How Your ERP System Can Help Your Company Manage Its Energy Use

A few years ago, we had the local electric company do a home energy audit. Our 19th-century house was hard to heat, and as we suspected, the inspector found we didn’t have enough insulation. But our most cost-effective change turned out to be the purchase of a new refrigerator. You can’t manage what you don’t measure. Once you start looking at the right data, the results can lead you to solutions you hadn’t imagined.

I thought about this as I was reading the CIO 100 application from one of this year’s winners, the City of Palo Alto. In 2007, the city council set a goal to reduce its carbon emissions 5 percent by 2009 and then to 15 percent of 2005 levels by 2020—one of the first cities to establish such targets. Every department got a carbon emissions budget, and managers were expected to come up with their own ideas for staying within it. As the recession deepened and fiscal budgets began to get squeezed, “it became clear this couldn’t be an add-on green thing,” says Karl Van Orsdol, the city’s energy risk and greenhouse gas manager. “It had to be cost-effective and we had to report on what our savings were.”

Officials already collected plenty of data about energy usage and spending, but didn’t look at it. Someone would key a code into the city’s SAP system to pay the utility bills, but “there was no accountability and no incentive to conserve,” Van Orsdol recalls. That changed in early 2009 when the city deployed environmental and energy-management software from Hara, based in Redwood City, Calif. This software-as-a-service solution lets managers extract detailed data about their energy and water consumption from the SAP system and analyze it. Out of 150 green projects the city has launched, more than half also show potential for cost savings. The city estimates it will save $520,000 on energy this year compared to 2005.

Like Palo Alto, you probably have data that could be used to develop options for running your company more sustainably. You just have to begin using it.

Start With ERP

Any organization with an ERP system keeps data on its resource use. For instance, if you’re running a vehicle fleet, you should know how much gasoline you’re buying. Palo Alto runs its own electric utility for the city and residents, so it also has details about its power consumption—information that’s often also available from independent power companies. Every time a city vehicle fills its tank, SAP captures that data. With such records, the police department discovered it could save fuel by using fans in parked canine unit vehicles. When the project is completed, officers won’t have to leave the cars running when the dogs are inside. Other initiatives include upgrading compact fluorescent lightbulbs and replacing old, inefficient equipment (such as refrigerators). City officials use the Hara software to track their progress toward those carbon emissions goals.

Palo Alto’s CIO Glenn Loo didn’t want to spend much money or staff resources managing a niche analytics tool. But a SaaS solution could be installed quickly, and the city wouldn’t have to assign anyone to learn a new application. Loo’s team wrote an interface between SAP and Hara to integrate the two applications. Having to pull data from multiple systems would have been harder, Loo says, but Palo Alto had just consolidated four legacy applications into a single SAP instance.

“In the end, we took something that was a sideline and we really built it into an energy-management system,” says Van Orsdol. “We built it as a business process.”