DNV Certification

Energy Crisis: Do You Have Your EMS in Place

Energy Crisis: Do You Have Your EMS in Place

Without an energy strategy, it will be lights out

for some companies.
At the recent gathering of the World Energy
Assessment (WEA), Chairman Josa Goldemberg
said, While industrialized countries are growing
at less than one percent per year, the four
percent annual growth rate of the developing
countries will double their energy consumption
in 15 years, making them major players."
Contributing to the challenge of sustainability is
the fact that the present energy consumption of
the developing countries is approximately onethird of the world total.
Until recently, it was only the developing world
that lived under conditions of energy shortage,
unreliable supplies and rising prices. But today,
in the most industrialized nation on earth, our
lack of an overall energy strategy has created
problems previously seen only in developing
countries: unreliable supplies, skyrocketing
costs, and, in some areas of the coutry, rolling
blackouts. This has occurred in addition to other
environmental problems, such as rising CO2
levels.
It is not scarcity of oil or even energy that is
today's problem. What is scarce is the ability
and wisdom to use energy wisely. Henry Ford
wrote in his 1924 book Today and Tomorrow,
"If one uses nothing then one would waste
nothing. But if we use nothing at all, is not that
a total waste?"
We are reaping the results of years of
concentrating on supplying whatever energy

Page 2

is necessary, instead of focusing on using

less energy more efficiently. Compared to
Germany and Japan, the United States
consumes twice as much energy per unit
of gross domestic product produced. This
difference translates into a five percent
cost advantage in favor of Japanese and
German products. In addition, oil imports,
which were the largest component of the
U.S. trade deficit in 1990, accounted for
almost $44 billion.
The ISO 14000 series can contribute
directly to reversing an obviously skewed
energy trend. Companies that have
performed environmental management
reviews under ISO 14001 are beginning to
recognize the universality of energy
efficiency and have identified how
increasing energy efficiency can positively
impact business. For example, Sealtest
Ice Cream saved $3 million via a
progressive EMS (environmental
management system) that focused on
energy efficiency.
Every organization must now add a new
category to its risk management strategy:
managing energy risk.
Some Energy Facts and Impacts
Overall energy use is closely linked to
population growth. World population
reached 6.1 billion in mid-2000 and is
currently growing at an annual rate of 1.2
percent, or about 77 million people a year.

By the year 2020, the United Nations

estimates there could be as many as eight
billion people on Earth. As the world
population continues to grow, the demand for
fuel is projected to increase by 30 percent,
while the demand for electricity is projected to
increase an astounding 270 percent.
Analysts predict that carbon dioxide emissions
will grow from 5.8 billion metric tons carbon
equivalent in 1999 to 7.8 billion metric tons in
2010, and 9.8 billion metric tons by 2020.
Much of the increase in carbon emissions is
expected to occur in the developing world,
where emerging economies are expected to
produce the largest increases in energy
consumption. Developing countries are
expected to account for 81 percent of the
incremental increase in carbon dioxide
emissions between 1990 and 2010, and 76
percent between 1990 and 2020.
The Energy Information Administration has
stated, "Continued heavy reliance on coal and
other fossil fuels, as projected for the
developing countries, would ensure that even
if the industrialized world undertook efforts to
reduce carbon dioxide emissions, worldwide
emissions would still grow substantially over
the forecast horizon."
However, with energy efficiency, economic
growth need not mean a growth in energy use
or emissions. Between 1973 and 1988, the
U.S. economy grew about 40 percent. During
this same period, total energy consumption
remained nearly constant, disproving the myth
that growth of the economy requires a growth
in energy consumption.

Page 3

North America's Power Grid

There are problems throughout the North
American power grid, which is a 70-yearold system containing approximately
158,000 miles of high-voltage wires,
towers, substations, and transformers. As
the national demand for power continues
to grow, almost every plan to expand the
system faces opposition, even while the
system is being used in ways never
anticipated when construction first began.
Initially, modest connecting capabilities
allowed neighboring power companies to
trade electricity back and forth during
emergency situations. Now, the system is
being used to move huge, wholesale
blocks of power, sometimes from one
region of the country to another. Today,
traffic demands are often higher than
transmission capabilities. While demand
has increased, construction of power lines
has actually decreased during the past 25
years. "The system is getting tighter and
tighter as time goes on," says William
Hogan, an economist with Harvard
University's Electricity Policy Group.
From coast to coast, high-tech demands
and heat waves are straining the power
grid. Anyone who believes this problem is
restricted to California should take note:
Although proposed construction of
power plants will give Texas a
surplus of power, there are only
two high voltage lines leaving the
state. How will Texas ship the
surplus to neighboring areas?

 Past blackouts have exposed a critical

weakness in New York City. Incoming
transmission lines are capable of
carrying only half the electricity
demanded during heat waves. Although
there are proposals to build metropolitan
(or distributed) power plants, there are
no plans to build more transmission
lines.
Two of California's blackouts were the
result of an electric traffic jam at
transmission lines carrying power from
one part of the grid to another. There
have been no transmission wires added
to the system since the 1960s. From the
power companies' perspective, they
have been slapped with a triple
whammy: high energy prices, expanding
environmental awareness, and
deregulation.
Unfortunately, this convergence of events has
produced an operational environment not
widely anticipated or generally prepared for.
Customers are also ill prepared for a scenario
where, almost overnight, energy has become
expensive, unavailable, or unreliable.

can't ignore-and in some cases, that they

can't afford to pay. Of the more than 170
companies certified to ISO 14001 by Det
Norske Veritas, only a handful have any
objectives and targets associated with
energy conservation.
Electricity deregulation is continuing to
affect manufacturing. At the end of 2000,
the markets in 17 states were fully or
partially open to competition, while 24
other states offered a "competitive
choice." As deregulation activities
accelerate, the links between air
regulations and clean air technologies are
becoming more evident. This is leading to
the production of more "green electricity"
from sustainable development and
greenhouse-gas-reduction projects.
Some of the issues facing manufacturing
include electric energy restructuring,
environmental regulations, climate
change, information technology, and
telecommunications-not to mention
grasping the true cost and value of "green
power."

Added Woes for Manufacturing

The recent rolling blackouts in California have
come at a very critical time. Manufacturers that
rely heavily on electronics or electric
consumption must have a continuous supply of
moderately priced electricity available. Instead,
they have had to endure energy bills that are
rising astronomically and shutdowns resulting
from "no power at any price." This, in an
already weakening economy, spells real trouble.
The situation for many companies has been
exacerbated because, until recently, they have
simply ignored their rate of energy consumption
and paid the bill. Now they are getting bills they

Page 4

The New Role of Energy in

Environmental Management
As companies continue to turn to ISO
14001 and other EMS programs such as
renewable portfolio standard (RPS)
verification, greenhouse-gas-emissionsreduction validation, and green pricing
programs, energy will play a significant
role.
Creating an EMS that can support
economic growth is a major challenge
facing businesses today. The ultimate goal

is to forge a system that allows for

sustainability and economic growth to go hand
in hand, just as quality and profitability did in
the 1980s.
First must come the recognition that energy is
neither created nor destroyed. This concept can
be applied to the processes in place at a
manufacturing facility, as well as to quantum
physics. The aim is to equalize the energy flow,
resulting in the same quantity of energy coming
out of a building that goes in.
Although it might be a little premature to call
this new approach to energy an "environmental
revolution," there is no doubt that the resulting
changes will be significant for many
corporations. What is clear is that the foremost
factor for environmental protection and
sustainability will be generation technology and
conversion of energy.
Forward-thinking companies are beginning to
see significant savings already. These
companies have gained a competitive
advantage and harvested unexpected profit by
focusing on environmentally sound solutions
through the use of EMS. They have also realized
that they cannot produce a low-priced product
without technological change, minimization of
materials waste, and, especially, more efficient
use of energy.

energy moves the entire economy. Today,

energy efficiency has become one of the
world's leading environmental missions
and a high-profile watchword for the 21st
century marketplace. It is praised as the
solution to the excessive appetites of a
power hungry society.
In order to equalize its energy inflows and
outflows, an organization must be able to
measure improvements. Without
measurement capabilities, there can be no
management. An EMS lays out an
organization's responsibilities, procedures,
practices, policies, resources, accounting
systems, and other functions aimed at
minimizing harmful environmental
impacts. As we see newer generations of
EMSs, we note that organizations are not
only including traditional environmental
activities; they have added research and
development programs, continuous
improvement efforts, and stakeholderrelations activities.

A large organization can spend $100 million a

year on energy, making savings of 5 or 6
percent quite significant to the bottom line.
Energy experts have placed the annual market
for energy outsourcing at $16 billion per year,
with many companies flocking to energy
conservation specialists as their last resort.

As companies uncover opportunities to

reduce costs, generate revenues, and gain
competitive advantages while
simultaneously improving environmental
quality, they are being rewarded with
economic gains: the result of applying the
language of business to environmental
and energy management issues. And they
are talking about it. "Green newsletters"
and environmental statements have
become an increasingly popular vehicle to
educate and inform employees,
management, stakeholders, and
interested parties about environmental
accomplishments.

Economic growth depends on energy, and

One of the things these companies are

Page 5

talking about is recognizing the business value

of design for the environment (DFE) and EMS.
As legal requirements continue to become more
rigorous, and as public concerns about
industrial impacts on the environment become
more vocal, organizations are responding by
integrating environmentally responsible
characteristics into their products. These
companies are hoping to be seen as
"environmentally preferable" compared to their
competitors, who may be operating without the
same "green" characteristics.
As command-and-control approaches the culde-sac of their ability to effect environmental
improvements, the ISO 14000 standards are
the best available tool to carry this work
forward. As managers continue to look for
inefficiencies and eliminate the most apparent
of them, the more successful companies will
uncover less apparent inefficiencies faster and
eliminate them more quickly than their
competitors. The number one example here is
waste, which represents profits lost in the form
of processed materials, spent (or wasted)
energy, and negative environmental impacts.

increased service effectiveness should all

be considered.
The list of identified environmental
aspects produced by a product can be
considered against legal and customer
environmental requirements. Significant
aspects are considered alongside other
business factors to identify potential EMS
objectives and targets. These, in turn,
should be integrated into a concurrent
engineering scheme for the company's
worldwide processes. Feedback loops
should accompany new products,
customized orders, and stakeholder
reports.
Forward-thinking companies have already
gained a competitive advantage and
harvested unexpected profits by focusing
on environmentally sound solutions
through the use of an EMS. For example,
BP-Amoco has an ambitious five-year plan
to overhaul 28,000 service stations. The
revamped stations will run on solar
energy, have Internet access, and offer
low-sulfur gasoline.

Proactive Benefits
What Your Company Should Do
Better product realization is already available to
those organizations with an EMS in place. The
EMS can be used to support further applications
of concurrent engineering concepts aimed at
minimizing environmental impact at all stages
of a product's life cycle. These stages include
design, procurement, packaging and
transportation, installation, use, and end-of-life.
The relevant concerns include functional life,
field service, ease of use, and reuse. Criteria
such as detoxification, dematerialization,
energy efficiency, durability, customer appeal,
maximization of renewable-resource use, and

Page 6

An important first step for companies

wanting to pursue energy efficiency is to
ensure that a corporate life-cycle cost
accounting system is used to assign the
full costs of waste generation (including
the cost of wasted energy) to the process
responsible. Costs should include
processing losses, waste disposal,
regulatory cost liability risk, and goodwill
losses.
Manufacturers should keep in mind that

there are two basic uses of energy in

manufacturing. First, there is the production of
heat and power; this area almost always falls
within the domain of the facility manager and is
usually imbedded in overhead cost. Second,
there is the energy used in product creation.
Rarely do we consider the embodied energy
present in the raw materials needed to
manufacture products. Energy consumed as a
raw material is considered to be feedstock. This
is precisely where DFE and energy conservation
can provide an amplified usefulness.
Another area of energy use that often goes
unnoticed is the office environment. Today,
office equipment usage in commercial buildings
is one of the fastest growing categories of
overall energy usage in the country. In 1991
this use consumed 26 billion kilowatt-hours, or
about 3 percent of total commercial energy
consumption. In 2001 the total cost will be
roughly $2.5 to $4 billion. By developing a
simple EMS program and providing the proper
training on energy issues, an office-heavy
organization can quickly discover the benefits to
be derived from managing environmental
impacts.
As soon as companies begin to investigate their
significant environmental impacts, the energy
consumption light will come on. As
management addresses the issue of reducing
energy use as part of continual improvement
within ISO 14001, they will discover unknown
profit possibilities. This can result without a
large investment in technology or major team
building. Improvements in environmental
efficiency and energy use are within reach
today and can be enacted without sacrificing
economic well being.

Page 7

Russell V. Thornton is manager of

environmental certification for Det Norske
Veritas (DNV), a leading supplier of
accredited management systems
certification services worldwide. Robert
Ferrone is president of The Ferrone
Group, a management consulting firm
specializing in the integration of industrial
design engineering, quality
manufacturing, and EMS for improved
environmental and economic
performance. He can be reached at
Bob@ferrone-group.com.