The Corporate Energy Strategist’s Handbook : Frameworks to Achieve Environmental Sustainability and Competitive Advantage

In an era in which scientists say we are approaching a point of no return in terms of climate change, companies are looking for ways to improve productivity of innovations that reduce environmental footprints. Among the questions they are looking to answer are: How can financial tools be leveraged for positive energy outcomes? How can the energy strategy be integrated into board responsibility? This book provides answers to these questions and more, presenting a selection of decision-making frameworks for strategy and sustainability management. Comprehensive in scope, its 120 frameworks--some well-known while others are original--provide a thorough, practical guide to inform the sustainability strategy of your organization. In addition to learning how to green your organizational strategy, you will also learn how to communicate your strategy to your teams. An essential source for executives desiring to be more responsible in energy performance and to decarbonize their operations, this book will prove useful in your day-to-day organizational work Acknowledgments......Page 7 Contents......Page 8 List of Figures......Page 10 List of Tables......Page 16 1: Prologue: Why Create a Toolkit of Frameworks?......Page 17 Who Should Use This Handbook?......Page 18 What Are Frameworks Used For?......Page 21 How to Read This Book......Page 23 References......Page 24 Part I: Energy as Strategy......Page 25 2: Introduction to Part I: What Is Energy as Strategy?......Page 26 3: Strategy Literacy: Seeking Competitive Advantage......Page 29 Porter’s Five Forces of Industry Analysis......Page 30 SWOT: Situational Analysis......Page 31 Identified Knowledge (Known Knowns)......Page 33 Identified Risks (Known Unknowns)......Page 35 Untapped Innovations (Unknown Knowns)......Page 36 Ambiguous Uncertainties (Unknown Unknowns)......Page 37 References......Page 38 4: Energy Literacy: The Energy Balance for Business Decisions......Page 39 The Conservation of Energy......Page 40 Calculations for Energy Efficiency Depends on Defining the Value Proposition......Page 41 Energy Return on Investment: Different Definitions Create New Metrics......Page 42 Sankey Diagram of US Energy Flow......Page 44 Kinetic Energy: Transportation Constraints......Page 46 Enthalpy: Heating (and Cooling) Constraints......Page 47 Electric Energy: Electrons as a Commodity......Page 48 Electric Power: Electrons On-Demand......Page 49 References......Page 50 5: Financial Statements: The Universal Language of Business......Page 51 Elements of the Financial Statements......Page 52 Balance Sheet......Page 53 Cash Flow Statement......Page 55 The Value of Money......Page 57 Discounted Cash Flow: The Time Value of Money......Page 58 Net Present Value: Different Upfront Costs......Page 59 How Financial Tools Support Decision-Making......Page 60 How Financial Tools Affect Environmental Decisions......Page 61 References......Page 62 6: Energy Statements: Mediating Decision Cycles......Page 63 Relationship Between Energy and Financial Statement Frameworks......Page 64 Elements of the Energy Statements......Page 66 Energy Balance Sheet......Page 67 Energy Activity Statement......Page 68 Energy Flow Statement......Page 70 Energy Storage: Short-Term Time Shifting to Match Supply and Demand......Page 71 Store Electric Energy by Converting It to Another Form of Energy Temporarily......Page 72 Shift Demand Consumption to Match Supply Availability......Page 73 Embodied Energy: Long-Term Shifting of Energy by Storing It in a Product......Page 74 Operating a Net-Zero Building......Page 75 Installing an Electric Battery for Energy Storage......Page 76 Installing Triple-Paned Windows for Improved Insulation......Page 77 Upgrading an End-of-Life HVAC System......Page 78 7: Carbon Strategies: De-risking Exposures......Page 80 What Is Carbon?......Page 81 Carbon Inventory: Scope 1, 2, and 3......Page 83 Flow of Energy Decisions......Page 84 Energy Strategy Maturity CycleTM......Page 85 Principle of Strategic Energy Management......Page 86 Kaya Identity Regular: Quantifying Carbon Emissions......Page 87 Kaya Identity Differential: Decoupling Carbon Emissions from Economic Growth......Page 88 Kaya Identity: Adopted for Corporations......Page 89 Carbon Resource Prioritizations......Page 91 References......Page 93 Part II: On System Properties......Page 94 8: Introduction to Part II: What Is a System?......Page 95 9: Systems Literacy: How to Think in Systems......Page 99 Boundary Condition Analysis: What Is at the Boundaries?......Page 100 Perceptual Anchors: What Is Between the Boundaries?......Page 101 Average vs. Variance: The Context of Results......Page 103 Gaussian vs. Pareto Worldviews: Linear vs. Holistic Approaches......Page 104 Variance Spectrum: A Boundary Condition Analysis of Variance......Page 106 Innovation vs. Risk: Optimizing Variance......Page 107 Maslow’s Hierarchy of Needs: Boundaries of Physiological Needs......Page 108 Wicked Problems: Shifting Social Contexts......Page 109 Clumsy Solutions: Balancing Approaches......Page 111 Energy Literacy Matrix: Socio-technical Model for Energy......Page 112 Extending the Energy Literacy Matrix......Page 113 References......Page 114 10: Metrics Systems: Managing Resource Flows......Page 115 Tips for Data Granularity......Page 116 Unit of Analysis......Page 117 Data Quality......Page 118 Absolute vs. Relative Metrics: Setting Comparables......Page 119 Cross-sectional Metrics: Comparisons to Your Peers......Page 120 Longitudinal Metrics: Comparisons to Yourself......Page 121 Per-Unit Metrics: Comparisons of Productivity......Page 122 Trifecta of Statements to Manage Any Resource Flow......Page 123 Reference......Page 125 11: How to Create Your Own Framework......Page 126 White Spaces: The Gap Between Frameworks......Page 127 Concept-Knowledge (C-K) Theory......Page 130 Six Steps of Innovation......Page 132 The Seven Basic Shapes......Page 133 Flow Frameworks......Page 134 Categorization Frameworks......Page 135 Matrix Frameworks......Page 136 How to Simplify Ideas......Page 137 How to Clarify Benefits......Page 138 References......Page 139 Part III: On Leadership......Page 140 12: Introduction to Part III: What Is a Leader?......Page 141 Reference......Page 143 13: Organizational and Decision-Making Tools......Page 144 Galbraith’s Star ModelTM of Organizational Design......Page 145 Responsibility Assignment Matrix......Page 146 Tuckman’s Stages of Group Development......Page 147 Circle Methodology for Meetings......Page 148 Garbage Can Model of Decision-Making......Page 150 Muddling Through: Incrementalism......Page 151 Explore/Exploit: The Multiarmed Bandit Problem......Page 152 References......Page 153 14: Communication: Using Structures to Send Information......Page 154 Circle of Communication......Page 155 Message House: Anchoring Your Communication......Page 157 Mental Preparation......Page 158 Simple Narratives......Page 159 Preparing to Moderate a Panel......Page 160 Mental Preparation......Page 161 Question Development for a Talk......Page 162 The Six-Sentence Story......Page 163 Statement of Purpose/Chasm Statement......Page 164 Executive Summary/Pitch Deck/Business Plan Outline......Page 165 References......Page 166 15: Communication: Perceiving Structures When Receiving Information......Page 167 Four Stages of Competence: The Journey of Learning......Page 168 DIKW Pyramid: Hierarchy of Knowledge......Page 169 Sending and Receiving DATA......Page 170 Sending and Receiving INFORMATION......Page 171 Sending and Receiving KNOWLEDGE......Page 172 Sending and Receiving WISDOM......Page 173 Five Rs of a Debrief......Page 174 Immediate Feedback Suggestions......Page 176 References......Page 177 Part IV: On Innovation......Page 179 16: Introduction to Part IV: What Is Innovation?......Page 180 Reference......Page 182 17: How to Ask Questions......Page 183 Why Are Questions a Boundary of Knowledge?......Page 184 The Five Whys: Root Cause Analysis......Page 185 Null Hypothesis: Setting Boundaries......Page 186 Focal Question: Explore Beyond Boundaries......Page 188 Suggested Question Formulations......Page 189 For Futurism......Page 190 For Generating Excitement......Page 191 References......Page 192 18: Micro-innovations: Incremental Process Improvements......Page 193 Lean Manufacturing: Reducing Waste......Page 194 Six Sigma: Eliminating Defects......Page 195 Waterfall Project Management: Linear Processes......Page 197 Agile Project Management and Scrum: Iterative Processes......Page 198 Kanban: A Pull Process for New Tasks......Page 199 Kaizen and PDCA......Page 200 References......Page 201 19: Meso-innovations: Creating Serendipity for Emergent Ideas......Page 202 Weak Ties: Strengths of Relationships......Page 203 Brainstorming: Generating Ideas......Page 204 Questionstorming: Generating Curiosity......Page 206 Techniques to Add or Limit Information......Page 207 Affinity Diagrams (the KJ Method): Sorting Ideas......Page 208 Scenario Planning: Designer of Worlds......Page 210 References......Page 211 20: Macro-innovations: The Discipline of Scaling Adoption......Page 212 Diffusion of Innovation......Page 213 Business Model Canvas......Page 214 Four Ps of the Product Marketing Mix......Page 216 Four Cs of the Consumer Marketing Mix......Page 217 Five Cs of Marketing: Situational Analysis......Page 218 PEST (or PESTEL): Context Analysis......Page 219 Sales Funnel and Pipeline Management......Page 221 References......Page 222 Part V: Non-Financial Indicators for Corporate Governance......Page 223 21: Introduction to Part V: What Is Governance?......Page 224 22: Influence of Energy on Internal Reporting......Page 227 Resiliency and Sustainability: Two Different Strategies......Page 228 Four Views of Energy Data......Page 229 Financial Risk Management......Page 231 Enterprise Risk Management......Page 232 Sustainability Risk Management......Page 234 Environmental Health Safety and Sustainability......Page 236 References......Page 238 23: External ESG Reporting Frameworks......Page 239 Triple Bottom Line......Page 240 Environmental P&L......Page 242 Global Reporting Initiative......Page 244 Sustainability Accounting Standards Board......Page 246 Task Force on Climate-related Financial Disclosures......Page 247 Integrated Reporting......Page 250 References......Page 251 Part VI: Epilogue......Page 253 24: Epilogue: Advice to an Energy Strategist......Page 254 Why Do You Consume Energy?......Page 255 What If You Didn’t?......Page 256 How Could You Achieve That Goal?......Page 257 Last Words: Two Challenges......Page 258 Index......Page 259 Acknowledgments 7 Contents 8 List of Figures 10 List of Tables 16 1: Prologue: Why Create a Toolkit of Frameworks? 17 Who Should Use This Handbook? 18 What Are Frameworks Used For? 21 How to Read This Book 23 References 24 Part I: Energy as Strategy 25 2: Introduction to Part I: What Is Energy as Strategy? 26 3: Strategy Literacy: Seeking Competitive Advantage 29 Porter’s Five Forces of Industry Analysis 30 SWOT: Situational Analysis 31 Johari’s Window: Analyzing the Strategic Landscape 33 Identified Knowledge (Known Knowns) 33 Identified Risks (Known Unknowns) 35 Untapped Innovations (Unknown Knowns) 36 Ambiguous Uncertainties (Unknown Unknowns) 37 References 38 4: Energy Literacy: The Energy Balance for Business Decisions 39 The Conservation of Energy 40 Calculations for Energy Efficiency Depends on Defining the Value Proposition 41 Energy Return on Investment: Different Definitions Create New Metrics 42 Sankey Diagram of US Energy Flow 44 Kinetic Energy: Transportation Constraints 46 Enthalpy: Heating (and Cooling) Constraints 47 Electric Energy: Electrons as a Commodity 48 Electric Power: Electrons On-Demand 49 References 50 5: Financial Statements: The Universal Language of Business 51 Elements of the Financial Statements 52 Balance Sheet 53 Income Statement 55 Cash Flow Statement 55 The Value of Money 57 Discounted Cash Flow: The Time Value of Money 58 Net Present Value: Different Upfront Costs 59 How Financial Tools Support Decision-Making 60 How Financial Tools Affect Environmental Decisions 61 References 62 6: Energy Statements: Mediating Decision Cycles 63 Relationship Between Energy and Financial Statement Frameworks 64 Elements of the Energy Statements 66 Energy Balance Sheet 67 Energy Activity Statement 68 Energy Flow Statement 70 Energy Storage: Short-Term Time Shifting to Match Supply and Demand 71 Store Electric Energy to Be Used Later 72 Store Electric Energy by Converting It to Another Form of Energy Temporarily 72 Convert Electric Energy into Another Form of Energy Permanently 73 Shift Demand Consumption to Match Supply Availability 73 Embodied Energy: Long-Term Shifting of Energy by Storing It in a Product 74 Creating Holistic Energy Strategies 75 Operating a Net-Zero Building 75 Installing an Electric Battery for Energy Storage 76 Outsourcing HVAC System Management 77 Installing Triple-Paned Windows for Improved Insulation 77 Upgrading an End-of-Life HVAC System 78 7: Carbon Strategies: De-risking Exposures 80 What Is Carbon? 81 Carbon Inventory: Scope 1, 2, and 3 83 Flow of Energy Decisions 84 Energy Strategy Maturity CycleTM 85 Principle of Strategic Energy Management 86 Kaya Identity 87 Kaya Identity Regular: Quantifying Carbon Emissions 87 Kaya Identity Differential: Decoupling Carbon Emissions from Economic Growth 88 Kaya Identity: Adopted for Corporations 89 Waste Resource Prioritizations 91 Carbon Resource Prioritizations 91 References 93 Part II: On System Properties 94 8: Introduction to Part II: What Is a System? 95 9: Systems Literacy: How to Think in Systems 99 Boundary Condition Analysis: What Is at the Boundaries? 100 Perceptual Anchors: What Is Between the Boundaries? 101 Average vs. Variance: The Context of Results 103 Gaussian vs. Pareto Worldviews: Linear vs. Holistic Approaches 104 Variance Spectrum: A Boundary Condition Analysis of Variance 106 Innovation vs. Risk: Optimizing Variance 107 Maslow’s Hierarchy of Needs: Boundaries of Physiological Needs 108 Wicked Problems: Shifting Social Contexts 109 Clumsy Solutions: Balancing Approaches 111 Energy Literacy Matrix: Socio-technical Model for Energy 112 Extending the Energy Literacy Matrix 113 References 114 10: Metrics Systems: Managing Resource Flows 115 Tips for Data Granularity 116 Frequency of Analysis 117 Unit of Analysis 117 Data Quality 118 Absolute vs. Relative Metrics: Setting Comparables 119 Cross-sectional Metrics: Comparisons to Your Peers 120 Longitudinal Metrics: Comparisons to Yourself 121 Per-Unit Metrics: Comparisons of Productivity 122 Trifecta of Statements to Manage Any Resource Flow 123 Reference 125 11: How to Create Your Own Framework 126 White Spaces: The Gap Between Frameworks 127 Concept-Knowledge (C-K) Theory 130 Six Steps of Innovation 132 The Seven Basic Shapes 133 Basic Frameworks 134 Flow Frameworks 134 Categorization Frameworks 135 Matrix Frameworks 136 How to Simplify Ideas 137 How to Clarify Benefits 138 References 139 Part III: On Leadership 140 12: Introduction to Part III: What Is a Leader? 141 Reference 143 13: Organizational and Decision-Making Tools 144 Galbraith’s Star ModelTM of Organizational Design 145 Responsibility Assignment Matrix 146 Tuckman’s Stages of Group Development 147 Circle Methodology for Meetings 148 Garbage Can Model of Decision-Making 150 Muddling Through: Incrementalism 151 Explore/Exploit: The Multiarmed Bandit Problem 152 References 153 14: Communication: Using Structures to Send Information 154 Circle of Communication 155 Message House: Anchoring Your Communication 157 Preparing for a Talk 158 Mental Preparation 158 Simple Narratives 159 Preparing to Moderate a Panel 160 Mental Preparation 161 Question Development for a Talk 162 Possible Narratives 163 The Six-Sentence Story 163 Statement of Purpose/Chasm Statement 164 Executive Summary/Pitch Deck/Business Plan Outline 165 References 166 15: Communication: Perceiving Structures When Receiving Information 167 Four Stages of Competence: The Journey of Learning 168 DIKW Pyramid: Hierarchy of Knowledge 169 Suggestions for Sending and Receiving Messages 170 Sending and Receiving DATA 170 Sending and Receiving INFORMATION 171 Sending and Receiving KNOWLEDGE 172 Sending and Receiving WISDOM 173 Five Rs of a Debrief 174 Immediate Feedback Suggestions 176 References 177 Part IV: On Innovation 179 16: Introduction to Part IV: What Is Innovation? 180 Reference 182 17: How to Ask Questions 183 Why Are Questions a Boundary of Knowledge? 184 The Five Whys: Root Cause Analysis 185 Null Hypothesis: Setting Boundaries 186 Focal Question: Explore Beyond Boundaries 188 Suggested Question Formulations 189 For Innovations 190 For Futurism 190 For Puzzles and to Express Curiosity 191 For Generating Excitement 191 References 192 18: Micro-innovations: Incremental Process Improvements 193 Lean Manufacturing: Reducing Waste 194 Six Sigma: Eliminating Defects 195 Waterfall Project Management: Linear Processes 197 Agile Project Management and Scrum: Iterative Processes 198 Kanban: A Pull Process for New Tasks 199 Kaizen and PDCA 200 References 201 19: Meso-innovations: Creating Serendipity for Emergent Ideas 202 Weak Ties: Strengths of Relationships 203 Brainstorming: Generating Ideas 204 Questionstorming: Generating Curiosity 206 Techniques to Add or Limit Information 207 Affinity Diagrams (the KJ Method): Sorting Ideas 208 Scenario Planning: Designer of Worlds 210 References 211 20: Macro-innovations: The Discipline of Scaling Adoption 212 Diffusion of Innovation 213 Business Model Canvas 214 Marketing Mix 216 Four Ps of the Product Marketing Mix 216 Four Cs of the Consumer Marketing Mix 217 Five Cs of Marketing: Situational Analysis 218 PEST (or PESTEL): Context Analysis 219 Sales Funnel and Pipeline Management 221 References 222 Part V: Non-Financial Indicators for Corporate Governance 223 21: Introduction to Part V: What Is Governance? 224 22: Influence of Energy on Internal Reporting 227 Resiliency and Sustainability: Two Different Strategies 228 Four Views of Energy Data 229 Financial Risk Management 231 Enterprise Risk Management 232 Sustainability Risk Management 234 Environmental Health Safety and Sustainability 236 References 238 23: External ESG Reporting Frameworks 239 Triple Bottom Line 240 UN Sustainability Development Goals 242 Environmental P&L 242 Global Reporting Initiative 244 Sustainability Accounting Standards Board 246 Task Force on Climate-related Financial Disclosures 247 Integrated Reporting 250 References 251 Part VI: Epilogue 253 24: Epilogue: Advice to an Energy Strategist 254 Why Do You Consume Energy? 255 What If You Didn’t? 256 How Could You Achieve That Goal? 257 Last Words: Two Challenges 258 Index 259