Many Canadians are trying to do more with less during this economy of thrift. But we all face essential expenses -- those costs associated with "keeping the lights on" -- often, literally. Whether you're managing a household or a large corporation, energy -- that stuff that enables your car to move from one place to another, keeps your beer cold and your shower hot -- is generally regarded as an essential expense. Sure, you could drink warm beer and take cold showers; but really? There's got to be a better way. During a poor economy, it can be a challenge for a business to increase profitability as competition for the "cautious consumer" intensifies and there is increasing pressure on margins. But a recession offers the perfect opportunity to question the way things have always been done -- and drive out waste and inefficiency. One of Jim's favourite slogans is: "a crisis is a terrible thing to waste." While most are cautiously optimistic about the North American economy today, it was a different story in the latter half of 2008 when Canadian Tire launched its Business Sustainability Strategy with an aspiration to profitably grow the business without increasing energy use or contributing to an increase in the carbon footprint of the economy. And the company has been somewhat successful: energy and fuel used to move product from vendors to stores is nine per cent lower, despite a 22 per cent increase in tonne-km of product shipped. And energy use for buildings and … [Read more...] about In Business, Don’t Waste a Crisis
risk management
Pre-empting the energy shockwave
The inevitable long-term rise of energy prices poses a serious risk to corporate profitability. A Deloitte study, released at the World Economic Forum in Davos in 2009, showed that even modest 3.5 per cent year-over-year increases in energy and resource input costs could wipe out the profitability of a vast number of North American firms. To put 3.5 per cent increases into perspective: The price of oil was $10 a barrel in 1999 and ran up to $147 in 2008 – that represented a 40% annual compounded increase. Jeff Rubin, the former chief economist of CIBC World Markets, predicts oil will hit $225 a barrel in 2012. Heightened tensions with Iran, the fourth largest oil producing country worldwide, could be the catalyst for the run up in oil prices. A risk for Canadian manufacturers is that the Canadian dollar has become a petro dollar. When the price of oil rose to $147 a barrel, the Canadian dollar hit its highest point in decades against the U.S. dollar. And that in turn hit Canadian exporters hard. How can exporters mitigate the risk of a high Canadian dollar? One way is by becoming more energy efficient, lowering the cost of production. Another, of course, is through hedging against a rising Canadian dollar through currency swaps. Energy efficiency is a powerful profit driver and risk mitigation strategy. Walmart is spending $500 million a year on fuel and energy efficiency projects with paybacks of four years or less. During the recession, the company’s … [Read more...] about Pre-empting the energy shockwave