Business-to-business clean energy entrepreneurs have long faced a consistent challenge: Getting their customers’ CFOs to care. But this CFO survey from Deloitte released yesterday (CFO Signals: Q4 2019) might hint at a better way to get their attention.
Many such clean energy B2B solutions being brought to the market by startups include no-brainer value propositions. Energy efficiency solutions such as advanced lighting for warehouses, improved industrial processes at factories, HVAC (a/k/a air conditioning) savings in office buildings, and other such solutions can provide nice cost savings. Increasingly, rooftop solar, batteries and “microgrid” solutions can be money-savers and even potentially revenue sources for businesses that adopt them, as well.
These cost savings, of course, also come along with emissions reductions in most cases. The money savings, to oversimplify a bit, come directly from the energy savings. Because of the long-held belief among the business community (despite the cost savings mentioned above) that reducing carbon emissions is expensive and a “soft” issue, however, I find that many of the entrepreneurs offering these solutions shy away from making a climate-related sales pitch. They don’t want to undermine the seriousness of their economics-driven sales pitch. So if they mention climate change impacts from their solutions, it’s often buried in there at the back. Certainly not for all clean energy entrepreneurs, but for many this is the case.
You would think that a cost-savings focused sales pitch, when the solution being marketed offers a compelling payback period or such, would be an easy sale, then. Not necessarily. Because too often the clean energy entrepreneur is pitching a factory manager or other operations manager, and yet the customer’s CFO also must give approval and just can’t give it due attention.
Why not? After all, the CFO should be glad to see any cost savings right? But put yourself in the shoes of a busy CFO, with lots of priorities at any given time. While energy savings from these solutions may offer strong payback periods (2-4 years, in many cases, or even less), the aggregate dollar savings may be small potatoes compared with whatever strategic initiatives the CFO is tasked with this quarter. So getting their attention is the challenge.
In 15 years of investing into companies offering these types of solutions, I regularly see no-brainer value propositions where the main contact on the customer side wants to adopt the system, but it still takes months and months to get CFO approval.
That’s why yesterday’s Deloitte survey of CFOs grabbed my attention. They report that in terms of addressing climate change, 71% of CFOs say they face moderate or higher pressure from at least one stakeholder group. And that’s not pressure from outside environmental groups or regulators. That pressure, they report, is coming from employees, customers, boards and investors. And as one of the Deloitte managers on the project, Greg Dickinson, reports: “Perhaps most importantly, the majority say they are building management of climate risks into their governance processes.”
If this is true, then for a lot of CFOs climate issues are coming to the forefront of their attention really quickly. It’s a big shift over just the past few years, from my perspective. However, I can guarantee that many of theses CFOs don’t really know what to do about it yet.
This is where clean energy entrepreneurs may now be able to tout their solutions’ positive climate impacts more loudly, in order to help the CFO make it a priority. Instead of a pitch summarized as “We will save you 15% on your energy bill,” perhaps it’s finally time for a pitch more along the lines of “We will save you money by reducing your carbon impact.”
If the CFOs are under this pressure to include climate impacts and risks in their governance, they’re going to soon be tracking corporate carbon emissions, if they’re not already, and this will include emissions reduction targets. Where applicable, this would mean making the carbon emissions reductions specific and explicit: “By adopting this solution, your firm will reduce carbon emissions by [X] tons per year.” If your solution helps make a tangible and quantifiable impact toward meeting their climate goals, perhaps now that will help it get more attention. And even if the customer hasn’t stated specific emissions reduction goals yet, just the story-telling benefits themselves may help elevate the sale for the CFO.
From an investor standpoint, this kind of shift in the C-suite at business customers is also a strong signal that we may be on the verge of an inflection point. Just as is being seen with corporate purchases of renewable energy, perhaps we’re on the cusp of a big uptake in corporate energy efficiency purchases as well, since those can often have significant and quick carbon emissions reductions impacts. Particularly as new capital models are increasingly enabling such purchases to be made with no money down, via third party financing, which should just further grease the skids. As an investor I’m actively looking at such opportunities, myself.
So perhaps it’s time for clean energy entrepreneurs to adjust their sales pitches to more strongly emphasize the climate impacts of their solutions just as much as the actual economic benefits for their customers.