Too big to save: Why businesses resist energy efficiency

Many businesses resist energy efficiency by not making simple changes that could save big bucks, new research finds. Here’s why – and what must be done to fix the problem

Lighting efficiency isn’t a lot of fun. Businesses resist energy efficiency measures such as installing LED lighting.

We know it is hard for businesses to push it up the to do list when there are dozens of competing priorities: sales to make, customers to meet, and suppliers to chase. It is especially difficult for small and medium-sized companies, where very often no single individual has specific responsibility for energy management.

But upgrading an inefficient obsolete lighting system to LED does make good business sense. In fact, it is very often one of the most cost-effective investments a company can make into reducing unnecessary overheads. Many businesses we approach regarding an LED lighting upgrade are concerned by the amount they spend on their energy bills, on maintenance and loss of productivity. We also found that 45 per cent want to do more to improve the energy efficiency of their business.

But despite recognizing the issue and wanting to change, many businesses resist energy efficiency by not taking enough action.

So why isn’t everyone doing it?

We know what the issues are, and we know how to solve them, It’s possible to get buildings to net zero or near net zero, but on average businesses still have a long way to go to improve efficiency. Energy use in buildings is a $400bn to $500bn a year problem.

The most common feedback we hear from businesses regarding barriers to making improvements is a lack of money to invest in new energy saving equipment. Other significant barriers include a lack of reliable external advice and support, as well as a lack of trusted and reliable suppliers.

Businesses resist energy efficiency and this is a complex societal problem that needs a multi-pronged approach. Policy, rate structures and utilities all make a difference, but in the end, the motivation for change remains with corporate entities and individuals

Lighting gives you some of the biggest bang for your buck, according to Arizona State University‘s Global Institute of Sustainability. Rebates tend to be high, which makes the lights almost free.

Barriers to change

Of course, low-hanging fruit may not always be enough. Some retrofits require major investments and disruptions, such as overhauling heating and cooling systems, intelligent monitoring systems, insulation and windows. Unsurprisingly, the higher the initial cost and the longer the wait for returns, the less likely a project is to be approved. Heating and cooling systems can last for decades, and many owners and facility managers subscribe to the old adage: “If it ain’t broke, don’t fix it.”

Often businesses don’t own their buildings, which leads to a split-incentive problem. Landlords are responsible for capital improvements, while tenants are responsible for operating expenses. Large buildings may have only one meter, making it difficult to correlate energy savings to particular businesses. On the balance sheet, energy efficiencies are often seen as an external costs outside of the core business model, which can push projects to the sidelines.

The result? Projects with six-month payback periods or that are cash-flow positive from day one don’t get done, the energy upgrade decision process seems to be similar to peace talks, where everyone is talking past each other and little changes.


A recent ASU study, Energize Phoenix, found that some contractors, who were conducting energy upgrades as part of the program, overestimated cost savings by as much as 100%, while others were right on target.

But contractors and energy efficiency developers are not the only ones overestimating results. “Business decision makers tend to overestimate the energy efficiency of their buildings,” said Lee Ann Head, vice president of research and insight at the Shelton Group, which conducts research on energy markets.

Behaviour change

The UC Davis’s Energy Efficiency Center, points out that energy research today is shifting away from focusing on technology, finance and individual behaviour to examining social change. Some individual changes, such as turning off lights or pulling down shades, are becoming less relevant given today’s advances in technology and automation.

They believe, buildings are social systems. He believes that economic incentives like rebates, while helpful, don’t touch on some of the deeper issues at play. For one thing, building operators, who manage facilities on a daily basis, typically don’t see electricity bills. Upgrades may increase the likelihood of occupant complaints, which may be tied to their job performance, according to the UC Davis and CARB study. In addition, the study found that occupants overall are dissatisfied with building temperature, lighting, air quality and acoustics.

They believes that more incentives beyond financial rewards, such as certification and recognition, are needed.

We need to identify ways in which we can reward people for not only making people more comfortable and happier, but also for saving energy.

Buildings as systems

Focusing on upgrading and measuring individual buildings may get in the way of solutions, because buildings are key part of streets and cities. An example is of a high-rise hospital that uses a lot of energy. It may be built in an urban environment with other buildings around it that shade its roof and walls. The hospital cannot install PV solar panels to generate its own power and reach net zero energy, but the solar panels could be installed on neighbouring buildings and shared.

Energy efficiency researchers agree that systems-level thinking is required to overcome barriers to energy efficiency. Owners may need to explore community-based solutions that move beyond individuals’ behaviour changes – or even changes to individual buildings.

Done properly, an LED lighting upgrade allows for the fastest return on investment (ROI) | Workplace Wellness, Increased Productivity, Reduction in Operating Costs & Carbon Emissions.

Request a free on-site energy audit and analysis to help your business save in energy and operating costs.