SUPPLY CHAIN

ENERGY EFFICIENCY
Engaging Small & Medium Entities
in Global Production Systems
// AUGUST 2013 //

MAKING PROGRESS
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 Foundation at Wingspread campus. The symposium addressed the issues of industrial energy
efficiency and the role supply chains can have
in facilitating project implementation. Thirtyone participants attended, representing many
of the actors in the energy efficiency supply
chain, including energy service companies,

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 downstream 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

financers, retailers, nongovernmental organizations, government and academia. This small,

yet influential group joined together to present, discuss and brainstorm barriers to energy
efficiency, the role of small and medium enterprises, 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.

further transparency and standardization.

These conditions suggest that supply 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

small and medium enterprises across the globe.

However, many organizations across the
energy efficiency supply chain are beginning
to make progress. Financial institutions, utilities, energy service companies, brand owners,
retail giants and factories are all beginning to
connect the dots and understand how clear
communication, innovative finance models 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 innovators across the energy
efficiency supply chain
to discuss these key
drivers and opportunities. We focused on how
to accelerate industrial energy efficiency
initiatives in small and
medium enterprises,
sharing lessons learned
about obstacles encountered, success achieved
and innovations in the
works to unlock the
full potential of supply
chain efficiency. Emerging 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 recommendations based on
participant discussions. These recommendations include:
1. Engage leading companies (manufacturer/retail brand owners) to identify
high-quality suppliers for pilot supply
chain energy efficiency improvements.
2. Create one or more sector-based collaborations for improving supply chain
energy efficiency by assembling groups of
peer manufacturers within a supply chain

ACKNOWLEDGMENTS
and using benchmarking, process capability analysis and best practice sharing
to identify and improve energy efficiency
and industry competitiveness.
3. Increase transparency and standardization of energy use, audits and supply
chain information.
4. Create finance and credit risk approaches
and models for portfolio-level energy efficiency 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 potential embedded in current industrial energy
systems. As the following report describes,
large leading companies can provide motivation 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, transparent and creative solutions for progressing
global industrial energy efficiency.
Sincerely,

TIM SMITH
NorthStar Initiative
for Sustainable Enterprise

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 development 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).

SYMPOSIUM
THE SUPPLY CHAIN COORDINATION AND ENERGY EFFICIENCY SYMPOSIUM

occurred October 2224, 2012 in Racine, Wis. Thirty-one participants representing key
actors of the industrial energy efficiency supply chain, from product development companies 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 project 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.

TABLE OF CONTENTS
ANDREW HUTSON
Environmental Defense Fund

3
5

7
9
10
15
16

Introduction
Energy Systems & Markets:
Energy efficiency in small and medium-size enterprises
Supply Chain Energy Management: A nested energy services network
Data, Metrics & Analytics: Improvement measures
Regional Collaboration & Implementation: Global policy and financing
Conclusions
References

INTRODUCTION
RISING ENERGY PRICES, new governmental 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 governments national CO2 emissions as well as a
products supply chain CO2 emissions; thus,
both governments and companies are striving to identify the most effective measures
to increase industrial energy efficiency. The
industrial sector is one of the main consumers of energy and emitters of CO2, consuming nearly one-third of total global primary
energy supply and causing 36% of energyrelated 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
1826% of industrial
consumption or 5.48.0%
of total global energy consumption (IEA 1007).
From an individual
firm perspective, these energy efficiency investments
are often a no- or low-cost
proposition. Particularly in
the industrial and commercial sectors, many energy
efficiency projects carry
the promise of substantial
financial returns within
only a few years. Overall,
McKinsey and Company
estimate the global investment 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

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

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 interorganizational 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 smallto medium-size enterprises (SMEs). Only
recently have management and policy scholars
begun to evaluate the role of private sector

in the United States alone in 2004, amounting to 1.7 quads of energy savings (EhrhardtMartinez & 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

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 technologies, operational support and financing to
clients. Financial institutions, in search of new
markets, are beginning to explore financial
mechanisms targeting energy efficiency. Large

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 1

Supplier 1

Supplier 2

Industry
Sector 2

Brand
Owner
LLC

Supplier 3

Industry
Sector LLC
Supplier N

Supplier
N-1
Industry
Sector J-1

Industry
Sector J

Data, Metrics & Analytics

Industry Sector
Benchmarking

Standardized
Facility Audits

Supply Chain Savings

Regional Collaboration & Implementation

Financing

ESCO Certification

Policy

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 chains 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 require significant new and increasingly more transparent data, common metrics and
analytics. Finally, public and private collaboration is required to reduce the transaction costs of implementing SCEE, particularly with regard to credit enhancement,
technology provider accreditation and governmental policies.

manufacturing and retail brand owners

(Walmart, Ikea, Tesco, Herman Miller, Pepsi, 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 increasingly engaging industrial energy efficiency
implementation and financing among
smaller, less sophisticated and less capitalized 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, supply 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 efficiency 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 projects is difficult and unconventional, as no
generally accepted measurement and verification 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 riskaverse 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 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 overcoming these obstacles in the very near term are
tremendous. In China alone, energy efficiency
investment to meet new policies implemented under the 12th Five Year Plan (FYP)
(20112016), 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 937% (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 Coordination 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 efficiency 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 effectiveness 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

symposium. It suggests that a more comprehensive view of current and potential efforts
targeting supply chain energy efficiency may
illuminate very different paths forward from
the largely facility-level adoption or sectorlevel energy savings opportunity studies so
pervasive in the literature.
Specifically, recommendations emanating
from the symposium are as follows:
1. Engage leading companies (manufacturer/retail brand owners) to identify
high-quality suppliers to pilot supply
chain energy efficiency improvements.
2. Create one or more sector-based collaborations for improving supply chain
energy efficiency by assembling groups of
peer manufacturers within a supply chain
and using benchmarking, process capability analysis and best practice sharing
to identify and improve energy efficiency
and industry competitiveness.
3. Increase transparency and standardization of energy use, audits and supply
chain information.
4. Create finance and credit risk approaches
and models for portfolio-level energy efficiency and energy management projects.
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 implementation approaches (audits, savings calculations, 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 recommendations 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

Mtce (metric tons of standard coal equivalent) is an energy equivalency metric.

MtCO2-eq (metric tons of carbon dioxide equivalent) is a global warming potential metric.

information and when relevant to our symposium discussions, recommendations. These

recommendations require an unprecedented
ability to characterize and benchmark sectorlevel and facility-level energy savings opportunities, 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 regional 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.)

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 financial 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 insurance industry can lower the transaction costs and risk of energy efficiency investments by offering 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 investors, 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, contract guarantees, etc.

Supply chain management

companies (e.g. PCH
International)

Supply chain management companies can incorporate energy efficiency into their supplier development and selection criteria.

TABLE 1 // FRAMES AND POTENTIAL ROLES FOR ENERGY EFFICIENCY SUPPLY CHAIN COORDINATION
(expanded upon Fischlein et al. 2011)

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 companies, 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 associated with large, enlightened brand owners.
Understanding this tension between shortterm stress to the material supply chain and
long-term resiliency and advantage of less
environmentally and socially impactful supply
chains is paramount ultimately changing

the optimization function from cost reduction 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 worlds
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 Chinas 2.4 million SMEs make up 99% of all enterprises in
that country, accounting for more than half of
all of Chinas 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

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 disruption 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 ENERGY MANAGEMENT:

A nested energy services network
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, globalization and time-based competition (Bhatnagar & Viswanathan 2007). Globalization
motivated by cost minimization, access to
new markets, economies of scale, etc. has
led to the emergence of borderless organizations with globally located suppliers and

substantial, unanticipated additional costs

stemming from reputational to natural hazards (Geary et al. 2006; Halldrsson & Kovcs
2010). Many of these risks are exacerbated by
the increasing geographic scope of firms supply chains that expose supply chains to a variety 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

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

of publicly proclaimed best practices comes

into question including supply base reduction, global and supply cluster sourcing, and
the broad implementation of lean production
systems (e.g., reduced inventory, shipment
sizes, production batches; frequent just-intime delivery; rapid-response logistics; central
warehousing; mass customization). This has
fueled interest in green supply chain management; 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

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 profiting 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 activities 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

RECOMMENDATION
Engage leading companies to
identify high quality suppliers
to pilot supply chain energy
efficiency improvements

GOAL

BARRIERS TO IMPLEMENTATION

Create a demonstration project of multiple

leading companies willing to actively engage 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.

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: multiyear purchase agreements, investment
into a project finance vehicle, backstopping loans, etc.
Widespread dispersion of success
stories

Identifying corporate leaders

Hesitation of leading companies to put
time, money, effort or reputation in the
process
Leading companies may have great energy efficiency intentions, but they may
lack knowledge about the actual energy
processes and technologies

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 motivations including: preserving or improving
reputation, competition, profit, corporate
values, customer preferences and correlations to better business health

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

as aggregators of SMEs and facilitate implementation of energy efficiency projects.

The recommendation coming from the
Supply Chain Coordination and Energy
Efficiency Symposium to increase leading companies role in their supply chain
energy efficiency implementation is to
engage leading companies in a demonstration 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.

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 opportunities. 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 companies on how they will put forth time, money, effort or reputation to promote
energy efficiency improvements in their suppliers.

Cradle-to-gate refers to a partial lifecycle analysis of the companys 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 companys product uses and disposal are
not considered.

DATA, METRICS & ANALYTICS:

Improvement measures
ENERGY AUDITS OF FACILITIES provide
invaluable data on energy performance and are
increasingly being demanded by downstream
customers, upstream financiers and insurance 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. Standardizing 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 project 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-intensive industries like steel, cement and the glass
industry, have benefitted from U.S. Department 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 Challenge (DOE 2013), in which manufacturing
companies are recognized for making commitments and achieving a 25% energy intensity4
improvement over 10 years. Unfortunately,
4

these resources have not generally been as accessible to SMEs, and without sector benchmarking, 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, countrylevel 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, standardized transparent data is often not required. Of
the 38 implemented measures for identifying
energy efficiency opportunities in International 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 initiative, Energy Star Industries in Focus, the U.S.
Government Green Button program and the
Institute on Industrial Productivity best practice 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 Efficiency 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 accounting 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 chainlevel analyses of best practices.

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

consumption to gross domestic product (Joule/USD).

INDUSTRIAL ASSESSMENT
CENTERS // U.S. DEPARTMENT OF
ENERGY
The U.S. Department of Energys Industrial Assessment Centers are a collaboration of 24 centers and 32 universities
across the United States assessing
industrial plant energy efficiency improvements, waste minimization and
pollution prevention and productivity
improvement. A university-based team
conducts the initial survey of the plant,
performing a detailed analysis and follow-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, stringing together the industry benchmarking data along product supply chains,
rather than simply focusing on sectorlevel savings, would provide key insight
into the energy efficiency potential of
different products.

RECOMMENDATION
Create one or more sectorbased collaborations for
improving supply chain energy efficiency, by assembling
groups of peer manufacturers
within a supply chain and using
benchmarking, process capability analysis and best practice
sharing to identify and improve
energy efficiency and industry
competitiveness.

GOAL

BARRIERS TO IMPLEMENTATION

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 characteristics to allow peer, plant-level benchmarking
and process capability analysis. Aggregate
sector benchmarking across supply chains
at the industry sector level and for individual supply networks.

MEASUREMENT & METRICS

POTENTIAL STRATEGIES & NEXT STEPS

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 opportunities across supply chain

Globally dispersed production systems

Coordination across multiple governmental policy and finance programs
Potential incongruence between cost/
benefit to global, private supply chain actors and nation-based, public actors

Develop anonymous benchmarking/

capability analysis through an accounting 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

REGIONAL COLLABORATION
& IMPLEMENTATION
Global policy and financing
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 management, equipment investment and research
and development (R&D) (Tanaka 2011). One
of the most documented programs is the U.S.
DOEs 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 individual projects across more than 9,000 U.S. facilities participating in the program yielded mixed

results in terms of energy efficiency adoption

(Anderson & Newell 2004). Although more
than half of recommended projects were
adopted, only the lowest hanging opportunities (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 investment 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

invite pre-applications for up to $2 billion in

loan guarantees.
Germanys Special Fund for Energy
Efficiency in SMEs provides SMEs with lowinterest loans for energy conservation. In Japan,
a government-affiliated financial institution
provides low-interest loans for energy conservation systems. In the United Kingdom, the
Carbon Trust runs an interest-free loan scheme
for energy efficiency investment of SMEs, with
loans ranging from 5,000400,000, depending 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

10

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 effort, Green Button is just that, a green
button available on participating utility
companies websites that provides
transparency and standardization to
electricity reporting, allowing consumers to verify the energy savings from
any retrofit, upgrade, behavior change
or other energy efficiency improvement. To date, utility commitments to
the green button program will generate 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 revolutionize energy efficiency monitoring,
evaluation and improvements.

of the most significant government involvement in energy efficiency. Chinas 12th FYP
(20112015) builds directly on previous efforts
targeting large (predominantly state-owned)
enterprises, extending the scope of the Top1,000 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 efficiencyimproving 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 Chinas
manufacturing sector, has
resulted in
an explosion
in the ESCO
industry,
supported by
NGO and
transnational
organizational
programs. A
comprehensive
analysis of
global energy efficiency
policies can
be found at
(Tanaka 2011).
Given
the large and
increasing
governmental
financing of
energy efficiency projects, it
is remarkable
that evaluation
of these efforts
is lacking,
largely due to
unavailability
of data. There
is no comprehensive knowledge about the
success of the
governments
investments.

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

specifically targeted toward industrial energy efficiency.

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), saving 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 $1016 billion per year by 2025 (ACEEE
Energy efficiency scorecard 2012). However,

11

assessing and evaluating which programs,

technologies and applications are most effective 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).

RECOMMENDATION

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

GOAL

Increase transparency and

standardization of energy use,
audits and supply chain
information

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 subsidize auditing and information programs and
develop reporting guidelines for best practices.

BARRIERS TO IMPLEMENTATION

Create critical data infrastructure associated

with supply chain energy use, capable of:
1. evaluating public and private investment in energy efficiency; and,
2. facilitating the integration of future
behind meter demand resources such
as distributed generation and demand
response.

MEASUREMENT & METRICS

POTENTIAL STRATEGIES & NEXT STEPS

While a significant component of this recommendation 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 (operating) risk
Ancillary benefits/costs: quality,
throughput, waste, labor, etc.

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 expected value and impact assessment

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

WHILE GOVERNMENTS are investing

widely in energy efficiency, the financial community has become increasingly interested
in capitalizing on energy efficiency. However,
significant interest in energy efficiency financing 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

can be generally classified into three types:

shared savings contracts; guaranteed energy
savings contracts; and outsourced contracts
(Xiaoliang et al. 2011). In shared savings contracts, assets created by the project are generally
owned by the ESCO, with the contract specifying payments to the ESCO based on an agreed
percentage share of an estimated minimum
cost savings scenario at normal asset operation. With guaranteed energy savings contracts,

assets typically belong to the client, but the

project is designed and implemented by the
ESCO under financial guarantees for performance. 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

FINANCING BARRIERS

Availability of Funds

Limited internal funds,

limited borrowing capacity
- SMEs, reluctance of top
management to invest
in EE

Information Awareness
and Communication

Project Development and

Transaction Costs

Risk Perceptions

Limited Capacity

Information on new EE
technologies, communication 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

CREDIT RISK AND PORTFOLIO
MANAGEMENT // INTERNATIONAL FINANCE CORPORATION

(Xiaoliang et al. 2011)

and a variety of hybrid approaches have been

developed. In nearly all cases, an ESCO establishes 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 investment in 2010 totaling more than $4.24 billion,
the business volumes of Chinas industry are
now on par with those of the ESCO industry
in the United States. Chinas energy performance contracting business has grown remarkably fast over the past decade, developing contractual 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 efficiency 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 Efficiency Symposium, was ensuring quality of ESCO

providers as the number of ESCOs continues

to proliferate. Another aspect participants
mentioned and spent substantial time discussing 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 ESCOs 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 equipment 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 equipment itself.
If banks do not value the equipment, factories 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.

The International Finance Corporation (IFC), a World Bank Group, has

been working to stimulate energy
efficiency investments since 2006.
Their China Utility-Based Energy Efficiency Finance Program (CHUEE)
provides bank guarantees for energy
efficiency loans and technical assistance to market players, including utilities, equipment vendors,
and energy service companies, to
help implement energy efficiency
projects. As of end-2011, the CHUEE
programs 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 predominance 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 cooperating with smaller banks. IFCs work
has improved financing for energy
efficiency in China and could provide
some baseline data for how alternative credit risk models and portfolio
financing could work globally.

13

RECOMMENDATION
Create finance and credit risk
approaches and models for
portfolio-level energy efficiency
and energy management
projects

GOAL

BARRIERS TO IMPLEMENTATION

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 concentration, evaluation of return on capital at the
supply-chain level, and active management
of credit portfolios.

Small size of individual projects and possibly 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 selection, and savings calculations
Potential low returns of individual projects (~10% under current transaction
costs) reduces attractiveness of portfolio

MEASUREMENT & METRICS

POTENTIAL STRATEGIES & NEXT STEPS

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

ESCOs may have information about the technology, its effectiveness, payback period, etc.,
but this information is not relevant to a banks
decision to loan money.
Investors need new credit/risk models to
enable the financial community to capture the
extensive potential of energy efficiency investments for small and medium enterprises.
The recommendation from the Supply
Chain Coordination and Energy Efficiency
Symposium for new credit / risk models centers on creating ways to assess credit risk to

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 aggregated 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 essential 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 quality 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

CONCLUSIONS
THE PERSISTENT GAP between eco-

nomically justifiable and implemented energy

efficiency investments has puzzled researchers
and practitioners for over four decades. Economists have characterized this gap as market
failure, while behaviorists believe it is caused
by individual, interpersonal, organizational
or cultural factors. The gap between potential 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 identification, technology assessment, financing, etc.).

The information and recommendations provided are based on expert opinion obtained
through a workshop of influential stakeholders and relatively limited literature focused on
supply chain energy efficiency.
At the heart of this report resides the
assumption that the benefits of energy efficiency 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 supplychain actors involved in designing, planning,
executing, controlling and monitoring the ultimate provision of net value to end customers.

As such, the four recommendations emanating from the Supply Chain Coordination and
Energy Efficiency Symposium are, individually,
herculean efforts across multiple actors, multiple 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 comprehensive 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 efficiency projects;
complexities
associated with
geographic
variation across
supply chains;
and perceived
misalignment
of institutional
factors (government policy
targeting large
projects, lack
of SME experience among financial institutions, 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 recommendations surfaced are:
1. Engage leading companies (manufacturer/retail brand owners) to identify
high-quality suppliers to pilot supply
chain energy efficiency improvements.
2. Create one or more sector-based collaborations for improving supply chain
energy efficiency by assembling groups of
peer manufacturers within a supply chain
and using benchmarking, process capability analysis and best practice sharing

to identify and improve energy efficiency

and industry competitiveness.
3. Increase transparency and standardization of energy use, audits and supply
chain information.
4. Create finance and credit risk approaches
and models for portfolio-level energy efficiency and energy management projects.
5. Accomplishing high penetration of
energy efficiency technologies in global
SMEs represents a daunting, though attainable, challenge.
Meeting energy and environmental goals
will require an unprecedented ability to characterize and benchmark sector- and facilitylevel energy savings opportunities, 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. 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 development 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 precompetitive 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.

15

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