GUIDELINES FOR AN INTEGRATED ENERGY STRATEGY
Helping companies achieve their sustainable energy objectives
The energy sector is undergoing a fundamental transition – driven by new technologies, new business models, and the need to limit climate change. To derive opportunities from the energy transition, energy users need to rethink how they source and consume energy within their business, and collaborate with stakeholders along their energy-related value chain.
An integrated energy strategy sets out how to achieve a company’s energy-related financial and environmental objectives – considering all energy uses within its operations and across its energy-related value chain. Crucially, an integrated energy strategy defines these objectives – including cost reductions, energy and carbon savings – and sets a roadmap for achieving them.
Companies with an integrated approach to energy:
- Consider all energy uses – electricity, heating and cooling in buildings and industry, and transport – across all assets and geographies;
- Include all relevant internal stakeholders – from procurement and operations through to finance and executive management;
- Collaborate with external stakeholders, across the supply chain, customers and local end-users.
Collaboration is key to building a successful integrated energy strategy. Working across functions internally and with stakeholders across the value chain is critical to understanding your company’s position in an evolving energy system, unlocking marketplace value and managing social and environmental impacts, including climate change.
With an integrated energy strategy, companies can elevate energy from an operational expense to a strategic priority; articulate the business benefits of energy investments; identify potential synergies with suitable partners; employ novel business models; and access new sources of capital.
These guidelines consist of four key sections:
1. An overview outlining what an integrated energy strategy is, why your business needs one, and how you can develop your strategy;
2. A description of the six key elements that are vital for an effective integrated energy strategy, ranging from a credible vision and strong governance to robust data and effective stakeholder management;
3. Two implementation guides, providing guidance and examples of collaboration on energy efficiency and low-carbon energy sourcing;
4. A set of nine business cases showing how your company can best integrate renewable technologies such as solar cooling and heat pumps into operations.
Using this guidance will allow you to visualize your company’s energy journey, generate and maintain buy-in across your organization and future proof your energy strategy. Collaborating with external partners will unlock additional opportunities, drive innovation and accelerate the transition to resilient and low-carbon operations across your businesses and those in your value chain.
Developing your integrated energy strategy
Watch this video for a high-level look at integrated energy strategies
What is an integrated energy strategy?
An integrated energy strategy covers all the energy your company uses for its operations and across its energy-related value chain. It describes how your company works cross-functionally internally and with upstream and downstream stakeholders externally. It defines how all energy-related inputs and outputs become more efficient, more circular and low-carbon. It acts as a roadmap to take your company from being a passive energy user to a proactive player.
An integrated energy strategy should be developed and implemented in alignment with your overall business strategy, anticipating and managing feedback loops between the two. This is particularly important for companies who are revising their business strategy to manage climate-related risks.
Developing and implementing an integrated low-carbon energy strategy is challenging. It requires involving a broad range of internal and external stakeholders, understanding fast evolving and complex energy markets, and the evaluation of new technologies and new energy sources using multifaceted decision criteria.
It’s also important to consider how your energy strategy interacts with your over-arching sustainability strategy and broader societal frameworks such as the United Nations Sustainable Development Goals (SDGs). An integrated energy strategy presents a range of opportunities to contribute towards achieving the SDGs. Direct contributions to SDGs 7 (affordable and clean energy) and 13 (climate action) are clear, but these efforts also have the potential to support the achievement of a wide range of other SDGs, such as SDG 11 (sustainable cities and communities) and SDG 12 (responsible consumption and production) to name but two.
Companies should also be mindful of any potential negative impacts on the global sustainable development agenda that could arise as consequences of their integrated energy strategy. It’s important to develop a clear picture of any potential risks to people or the environment ahead of implementation and to ensure that measures are in place to prevent or mitigate negative impacts.
These guidelines explain the six elements that are vital for an effective integrated energy strategy:
|Vision and targets
||Energy strategy governance
||Data collection and management
|A vision that is supported by credible targets provides context, direction and commitments.||A strong governance framework clearly defines accountabilities throughout the company and ensures continuing commitment from executive management.||A robust data management program allows energy and emissions data to be analyzed with confidence.|
|Mandatory and voluntary reporting
||Internal and external engagement
|external and internal reporting aids action-oriented insight, maintains momentum, and identifies improvements areas for the energy strategy.||An effective plan to engage with internal and external stakeholders enables prioritization of efforts, accelerates progress and can be critical to securing buy-in and achieving strategic goals.||A roadmap of measures that improve energy efficiency and increase the use of low-carbon energy and fuel – in your operations and together with your value chain. It ensures that highest impact measures are acted on first and strategy implementation is coordinated with other business priorities.|
Who should read these guidelines?
These guidelines are designed for employees involved in developing the company’s integrated energy strategy, encompassing different positions in senior management, strategic sourcing/procurement, manufacturing, engineering, energy, sustainability and corporate strategy. The guidelines help different functions understand an integrated energy strategy’s:
- business benefits and new opportunities
- value of harnessing collaboration with upstream and downstream stakeholders
- key elements and processes
Why does my company need an integrated energy strategy?
An integrated approach to energy will help companies to decrease and decarbonize their energy footprint and unlock value from the energy transition.
To respond to the climate change challenge, companies need not only decarbonize their own operations – they must also act to drive decarbonization into their supply chains and support their customer base to reduce their GHG emissions.
At the same time, energy users need to understand and respond to the energy systems becoming more decentralized, low-carbon and resilient. Most energy users aren’t just buying energy anymore, they’re now grappling with how to mitigate emerging risks, accelerate their transition to low-carbon operations and capture new commercial opportunities.
An integrated energy strategy will help your company navigate these challenges and capture a range of benefits.
To respond to climate change
The IPCC’s Special Report on ‘Global Warming of 1.5°C’ communicated a stark warning: avoiding the worst impacts of climate change requires “rapid, far-reaching and unprecedented changes in all aspects of society” and the complete decarbonization of the global economy. Today, around 80 percent of CO2 emissions come from the energy system. A radical transformation is required to transition the energy system away from its reliance on fossil fuels and towards zero carbon energy in all sectors.
An integrated energy strategy defines how your company responds to climate change and other environmental concerns: It helps you use less energy and transition towards net zero carbon energy.
To limit global warming to 1.5°C, GHG emissions need to be net zero as early as possible in the second half of this century and will need to be reduced by 45 percent by 2030 compared to 2010 levels. This time horizon is now within the business planning cycle of companies and requires companies to align their targets and actions. Failing to consider decarbonization in today’s business, and particularly investment decisions, increases the risk of disruption to business operations and reputational damage in the future.
As such, companies must consider decarbonization as a fundamental part of their integrated energy strategy.
To respond to an evolving energy system
An integrated energy strategy sets out how to achieve your company’s energy-related financial and environmental objectives by working cross-functionally internally and with upstream and downstream stakeholders externally. This means it assesses and clarifies the role your company plays in its evolving, interconnected, energy-related value chain. Failing to think and act strategically risks missing arising opportunities.
The traditional energy value chain was linear, with energy carriers produced centrally and distributed to a passive end user.
The traditional and linear energy value chain
The emerging decentralized and interconnected energy value chain is characterized by distributed energy resources, technology-enabled collaboration, as well as new roles and business models. The energy user is a participatory player that can take multiple roles to suit their business model.
Companies who take advantage of the energy system transformation evaluate what energy inputs they really need, where those are available and how their products, services and by-products/waste streams can provide low-carbon energy solutions to other energy consumers. They will have a comprehensive understanding of their energy consumption and leverage the demand side and supply side with a collaborative approach. They will look to recover and extract value from energy resources that would otherwise go to waste and consider local partnerships to share energy resources efficiently.
Companies who understand how they fit within the interconnected energy value chain and where their opportunities lie will benefit most from the transition.
Traditional energy value chain and passive energy user
- Limited sources of fuel production and electricity generation
- Limited choice of suppliers
- Limited capabilities in switching to more efficient and low-carbon technologies
Evolving energy system and active energy user
- Energy users’ interest in energy management drives new choices
- Broader choice of suppliers, products and services lead to an active selection of suppliers that will help to achieve strategic objectives
- Energy user doesn’t control fuel production or electricity generation, but has stronger influence via sourcing choices
- Energy efficient technologies
Decentralized & interconnected energy value chain and participatory energy user
- Energy user takes a participatory role in fuel production, electricity generation, storage and management
- Comprehensive understanding of the technologies can improve energy and fuel efficiency, while reducing GHG emissions
- Increasing interactions with other players across the energy value chain
- Involvement in energy recovery and reuse solutions
- Creation of new energy supply options for property, plants and transport fleets
To collaborate with upstream and downstream stakeholders
An integrated energy strategy enables a company to collaborate with stakeholders that sit outside its traditional energy value chain. It harnesses knowledge, expertise and relationships that exist with an organization’s suppliers and customers to find more energy efficient, circular and low-carbon ways of doing business.
When companies become actively engaged with their supply chain and customers on the topic of energy resources, they can create advantages by developing new capabilities, exploring new business models, capturing new revenue streams and finding energy and cost efficiencies.
When procuring products or services that have an impact on your company’s energy use or GHG emissions, there’s an opportunity to work with upstream stakeholders to improve energy efficiency and lower the carbon content of purchased goods and services. Similarly, companies can engage with their customers to ensure they understand how their products and services can help them reduce their carbon impacts. This might lead to further collaboration and help their customers to lower GHG emissions.
Companies may also benefit from collaborating with companies in their vicinity. Using the concept of industrial symbiosis, companies may find that their by-products/waste is another company’s input, potentially reducing operating costs, securing financial gains or mitigating risk. Steam, sludge, biomass and other by-products of primary production processes can generate value for companies who identify the right partners.
The benefits of an integrated energy strategy
- Manage energy and maintenance costs
- Reduce costs associated with carbon pricing
- Explore new revenue streams and commercial models
- Improve business performance and productivity
- Extend asset life
- Improve security of supply
- Reduce exposure to energy price volatility
- Improve resilience against policy and legal risks
- Reduce exposure to stranded assets
- Reduce reputational risk
- Innovation with suppliers provides a competitive advantage
- Innovation with customers builds loyalty
- Innovation with local end users enables new technologies, commercial and financing solutions
- Reduce life-cycle GHG emissions in alignment with SDG 13 and the Paris Agreement
- Reduce life-cycle air quality and water quality impacts in alignment with SDG 3
- Reduce life-cycle biodiversity impacts in alignment with SDG 15
- Reduce waste and improve circularity in alignment with SDG 12
- Contribute to job creation and reduce economic inequality in alignment with SDG 8
- Improve labor practices and human rights in your supply chain in alignment with SDG 8
- Provide access to new sources of clean energy for local communities in alignment with SDG 7
- Build brand reputation and improve performance in sustainability benchmarking
- Improveinvestor confidence and attract investment from new sources
- Improve talent acquisition and retention
How should my company develop an integrated energy strategy?
The typical journey to an integrated energy strategy
Developing an integrated energy strategy is a challenging activity. It takes time to build understanding of the need and value of an integrated energy strategy within your company, and it requires confidence and commitment from executive management.
The typical journey to reach an integrated energy strategy is depicted below. It illustrates how a company’s approach can evolve over time to become more ambitious, more outward looking and more integrated across its value chain. In reality, every company’s journey is distinct; some may progress quickly in their journey – jumping from bottom left to top right.
Who should be involved in strategy development?
Developing an integrated energy strategy must be a collaborative process, involving internal stakeholders from a range of business functions, upstream and downstream stakeholders, as well as other external stakeholders who may not be immediately obvious. The first task is to work with all relevant internal stakeholders to understand which upstream and downstream stakeholders you should engage.
Internal stakeholders: what do you need from them?
|Board and executive management team||Strategic sourcing/ procurement||Energy, environment and sustainability|
|A mandate to invest time and resources in strategy development as well as input to clarify the drivers and business value of an integrated energy strategy.||Support to engage with relevant suppliers as well as develop new criteria and processes to guide sourcing decisions. Relevant suppliers include energy and fuel suppliers, energy consuming plant and machinery, vehicle fleet and other equipment and services that have an impact on energy efficiency and GHG emissions.||Technical advice on energy policy and energy management, appraisal of strategic options across the value chain and alignment with other sustainability commitments.|
|Finance||Major energy user stakeholders from within your company|
|Provision of financial data on energy and fuel consumption, support with building financial business cases using life-cycle costing, forecasting energy spend, review of third party financed products and services||Technical and practical advice on how energy, fuel and equipment is used in business operations, as well as support to evaluate solutions across the value chain for energy efficiency, carbon reduction and making use of the company’s energy outputs.|
External stakeholders: what do you need from them?
|Ideas to shape the options for improving energy efficiency and reducing GHG emissions from the supply chain. Provision of data and information to help evaluate these options. This also includes other upstream stakeholders that support business operations and can have an impact or influence on energy consumption.||Involvement in service and product design to help identify opportunities that will improve energy efficiency, reduce GHG emissions and make use of energy outputs.|
There will be a wide range of other external stakeholders unique to every company that could be involved in strategy development and implementation, which will depend on your strategic objectives and the opportunities to collaborate Including:
Typical strategy development, implementation and improvement process
We have identified a five-step process to develop, implement and continually improve an integrated energy strategy. This section focuses on the strategy development phase of the process.
Strategy development is characterized by two steps. These aim to define where your company should be and how to get there:
- Diagnose: establish a strategy development team, assess current energy management capabilities, develop a vision and secure a mandate to invest in strategy development.
- Plan: set targets and build an integrated energy strategy that defines how to enhance current capabilities and how to prioritize energy efficiency and low carbon energy consumption – across your operations and your energy-related value chain.
- Do: implement and embed the integrated energy strategy by taking the actions defined in your plan.
- Check: monitor and evaluate strategy implementation and performance referencing the actions defined in your plan.
- Act: use findings from checking to continually improve your integrated energy strategy.
|Strategy development is
characterized by two steps.
These aim to define where your company
should be and how to get there:
|Establish a strategy development team, assess current energy management capabilities, develop a vision and secure a mandate to invest in strategy development.||Set targets and build an integrated energy strategy that defines how to enhance current capabilities and how to prioritize improving energy efficiency and increasing the use of low-carbon energy and fuel – across your operations and your energy-related value chain.|
Establish a strategy development team
Identify internal and external stakeholders and consider their impact and influence on sourcing and using energy. Create a strategy development team with people who have the greatest impact and influence.
Evaluate your current capabilities and energy performance
Assess how you currently use energy and fuel across your business, the associated GHG emissions and how this has changed over the past years.
Work collaboratively to evaluate your current situation across the six elements of an integrated energy strategy and consider where and why you need to improve.
Get agreement that your approach needs to change
It’s important that your company understands the need and urgency to change. Explain the gaps in your capabilities and the value that is at risk by doing nothing. Explain how you will build an impactful integrated energy strategy to address these risks. With everyone on the same page, it’s easier to build momentum.
Determine what you want to achieve
Defining your vision and targets together with the board/management team will help to focus efforts and ensure there is alignment across the company. Ensure alignment between the integrated energy strategy and your company’s sustainability strategy.
Your vision needs to be communicated and reinforced regularly to create clarity and avoid distractions
Who needs to be involved in strategy development?
What are the gaps in your capabilities and how are they stopping you from achieving your goals?
How does your company use electricity, fuels and related equipment and what is the environmental and social impact?
What’s your current position in the energy value chain and where are new opportunities to participate?
What are your competitors doing, and in what aspects of your integrated energy strategy are you leading or lagging compared to your competitors?
Would an integrated energy strategy give you a competitive advantage, and do you want to be market following or market leading?
What are the implications of doing nothing?
Is your energy strategy aligned with your company’s sustainability strategy?
1. A highly engaged board/executive management team that understands the value at risk and the opportunities to be captured.
2. A clearly defined vision for your integrated energy strategy.
3. A mandate to progress with the development and implementation of an integrated energy strategy.
Take a collaborative approach to strategy development and target setting
The planning phase requires engagement with internal stakeholders, suppliers, customers and other partners to identify and qualify suitable activities and solutions and set targets that support your vision.
Build a fundable and practical roadmap
The planning phase should result in a fundable and practical roadmap to achieve your vision and targets.
Set out the financial requirements and return on investment, then agree on the roadmap’s funding, rather than individual activities, to help bring the overall payback period of the investment down.
Explore the risks and benefits of various commercial funding models, so that all parties understand the financial risks and benefits.
How can your strategy include your supply chain and customers to identify new ways of doing business?
What opportunities are there for using surplus energy outputs and by-products from a neighboring facility?
Are your suppliers aligned with your strategy and clear on their roles?
What are the priorities for your strategy and what is your implementation plan?
How will your integrated energy strategy add value through operational and financial efficiencies, capture new revenue streams and can it become a self-funding program?
How will success be evaluated, and what tools do you need to make decisions in a changing environment?
1. Credible and ambitious targets that support your vision.
2. A roadmap that states the activities and solutions that will achieve your vision and targets, with a detailed plan for implementation involving suppliers and customers.
3. A funding plan for decision makers.
4. Success criteria and approach to measurement.
5. Engaged team ready for implementation.
Aligning with ISO 50001
For continuous improvement of your strategy, you should consider how you can align your approach with ISO 50001, the specification created by the International Organization for Standardisation for an energy management system.
ISO 50001 has guided international best practice for energy management and shows that a company has implemented a systematic and consistent approach to improving energy performance. Given this standard’s credibility and widespread use, it’s a sensible approach to align with. As these guidelines focus on the strategy development process, please refer to ISO 50001 for more information.
To get started with your integrated energy strategy:
Look at the follow-on modules we will create for the three categories we introduced in the Solutions section:
- Reducing energy and fuel consumption through energy efficiency;
- Sourcing low-carbon energy and fuel;
Look at the business cases we will publish to understand emerging technologies and assess their feasibility for your company.
Assess your integrated energy strategy using these five tests
Once you have developed your integrated energy strategy, use these five tests to assess whether it has the characteristics that you should be aiming for.
- Does your integrated energy strategy define your role in the energy value chain and how you are collaborating with upstream and downstream stakeholders from your company’s wider value chain?
- Does your integrated energy strategy take into consideration the environmental and
social impacts of your energy use?
- Is your integrated energy strategy consistent with a scenario of 1.5°C temperature increase above
- Does your integrated energy strategy cover the consumption of energy from all sources, all business activities and across your value chain?
- Does your integrated energy strategy align with your corporate strategy and leverage the strengths of your company?
- Does your integrated energy strategy support your company’s sustainability strategy?
- Have you built your integrated energy strategy through wellstructured collaboration with stakeholders from within your company and with your wider value chain?
||Energy, environment and sustainability|
This webpage and its content are the result of a collaborative effort between the World Business Council for Sustainable Development (WBCSD), Carbon Intelligence and representatives from WBCSD member companies participating in the New Energy Solutions project. A range of WBCSD members reviewed the material, thereby ensuring that the document broadly represents the majority view of members of the New Energy Solutions project. It does not mean, however, that every company agrees with every word.
This report was drafted by WBCSD and Richard Tarboton and Will Jenkins from Carbon Intelligence.
WBCSD’s New Energy Solutions project currently includes the following companies: