For manufacturers, "going green" can be good for business and the environment

Marc Moschetto, editorial director, Control Engineering magazine -- Manufacturing Business Technology, 12/4/2007 7:58:00 AM

Washington, DC—Reducing greenhouse gas (GHG) emissions in the United States will require far-reaching efforts spanning all sectors of the economy, but significant savings generated by “going green” can outweigh the costs over time. So says the newly released McKinsey & Company report, Reducing U.S. Greenhouse Gas Emissions: How Much at What Cost? 

Based on information gathered from more than 200 interviews with representatives from government agencies, public and private companies, academic institutions and research foundations, the report provides a comprehensive overview of  the sources of GHG emissions within U.S. borders, and identifies those areas where emissions can be most dramatically reduced.

According to the report, annual GHG emissions within the United States will increase from 7.3 gigatons of carbon-dioxide equivalents (CO₂e) to 9.7 gigatons by 2030. (As a frame of reference, all of the light-duty vehicles used in the United States today collectively produce only 1 gigaton.) Congress is reviewing legislative options aimed at keeping these levels in-check during that time period, but there is a significant amount of debate surrounding the costs required to do so… particularly for industrial organizations.

The study sayindustrial sector alone can reduce emissions by 620-770 megatons, and that the associated energy savings can outweigh the cost of making the changes necessary to meet these reduction goals. However, the report does acknowledge that it will require a substantial investment in equipment upgrades and process changes, which inevitably compete with other capital cost needs within the plant.

Honeywell, one of the main underwriters of the report, is taking an active role in helping industrial organizations to make those investments more palatable. Harsh Chitale, VP of strategy and global marketing for Honeywell Process Solutions, spoke with Control Engineering after the results of the McKinsey study were announced, and detailed the steps his organization is taking to accelerate the deployment and adoption of green technologies.

“We understand that making the initial investment in energy-efficient solutions can be challenging,” stated Chitale. “However, our experience tells us that such investments can not only be ‘cost-neutral,’ but can help companies to actually improve profitability.”

According to Chitale, Honeywell is helping manufacturers in three key areas:

1) Promoting and facilitating deeper deployment of energy-efficient solutions.
Chitale says there are untapped opportunities to drive deeper deployment of energy-efficient technologies within industrial organizations, both within smaller organizations that have not yet invested in green solutions, and larger organizations that have only made initial energy conservation investments. By promoting and bundling those technologies in a manner that is easily deployable, as well as sharing best practices for implementation, Honeywell is helping companies identify and pursue improved energy efficiency at a much deeper level.

2) Establishing the financial justification necessary to invest in energy saving technologies.
Many organizations lack the proper in-house resources to effectively quantify and demonstrate the ROI for these investments. Honeywell bridges that gap by developing a consulting function within the business, and helping customers create the business case necessary to secure approval and move forward with the required investments.

3) Removing the barriers for entry to implement energy-saving technologies.
To make the business case even more digestible, Honeywell has developed programs where some customers can pay for their investments based on the savings they receive.

“In selected industries, we work with Honeywell Global Finance and offer a program where Honeywell actually owns the assets which are installed within a customer site and the customer pays for those investments based on the savings they receive,” says Chitale. “By doing so, we enable these organizations to implement solutions in a cash flow-positive, balance sheet-neutral way.”

Once the technology is in place, however, many organizations will opt for the more “traditional” purchasing model.

“What we have seen is that some customers will go with this financing approach for the first one or two programs, but will move to purchasing the assets because they have seen the return and want to gain the benefits of having those assets on their balance sheets,” adds Chitale. 

Honeywell can take such a bold approach due in part to its experience as a global organization. With more than 50 percent of Honeywell’s revenues coming from outside of North America, the company has experience in implementing solutions in geographies (such as Europe) where the green movement has taken root. According to Chitale, they have seen first-hand how organizations that take the necessary steps to reduce energy consumption can dramatically reduce associated costs and operate more profitably.

Click here to visit McKinsey & Company online and download a full copy of the report.