The World Energy & Meteorology Council (WEMC) has members across the globe, from a variety of backgrounds and expertise, doing work on a range of important issues to strengthen energy and meteorology education, research and collaboration. We welcome posts from our members communicating the fantastic work that they do. We are delighted to share with you this opinion piece written by Michael Ferrari, a WEMC member from New York USA, and Managing Partner & Principal of Atlas Research Innovations. If you are interested in becoming a WEMC member (it’s free!), find out more by clicking here.

Published: 7th October 2019

Why Every Company is an Energy Company

Michael Ferrari (Managing Partner & Principal of Atlas Research Innovations & WEMC Member). Edited by Kit Rackley.

Earlier this year at the Mobile World Congress, Microsoft CEO Satya Nadella stated that every company can now be considered a software company. This does not mean that every company produces software; rather, it highlights the software component that is becoming a part of an underlying foundation to nearly everything we do, touch, taste or experience. The rise of ubiquitous computing and data collection/transmission interfaces, Nadella reasons, blurs the lines between the definition of a ‘tech company’ and those companies operating in ‘other industries’. The automobile and the ground transportation system-of-systems at large, is a guiding example of this important yet under-appreciated paradigm shift. Brad Allenby touched upon this transition as part of his in-depth 2011 book ‘The Techno-Human Condition’, and it seems as if his discussion is now unfolding in real time.

Borrowing from Nadella’s premise, can we also say at some point in the near future, that every company will, or should, be considered an energy company? Just as the Internet of Things (IoT) enables computing devices to embed themselves into the fabric of everyday consumer products – ranging from household appliances, communications devices, to internet searches, to day-care and pet monitors – nothing works without an energy consideration. Whether it is the transfer of bits and atoms to information, or harvesting or synthesizing material into physical products, there is an energy requirement to construct and deliver the products, goods, and services which drive the global economic engine. Energy is not free, so an accounting system which quantifies the total (and recurring) energy cost throughout the physical and virtual supply chain, could help redefine how we look at energy production, distribution, and usage.

Whether the energy expenditure is embedded into the product or service itself, or passed along to the consumer, everything we look at, touch, or interact with carries an energy cost. Actually, the confluence of the digital and physical worlds, connected by IoT networks, has enormous potential for more efficient energy management along the entire product and service value chain. Further, the transition from passive energy accounting to accurate quantification and feedback may be a way to facilitate conservation and smarter energy choices; it may also serve as a useful metric in the evaluation of companies perform under an Environmental, Social & Governance, or ESG, framework.

In finance, ESG factoring has been gaining in popularity as an investment theme. Investors have been scouring alternative information sources, where providers range from boutique data shops to government maintained repositories, in an attempt to assess how companies perform with respect to ESG governing criteria – the catalyst in this movement has largely been customer demand. However, while the intent may be lauded, many (including myself) feel that much of what passes for defining ESG parameters today lacks real meaning with respect to sustainable environmental performance.

Subjective and voluntarily disclosed company data has its place, but these criteria should be augmented with more quantifiable environmental operating parameters, many of which can be tied to the energy footprint of a company defined by individual corporation, sector, or upstream/downstream supply chain.

A meaningful energy and ESG strategy with roots in empirical physical energy statistics can identify industrial output proxies towards uncovering representative factors closely related to how sectors and companies perform. In addition, an energy-centric evaluation technique can identify operational market catalysts that might be missed through the standard approaches embedded in traditional discretionary analysis. Bringing this back to the article’s title, by viewing every company through the lens of their physical and financial energy management and exposure practices, and relating these to financial performance, a standard measure could be developed and applied across portfolios to assess short and long term investment potential. As a result, energy then becomes the common denominator through which all companies operate, and the universal metric that guides economic and technological sustainable development.💡

You can follow Michael Ferrari and his work on Twitter (@MichaelRFerrari) and LinkedIn. 

Disclaimer: This post represents the views of the author and do not necessarily reflect the view of WEMC or any other agency, organization, employer or company.

 

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WEMC Member Guest Blogs & Contributions: 

• How hydrological cycles impact the worldwide energy industry (November 2019) – Vasilis Pappas, Senior Meteorologist, Trianel GmbH
• Should every company be considered an ‘energy company’? (October 2019) – Michael Ferrari, Managing Partner & Principal of Atlas Research Innovations
• The Climate Pocketbook: An example of educational outreach from experts (August 2019) – Sebastian Sterl, Researcher on Energy & Climate, Free University of Brussels (VUB)
• Malawi-UK Teacher Partnership Focuses on Clean, Affordable Energy (August 2019) – Noel Banda, Meteorologist & Climate specialist, Malawi Department of Climate Change and Meteorological Services
• Global Wind Atlas wind resource maps now available for every country (January 2019) – Oliver Knight, Senior Energy Specialist, The World Bank
• Prescient Weather’s World Climate Service launches “significant upgrade” (December 2018) – Jan Dutton, CEO, Prescient Weather