational, financial and organizational barriers challenge SMEs — and these challenges vary across sector, region and

or should a price be put on carbon (due to governmental policies) the returns for energy efficiency will change.

Within these global energy systems and markets, many actors play a role in the creation of a “saved kilowatt hour” (Table 1). Improved integration of these actors (financial institutions, utilities, energy service compa-nies, large leading companies, etc.) provide new and potentially fruitful avenues for aggregation and commoditization of energy efficiency assets deployed at SME facilities. Supply chains necessary for the creation of a “saved kilowatt hour” must not, however, decrease the robustness or resiliency of the material (or product) supply chains associ-ated with large, enlightened brand owners. Understanding this tension between short-term stress to the material supply chain and long-term resiliency and advantage of less environmentally and socially impactful supply chains is paramount — ultimately changing

organizational size. Major barriers include lack of time, other priorities for capital investments, lack of access to capital, lack of budget funding, cost of production disrup-tion and inconvenience, technical risk of future production disruptions, and difficulty of obtaining information on the energy use of purchased equipment (Painuly et al. 2003; Sardianou 2008; Shi et al. 2008; Trianni & Cagno 2011).

While SMEs pose some challenges to increasing global energy efficiency, energy savings and management opportunities may actually be considerably easier for SMEs than other enterprises to benefit from because many SMEs have yet to engage in significant energy efficiency, demand side management or distributed generation activities. However, without adequate visibility into energy use information, along with properly aligned incentives, these opportunities are largely unattainable.

SUPPLY CHAIN ACTOR POTENTIAL ROLE IN AGGREGATION

Governments Governments can match investors and clients for loan programs and provide loan guarantees.

They can develop standard contracts.

Electric utilities Utilities can utilize existing relationships with industrial customers and knowledge of their energy

use profile; identify those offering the best opportunities for load-shifting. Given the right finan-

cial incentives (decoupled rates, time of day pricing, energy efficiency performance standards)

utilities can bring together similar companies.

Insurance industry Insurance providers can offer standardized insurance for energy performance contracts. The in-

surance industry can lower the transaction costs and risk of energy efficiency investments by of-

fering loss prevention insurance. They also have a role to play as institutional investors interested

in annuity style investments.

Financial industry (e.g. banks,

pension funds, equity inves-

tors, the International Financial

Corporation)

The financial industry can build on the experience with securitization of credit card and other assets

to develop rules for energy efficiency investments. It also can build on the experience with metrics

and financial risk indices to develop a yardstick for evaluating energy efficiency investments.

Energy service companies

(ESCOs)

ESCOs could expand their business into the small business sector and develop methodologies to

streamline contracts for firms with similar characteristics.

Large leading companies

(Walmart, Nike, Levi Strauss,

Herman Miller, Best Buy, etc.)

Retailers and brand owners can aggregate along their supply chain, facilitating energy efficiency

investments in their suppliers through supplier incentives, supplier preference and retention, con-

tract guarantees, etc.

Supply chain management

companies (e.g. PCH

International)

Supply chain management companies can incorporate energy efficiency into their supplier devel-

opment and selection criteria.

TABLE 1 // FRAMES AND POTENTIAL ROLES FOR ENERGY EFFICIENCY SUPPLY CHAIN COORDINATION

(expanded upon Fischlein et al. 2011)

6

7

substantial, unanticipated additional costs stemming from reputational to natural haz-ards (Geary et al. 2006; Halldórsson & Kovács 2010). Many of these risks are exacerbated by the increasing geographic scope of firms’ sup-ply chains that expose supply chains to a vari-ety of cultural, legal, administrative, linguistic and political issues (Branch 2008; Mentzer et al. 2001). Thus, from a supply chain resiliency perspective, the wisdom of adopting a number

of publicly proclaimed “best practices” comes into question – including supply base reduc-tion, global and supply cluster sourcing, and the broad implementation of lean production systems (e.g., reduced inventory, shipment sizes, production batches; frequent just-in-time delivery; rapid-response logistics; central warehousing; mass customization). This has fueled interest in green supply chain manage-ment; many organizations are recognizing the need to influence operations that fall outside the direct control of a single business unit or manufacturing facility, and taking a full life cycle approach to improve the environmental

FOR MUCH OF the past three decades, the imperatives of cost efficiency and customer responsiveness have resulted in the pervasive pursuit of two basic business strategies, global-ization and time-based competition (Bhat-nagar & Viswanathan 2007). Globalization

— motivated by cost minimization, access to new markets, economies of scale, etc. — has led to the emergence of borderless organiza-tions with globally located suppliers and

production/distribution facilities. Time-based competition, by contrast, has been driven by more exacting customers demanding a wide variety of products with minimal lead time. Significant increases in risk and complexity of the supply chain function have come along with the benefits of globalization and just-in-time manufacturing.

Recent research has identified major risks that emerge in global supply chains optimized for speed: supply chain disruption and discon-tinuity (Craighead et al. 2007), inconsistent or inadequate product quality (Foster 2008), unpredictable delivery times (Levy 1997), and

impact of their products and services. In the case of GHGs, companies seeking to reduce policy or reputational risks associated with these emissions often find that their direct emissions are dwarfed by the emissions in their supply chains (Palmbeck 2012). In fact, across industries, companies’ direct GHG emissions average only 14% of their supply chain cradle-to-gate3 emissions (Matthews et al. 2008).

By far the most documented case of corporate efforts to reduce environmental impacts in its supply chain is that of Walmart (Humes 2011). Walmart is widely cited in the academic and popular press as profit-ing from its actions to reduce GHG emissions (and increasingly water use) in its own operations and its supply chain. Walmart has been successful in capturing cost reductions (energy efficiency being a central strategy), new sources of revenue, improved employee motivation, enhanced public relations and increased voice with policy makers through this strategy (Palmbeck 2012). Efforts to manage upstream energy and carbon impact are not, however, restricted to Walmart. Dell, Ford, Unilever, Pepsi, Best Buy and countless others, often in conjunction with NGO partners such as CDP, EDF and WRI, have put in place reduction targets and initiatives focused on upstream and downstream supply chain impacts.

Despite the growing interest by leading companies in their supply chains, there has not been a significant uptick in the number of energy efficiency projects implemented by suppliers. This phenomenon is borne out of data on 2,415 suppliers that shows only 27% invested in GHG emission-reducing activi-ties in 2011 (CDP 2012). Furthermore, this number has been steady for several years even though 69% of these suppliers’ customers were investing in emission-reducing activities in 2011, up from 39% in 2010.

Despite lack of universal success, there is still great opportunity for supply chains to act

SUPPLY CHAIN ENERGY MANAGEMENT:A nested energy services network

RECOMMENDATION GOAL BARRIERS TO IMPLEMENTATION

Engage leading companies to

identify high quality suppliers

to pilot supply chain energy

efficiency improvements

Create a demonstration project of multiple

leading companies willing to actively en-

gage and assist their suppliers with energy

efficiency improvements. This would include

involvement from the CEO/CFO, supplier

incentives and willingness of the leading

company to put forth time, money, effort or

reputation in the process.

• Identifying corporate leaders

• Hesitation of leading companies to put

time, money, effort or reputation in the

process

• Leading companies may have great en-

ergy efficiency intentions, but they may

lack knowledge about the actual energy

processes and technologies

MEASUREMENT & METRICS POTENTIAL STRATEGIES & NEXT STEPS

The demonstration project will measure:

• Number of energy efficiency projects

implemented

• Project costs

• Project paybacks

• Project energy and cost savings

• CO2 reduction benefits

• Willingess of companies to place a

stake in the process, including: multi-

year purchase agreements, investment

into a project finance vehicle, backstop-

ping loans, etc.

• Widespread dispersion of “success

stories”

• Identify an influential CEO willing to be

the “high profile messenger”

• Identify the five companies in the top

100 whose CEO/CFO may be interested

in this space. Look into highly energy

intensive industries

• Focus on leading companies’ motiva-

tions including: preserving or improving

reputation, competition, profit, corporate

values, customer preferences and correla-

tions to better business health

TABLE 2 // SYMPOSIUM RECOMMENDATION #1 - ENGAGING LEADING COMPANIES IN THE SUPPLY CHAIN

3 Cradle-to-gate refers to a partial lifecycle analysis of the company’s greenhouse gas emissions;

accounting for emissions not only produced by a company, but all those emissions associated with

creating the products the company sells and the emissions associated with the power generation for

the heat and electricity. The emissions associated with the company’s product uses and disposal are

not considered.

as aggregators of SMEs and facilitate imple-mentation of energy efficiency projects. The recommendation coming from the Supply Chain Coordination and Energy Efficiency Symposium to increase lead-ing companies’ role in their supply chain energy efficiency implementation is to engage leading companies in a demonstra-tion project to pilot supply chain energy efficiency improvements. Key to the success of this demonstration project would be the buy-in of a major CEO to be a “high profile messenger” to bring in other CEOs and CFOs and thus a handful of top 100 companies interested in collaborating in this space. Indicators of success would be an increase in the number of energy efficiency projects implemented, widespread sharing of success stories, and a willingness of leading companies to put forth time, money, effort or reputation to assist their suppliers with energy efficiency implementation.

8

ENGAGING LEADING COMPANIES // ENVIRONMENTAL

DEFENSE FUND

Environmental Defense Fund (EDF) has worked with leading companies such

as Walmart, Tesco, Levi Strauss & Co, and the London based investment bank,

Sustainable Development Capital LLP (SDCL), to drive energy efficiencies in

supply chains in China and, in some cases, to identify financing solutions to

support implementation. These leading companies agreed to support energy

audits of hundreds of their Chinese factory suppliers. EDF provided technical

support for these audits, which identified many low-cost energy saving oppor-

tunities. Suppliers of Levi Strauss & Co also participated in this program which

yielded important learnings on project design to engage upstream supply

chain actors in collaborative energy efficiency projects. Through its corporate

partnership work, EDF has been able to effectively link environmental gains

with bottom line efficiencies. Building upon this example, the recommendation

that emerged from the symposium suggests identifying a major CEO to act as

a “high profile messenger” to lead the charge in bringing together influencers

for a pilot project to improve supply chain efficiency. The recommendation also

emphasizes continued and increased concrete commitment by leading com-

panies on how they will put forth time, money, effort or reputation to promote

energy efficiency improvements in their suppliers.

4 Energy intensity is a measure of energy efficiency improvements, measured as the ratio of energy

consumption to gross domestic product (Joule/USD). 9

these resources have not generally been as ac-cessible to SMEs, and without sector bench-marking, facilities that are managing their energy have a difficult time evaluating their efficiency efforts.

Collected energy data is a prerequisite to understanding how energy savings at the factory level aggregates up to produce energy savings for an entire supply chain. It is also an imperative for supply chain, country-level and global-level energy mapping, and a requisite to managing energy on a systemic scale and substantially increasing possibilities of demand-side management. To date, many facilities are hesitant to share their energy data with customers because of concerns over pricing; they see a request for information about energy efficiency improvements as a way for leading companies to request cheaper product prices from the energy cost savings (Goldberg et al. 2012). Furthermore, standard-ized transparent data is often not required. Of the 38 implemented measures for identifying energy efficiency opportunities in Interna-tional Energy Agency member countries, the European Union and China, as outlined by Tanaka (2011), only seven used data collection/reporting, and only two programs made this reporting mandatory.

While there are a definite number of important sources for energy data and best practices (Industrial Assessment Centers, the World Bank Sustainable Energy for All initia-tive, Energy Star Industries in Focus, the U.S. Government Green Button program and the Institute on Industrial Productivity best prac-tice database, to name a few), a repository for global supply chain energy data has not been developed. The recommendation from the Supply Chain Coordination and Energy Effi-ciency Symposium stresses the need to create an information platform for sector-level benchmarking and sharing of best practices. This platform could be housed by a neutral third party, such as a university institute or ac-counting firm, and become the central agency for reporting, data aggregation and analysis. This would allow suppliers to securely share their data and reap the benefits of sector- and supply chain–level analyses of best practices.

ENERGY AUDITS OF FACILITIES provide invaluable data on energy performance and are increasingly being demanded by downstream customers, upstream financiers and insur-ance providers. Although numerous energy efficiency assessment data tools and approaches have been developed to meet this demand, the intensity and specificity of process data varies, making it difficult for financial professionals to assess medium-term energy efficiency contracts subject to operational and environmental risks. Multiple studies have pointed to the chasm between the types of data required by financial actors for project financing and those data most relevant and familiar to process engineers (Pye 2000; Simpson 1987; Tanaka 2008). In addition, data collection for baselines as well as measurement and verification following installation costs money and time. Standardiz-ing energy audits can decrease transaction costs for SMEs through the creation of commonly shared rules and procedures on the type and amount of information needed to justify proj-ect funding. Use of standard contract language will also help close the communication gap between process engineers and the financial community.

Along with standardizing energy audits, making facility-level data more transparent could facilitate industry-wide benchmarking. Large companies, particularly in energy-inten-sive industries like steel, cement and the glass industry, have benefitted from U.S. Depart-ment of Energy (DOE) and Environmental Protection Agency programs like the Energy Star Focus Industry program (Energy Star 2013), which includes communities of practice, industry-specific energy guides (Hasanbeigi 2010) and plant energy performance indicator benchmarking (Boyd 2005). There have also been detailed studies of theoretical potentials in selected industries to guide best-in-class energy efficiency improvements over the longer term (Energetics 2004). Large companies also benefit from national recognition programs, such as the U.S. DOE Better Buildings Chal-lenge (DOE 2013), in which manufacturing companies are recognized for making commit-ments and achieving a 25% energy intensity4 improvement over 10 years. Unfortunately,

DATA, METRICS & ANALYTICS:Improvement measures

INDUSTRIAL ASSESSMENT

CENTERS // U.S. DEPARTMENT OF

ENERGY

The U.S. Department of Energy’s Indus-

trial Assessment Centers are a collabo-

ration of 24 centers and 32 universities

across the United States assessing

industrial plant energy efficiency im-

provements, waste minimization and

pollution prevention and productivity

improvement. A university-based team

conducts the initial survey of the plant,

performing a detailed analysis and fol-

low-up regarding implementation. This

program has been operating for 35

years and now has a database of over

15,000 assessments and over 100,000

recommendations. A global version of

such a collaboration sharing data and

recommendations would provide a key

basis for sector bench markings and

capability analysis. Furthermore, string-

ing together the industry benchmark-

ing data along product supply chains,

rather than simply focusing on sector-

level savings, would provide key insight

into the energy efficiency potential of

different products.

results in terms of energy efficiency adoption (Anderson & Newell 2004). Although more than half of recommended projects were adopted, only the lowest hanging opportuni-ties (i.e. those that are easily achievable and do not require a lot of money or effort) were pursued – projects with average investments of less than $5,000 and simple paybacks of 1.02 years. The same study suggests that SMEs are about 40% more responsive to invest-ment costs than to energy savings, suggesting that policies to reduce implementation costs may be somewhat more effective than various mechanisms that raise energy prices (Anderson & Newell 2004). Also in the United States, the mandate provided by Title XVII of the Energy Policy Act of 2005 allowed the U.S. DOE to

NATIONAL GOVERNMENTS and pro-grams facilitated by transnational organizations have increasingly implemented programs addressing energy efficiency finance. Subsidies and funding schemes are widely used across the globe. Many, though not all, of these programs target SMEs and are typically used to pay for technical actions such as audits, energy man-agement, equipment investment and research and development (R&D) (Tanaka 2011). One of the most documented programs is the U.S. DOE’s Industrial Assessment Centers (IAC) program, which has provided no-cost energy audits to small and medium-size manufacturers since 1976. A review of nearly 40,000 individ-ual projects across more than 9,000 U.S. facili-ties participating in the program yielded mixed

invite pre-applications for up to $2 billion in loan guarantees.

Germany’s Special Fund for Energy Efficiency in SMEs provides SMEs with low-interest loans for energy conservation. In Japan, a government-affiliated financial institution provides low-interest loans for energy conser-vation systems. In the United Kingdom, the Carbon Trust runs an interest-free loan scheme for energy efficiency investment of SMEs, with loans ranging from £5,000–400,000, depend-ing on technology and region. In France, a loan guarantee fund with a budget of approximately €18 million for energy efficiency investment of SMEs (FOGIME) was created with the ability to guarantee up to €244 million in loans to the private sector. China has perhaps some


Create one or more sector-

based collaborations for

improving supply chain en-

ergy efficiency, by assembling

groups of peer manufacturers

within a supply chain and using

benchmarking, process capabil-

ity analysis and best practice

sharing to identify and improve

energy efficiency and industry

competitiveness.

Target tier 2 and tier 3 suppliers providing

inputs to a variety of industries that are

medium to high in energy-intensity and that

have common enough product characteris-

tics to allow peer, plant-level benchmarking

and process capability analysis. Aggregate

sector benchmarking across supply chains

at the industry sector level and for individu-

al supply networks.

• Globally dispersed production systems

• Coordination across multiple governmen-

tal policy and finance programs

• Potential incongruence between cost/

benefit to global, private supply chain ac-

tors and nation-based, public actors


Key benchmarking and capability analyses

will include:

• Efficiency of current facilities/processes

• Potential opportunity for improvement

• Identification of facilities/processes for

best practice

• Prioritization of improvement opportu-

nities across supply chain

• Develop anonymous benchmarking/

capability analysis through an account-

ing firm or university institute to manage

data collection, analysis and reporting

• Coordinate NGO and industry sponsors,

host initial meetings, invite suppliers to

share knowledge/expertise

• A reference operational model for this is

the Energy Star Focus Industry program

TABLE 3 // SYMPOSIUM RECOMMENDATION #2 - SECTOR BASED COLLABORATIONS TO IMPROVE DATA,

METRICS & ANALYTICS

10

REGIONAL COLLABORATION & IMPLEMENTATIONGlobal policy and financing

5 This includes $228 million in federal American Recovery and Reinvestment Act of 2009 funds

specifically targeted toward industrial energy efficiency. 11

of the most significant government involve-ment in energy efficiency. China’s 12th FYP (2011–2015) builds directly on previous efforts targeting large (predominantly state-owned) enterprises, extending the scope of the Top-1,000 Energy-Consuming Enterprises program to a Top-10,000 program. The plan sets a new national target to reduce energy intensity by an additional 16 % by 2015 and requires enterprises to invest in efficiency–improv-ing measures, develop energy reporting and auditing systems and report results quarterly to the National Bureau of Statistics. This policy environment, paired with the scale of China’s manufactur-ing sector, has resulted in an explosion in the ESCO industry, supported by NGO and transnational organizational programs. A comprehensive analysis of global en-ergy efficiency policies can be found at (Tanaka 2011).

Given the large and increasing governmental financing of energy efficien-cy projects, it is remarkable that evaluation of these efforts is lacking, largely due to unavailability of data. There is no compre-hensive knowl-edge about the success of the government’s investments.

In 2010, the U.S. government (through federal, state and local levels) spent approximately $1.1 billion5 on industrial energy efficiency programs (Chittum & Nowak 2012). In 2011 utilities spent almost $7 billion on energy efficiency programs ($5.9 billion on programs for electricity efficiency and an additional $1.1 billion for natural gas efficiency programs), sav-ing an estimated 18 million MWh in 2010, the most recent year for which data are available (ACEEE Energy efficiency scorecard 2012). These investments are projected to increase to $10–16 billion per year by 2025 (ACEEE Energy efficiency scorecard 2012). However, INCREASED TRANSPARENCY

AND STANDARDIZATION

// GREEN BUTTON

Green Button is a new service for

electricity customers in the United

States that allows for secure access

and downloading of personal energy

use information. An industry-lead ef-

fort, Green Button is just that, a green

button available on participating utility

companies’ websites that provides

transparency and standardization to

electricity reporting, allowing consum-

ers to verify the energy savings from

any retrofit, upgrade, behavior change

or other energy efficiency improve-

ment. To date, utility commitments to

the green button program will gener-

ate 27 million households with green

button capabilities, able to access,

monitor and use their own energy

data. Devising a comparable industrial

button that monitors the appropriate

metrics and enables sharing of data

along a supply chain would revolu-

tionize energy efficiency monitoring,

evaluation and improvements.

The lack of energy use data, program evaluations, standardizations and transparency poses a significant barrier to improving energy efficiency improvements worldwide. The recommendation coming out of the Supply Chain Coordination and Energy Efficiency Symposium is to increase transparency and standardization of energy use, audits and

assessing and evaluating which programs, technologies and applications are most effec-tive is often stymied by lack of energy use data. Energy efficiency investments are generally considered to be “money well spent” (Chittum & Nowak 2012), when in reality empirical evaluations of cost-effectiveness of programs often do not exist (Gillingham et al. 2006).

performance information to create a data infrastructure that can be used to evaluate public and private investment in energy efficiency. To achieve this, the symposium participants suggested the formation of public-private partnerships that could subsi-dize auditing and information programs and develop reporting guidelines for best practices.


Increase transparency and

standardization of energy use,

audits and supply chain

information

Create critical data infrastructure associated

with supply chain energy use, capable of:

1. evaluating public and private invest-

ment in energy efficiency; and,

2. facilitating the integration of future

“behind meter” demand resources such

as distributed generation and demand

response.

• Link between energy use and proprietary

processes may restrict access to some

information

• Standards do not exist for auditing or

reporting energy efficiency opportunites

or implementation

• Geographic differences complicate ex-

pected value and impact assessment


While a significant component of this rec-

ommendation is to determine appropriate

and comparable metrics at facility, sector

and supply chain levels, metrics would likely

include:

• Energy (costs; savings)/operating costs

• Energy (costs; savings)/production

output

• Energy (costs; savings)/budget (oper-

ating) risk

• Ancillary benefits/costs: quality,

throughput, waste, labor, etc.

• Create partnerships across govermental

and NGO-based programs facilitating and

subsidizing EE auditing and information

programs (World Bank, IFC, IIP, DOE/

EPA, EDF, etc.)

• Develop anonymous reporting guidelines

for best practice and participation in

subsidized programs

• Create a demonstration project with the

support of industry/retail participation

for application of database to supply

chain level

TABLE 4 // SYMPOSIUM RECOMMENDATION #3 - INCREASING TRANSPARENCY AND STANDARDIZATION TO EVALUATE

INVESTMENTS IN ENERGY EFFICIENCY

can be generally classified into three types: shared savings contracts; guaranteed energy savings contracts; and outsourced contracts (Xiaoliang et al. 2011). In shared savings con-tracts, assets created by the project are generally owned by the ESCO, with the contract specify-ing payments to the ESCO based on an agreed percentage share of an estimated minimum cost savings scenario at normal asset opera-tion. With guaranteed energy savings contracts,

WHILE GOVERNMENTS are investing widely in energy efficiency, the financial com-munity has become increasingly interested in capitalizing on energy efficiency. However, significant interest in energy efficiency financ-ing has been hampered by equally significant barriers to efficiency project financing. To date, the bulk of energy efficiency finance depends in one form or another on performance-based contracts. Energy performance-based contracts

assets typically belong to the client, but the project is designed and implemented by the ESCO under financial guarantees for perfor-mance. Finally, outsourced contracts allow for the direct sale of heat, electricity and energy services from assets owned or acquired by an ESCO over an extended period of time. While useful for discussion purposes, it is important to note that great variation exists, making it difficult to compare types across countries,

12

providers as the number of ESCOs continues to proliferate. Another aspect participants mentioned and spent substantial time discuss-ing was how banks and equity investors could play a larger role in energy efficiency financing, especially as projects move into SMEs.

Financing barriers are significant for SME energy efficiency projects and include issues of information asymmetries, transaction costs, perceptions of risk and limited capacity and knowledge of financial markets by small ES-COs or industrial process efficiencies by loan officers and risk managers (Figure 2). Central to these barriers is the perspective of banks on energy efficiency projects. Banks view loans for energy efficiency improvements as nonrecourse, meaning in the event of default, the banks can lay claim to the collateral (i.e., the equip-ment put into place for the energy efficiency improvement), but cannot take further legal action. Such loans are more risky for banks due to their limited opportunity for ensuring repayment. In the case of energy efficiency improvements, the risk is even greater because the transaction costs of getting the equipment out of the factory (e.g., removing an integrated HVAC system from a building) are high, so the bank sees no collateral value in the equip-ment itself.

If banks do not value the equipment, facto-ries have no collateral with which they can use to secure a loan. The value of energy efficiency improvements stems from the future stream of cost savings that will occur when the energy bills of the factory decrease from the increased energy efficiency of the new equipment.

and a variety of hybrid approaches have been developed. In nearly all cases, an ESCO estab-lishes the overall project design, manages most project implementation aspects, and guarantees energy savings performance, but financing, contract, asset ownership and risk-sharing arrangements vary. Of course, where clients have specific needs or concerns, ESCOs often will vary contractual arrangements. However, if ESCOs are looking to banks or other financial institutions for project loan financing, it is important for project payment regimes to be as fixed and predictable as possible.

On the global stage, China is emerging as an important arena in the development of energy efficiency implementation and finance. With energy performance contracting invest-ment in 2010 totaling more than $4.24 billion, the business volumes of China’s industry are now on par with those of the ESCO industry in the United States. China’s energy perfor-mance contracting business has grown remark-ably fast over the past decade, developing con-tractual practices, business models and market approaches that are distinctly adapted to the Chinese market, where almost three-quarters of energy performance contracting investment occurs in industrial sector projects.

The ESCO model of energy efficiency financing and project implementation has played a critical role in industrial energy ef-ficiency improvements to date. One aspect of this model going forward that was mentioned as important, but not further discussed at the Supply Chain Coordination and Energy Efficien-cy Symposium, was ensuring quality of ESCO

CREDIT RISK AND PORTFOLIO

MANAGEMENT // INTERNATION-

AL FINANCE CORPORATION

The International Finance Corpora-

tion (IFC), a World Bank Group, has

been working to stimulate energy

efficiency investments since 2006.

Their China Utility-Based Energy Ef-

ficiency Finance Program (CHUEE)

provides bank guarantees for energy

efficiency loans and technical as-

sistance to market players, includ-

ing utilities, equipment vendors,

and energy service companies, to

help implement energy efficiency

projects. As of end-2011, the CHUEE

program’s participating banks have

provide loans totaling close to $700

million, far exceeding the target of

around $500 million. The original

expectation was that 60% of the

guaranteed loans would be small

(about $0.2 million). However, by

mid-2009, the average loan was $5.7

million, and loans of $0.2 million or

less constituted less than 10% of the

actual portfolio. Given the project

success, coupled with a predomi-

nance of larger companies in the

CHUEE program, IFC is expanding

their effort to assist SMEs and is

setting aside $200 million for SME

energy efficiency financing, while

also giving more focus to cooperat-

ing with smaller banks. IFC’s work

has improved financing for energy

efficiency in China and could provide

some baseline data for how alterna-

tive credit risk models and portfolio

financing could work globally.

FINANCING BARRIERS

Availability of FundsInformation Awareness

and CommunicationProject Development and

Transaction CostsRisk Perceptions Limited Capacity

Limited internal funds, limited borrowing capacity - SMEs, reluctance of top

management to invest in EE

Information on new EE technologies, communica-

tion between project developers and bankers

Small project size, project development costs,

financing transaction costs for SMEs

Bankers’ risk perception, collateralization,

M&V, need for new financial products and

appraisal tools

Energy service providers, projects hosts, M&V

agents, bank loan officers and risk managers

FIGURE 2 // FINANCING BARRIERS TO INDUSTRIAL ENERGY EFFICIENCY

(Xiaoliang et al. 2011)

13

ESCOs may have information about the tech-nology, its effectiveness, payback period, etc., but this information is not relevant to a bank’s decision to loan money.

Investors need new credit/risk models to enable the financial community to capture the extensive potential of energy efficiency invest-ments for small and medium enterprises. The recommendation from the Supply Chain Coordination and Energy Efficiency Symposium for new credit / risk models cen-ters on creating ways to assess credit risk to


Create finance and credit risk

approaches and models for

portfolio-level energy efficiency

and energy management

projects

Develop the application of existing models

to quantify credit risk of supply chain and/

or SME energy efficiency portfolios: with

application in control of risk concentra-

tion, evaluation of return on capital at the

supply-chain level, and active management

of credit portfolios.

• Small size of individual projects and pos-

sibly small size of portfolios (est. 50-100

projects for a $20MM fund)

• High transaction costs associated with

education and informational costs of

project identification, technology selec-

tion, and savings calculations

• Potential low returns of individual proj-

ects (~10% under current transaction

costs) reduces attractiveness of portfolio


Measures of credit risk similar to influential

benchmarks common to the pricing of a

wide range of asset types used in energy

efficiency finance (i.e. private equity, loans

and bond-like instruments:

• Default Risk

• Value-at-Risk (Var)

• Convene key practitioner and academic

experts to identify specific barriers

and opportunities for energy/resource

efficiency risk portfolio management

products

• Explore the creation of a community of

practice for sharing knowledge and best

practice

TABLE 5 // SYMPOSIUM RECOMMENDATION #4 - ASSESSING CREDIT RISKS AND CREATING PORTFOLIOS OF ENERGY

EFFICIENCY PROJECTS

a portfolio of projects. Investment disparity poses a challenge to this task. A typical project at an existing facility can cost in the range of $50,000 to $5 million, while $100 million is the typical scale for a level of interest for ag-gregated investment in such projects (Kapur et al. 2011; Taylor et al. 2008). This disconnect in scale thus requires aggregation of many small projects into a portfolio approach to financing. The participant discussion identified four es-sential requirements for this portfolio approach to be successful: homogeneous products (e.g.,

the portfolio needs to be only industrial, with no mixing with municipals or residential), a two-year or less payback, consistent qual-ity and a mechanism for determining the portfolio credit rating. The first two criteria can currently be met (i.e., banks can require homogeneous projects, and information is available to estimate paybacks); however, the third and fourth criteria remain areas of key unknowns. The symposium recommendation centers around the fourth issue of portfolio credit ratings.

14

As such, the four recommendations emanat-ing from the Supply Chain Coordination and Energy Efficiency Symposium are, individually, herculean efforts across multiple actors, mul-tiple sectors and multiple regions. They are also largely interdependent, where addressing one recommendation may have significant implications on the effectiveness or efficiencies associated with addressing another.

Recommendations tend to address key barriers associated with the lack of standards and best practices in both technological and financial arenas; the lack of more comprehen-sive repositories of comparable information of factory, sector or supply chain level assessment and/or performance; the small size and high

transaction costs of SME energy effi-ciency projects; complexities associated with geographic variation across supply chains; and perceived misalignment of institutional factors (govern-ment policy targeting large projects, lack of SME experi-ence among fi-nancial institu-

tions, etc.). Therefore, the goals, measures and metrics, and suggested next steps are largely focused on the development of institutional infrastructure and shared informational assets facilitating implementation. Specific recom-mendations surfaced are:

1. Engage leading companies (manufac-turer/retail brand owners) to identify high-quality suppliers to pilot supply chain energy efficiency improvements.

2. Create one or more sector-based col-laborations for improving supply chain energy efficiency by assembling groups of peer manufacturers within a supply chain and using benchmarking, process capa-bility analysis and best practice sharing

THE PERSISTENT GAP between eco-nomically justifiable and implemented energy efficiency investments has puzzled researchers and practitioners for over four decades. Econ-omists have characterized this gap as market failure, while behaviorists believe it is caused by individual, interpersonal, organizational or cultural factors. The gap between poten-tial and actual savings is exacerbated among SMEs. This report provides initial insight into the potential role of large companies near the end of supply chains in providing motivation to upstream, and often smaller, supply chain partners and resources toward lowing the high transaction costs of performance-based energy efficiency implementation approaches (audits,

savings calculations, opportunity identifica-tion, technology assessment, financing, etc.). The information and recommendations pro-vided are based on expert opinion obtained through a workshop of influential stakehold-ers and relatively limited literature focused on supply chain energy efficiency.

At the heart of this report resides the assumption that the benefits of energy ef-ficiency investments and related sustainability co-benefits (carbon reductions, local GHG emissions reductions, process performance efficiencies, etc.), are created by, and shared between, complex configurations of supply-chain actors involved in designing, planning, executing, controlling and monitoring the ul-timate provision of net value to end customers.

to identify and improve energy efficiency and industry competitiveness.



5. Accomplishing high penetration of energy efficiency technologies in global SMEs represents a daunting, though at-tainable, challenge.

Meeting energy and environmental goals will require an unprecedented ability to char-acterize and benchmark sector- and facility-level energy savings opportunities, share knowledge in ways that allow for the flexible application of technological and organiza-tional information in a supply chain environ-ment, and coordinate resources across regions and across public and private actors. From a technical perspective, success will demand accurate, reliable and consistent computations and measurements across an expansive range of technologies, supply chain configurations and financial mechanisms. From a develop-ment perspective, resources from key actors

– namely, large leading companies in supply chains, national governments, transnational organizations, and technically adept NGOs

– will be required to create fundamental pre-competitive infrastructure and demonstration projects to further prove the concept.

The information and recommendations in this report represent incipient thoughts of stakeholders and experts within the global energy efficiency and research communities; advancement beyond this initial stage will require more detailed documentation and long range planning. Nevertheless, identifying these key barriers and brainstorming ways for overcoming them is imperative for maximizing supply chain energy efficiency.

CONCLUSIONS

15

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