A crisis is helpful - CFOs get energy-savvy part 2
Over exquisite food and wine at Marble restaurant, CFOs swapped notes with Deloitte leaders who were the official partners of this second dinner discussing energy efficiency.
Sibanye-Stillwater CFO Charl Keyter (profile) started at the company in 2007 and looks back with great pride at what he has achieved, but he singles out the 2008 energy crisis as an event that forced his hand as a finance executive. Until then, energy had been relatively cheap and supply was consistent, but the Eskom crisis spurred some drastic steps towards improved energy efficiency at the Driefontein mine, one of the richest gold mines in the world, having produced over 110 million ounces in its lifetime to date.
“It was a real wake up moment for us and in retrospect a blessing for our business as we had no choice but to get smart”.
Alongside Charl, leading CFOs Mark Kathan (AECI - profile), Glen Pearce (Sappi - profile), Neil Crafford-Lazarus (Sephaku - profile) and Wayne Koonin (Omnia - profile) were guests at the second CFO South Africa dinner focussed on energy efficiency, also joined by leaders from Deloitte. The question posed was whether energy efficiency is just fuzzy maths or a real value creator for businesses.
The open, frank and robust conversations made for a very stimulating evening and CFO South Africa MD Graham Fehrsen was delighted with the way the evening ran. “CFOs don’t regularly get the chance to swap notes with their peers or industry leaders on important issues that impact their business and every CFO left this evening thanking us for the opportunity. We’ve done our work when we can create these platforms and CFOs leave with new insights or perspectives,” he said.
Energy efficiency projects - big and small - make an enormous difference in the long term, said Charl:
“Together with the 12L incentive, we’ve returned over R120 million to the business, not to mention the leap forward in our overall approach to efficiency. It’s not easy and often you have to push people towards these initiatives, including them in their KPIs if necessary. But once people see the benefits of the efficiency initiatives to their own work and outcomes, it becomes second nature."
“I couldn’t agree more - leaders have to push the status quo, even if that makes you somewhat unpopular,” noted AECI’s Mark Kathan. “Allowing things to stay the same, especially on energy issues, will cripple our business really quickly”.
The rate of change in technology was a topic that generated really interesting perspectives, with Omnia's well-respected CFO Wayne Koonin, 2018 CFO Awards nominee and winner of the 2017 Finance and Technology CFO Award, giving some very clear examples of how new technology has helped him and the team at Omnia become increasingly efficient around energy consumption. “You have to keep investigating the new technologies because what was good and new just three years ago has often been improved or completely replaced. If you aren’t alive to this rate of change you can very quickly lose your edge in the market,” said Wayne.
The vastly experienced Neil Crafford-Lazarus (Sephaku) shared an example of how vastly improved crushing technology gave their newer plants outstanding competitiveness due to the energy savings that the technology brought them. “The long term nature of plants often means you’re tinkering to keep up when a real investment to upgrade might well give you far more value. These are not just finance decisions - they are decisions which must be tied to your overall strategy and the culture,” he sais.
Replied Mark Kathan:
“I would agree and you also need exceptional engineering talent to move forward. My sense is that it’s tough to come by in SA when I look at other countries. It’s important for finance to be part of hiring, developing and most importantly, empowering talented engineers if the profession is going to keep making an impact on business. It’s not just great technology - we need operations, engineering, logistics, IT, HR and finance to come together meaningfully."
This sentiment was echoed by Sappi CFO Glen Pearce, who gave the example of an elite group of engineering specialists within BASF in Germany who, with government backing, split out to form a very elite consulting group that was making a real impact across Europe and the US.
When probed on the role of government, there were some strong views in the room but the conclusion was unequivocal: the interplay between government and the private sector in nurturing and developing insights and solutions around energy is absolutely essential. All of the CFOs noted with concern the current state of Eskom and government bodies responsible for energy, and agreed that as a South African business, you could either wait for the next crisis or get on with finding your next efficiency option. Power independence was on the agenda for all in attendance, although some agreed it was unlikely they would ever get away from the grid entirely, given the high demand of their industry.
With CFOs all at different stages in their energy efficiency evolutions, the conversation was dynamic and practical. “Sappi measures everything - you could say we’re a little obsessed,” remarked Glen. “The truth is we make much better decisions when we have quality data and with good data you can often join the dots on opportunities that didn’t at first appear obvious. As an example, our drive to reduce consumption in our South African operations was matched by an overall view to managing waste, and we realised that waste in our business offered a chance to actually produce bio-energy. This seems really obvious today but getting to this point required us to have the ‘measure everything’ attitude.”
Deloitte's audit partner Sebastian Carter spoke highly of the dinner and the opportunity to network with finance leaders:
"It was a most enjoyable dinner and a discussion which is globally relevant and shared by leaders of businesses which form the cornerstones of our economy. Thanks to everyone, I really enjoyed your company."
As the evening wound to a close, the CFOs summed up some of their key takeaways:
- Don’t wait for a crisis before tackling the energy-efficiency challenge.
- Start the energy-efficiency journey as soon as possible - big projects and small projects eventually snowball and become part of your DNA.
- Find ways to keep up with the technology and ask whether you’re keeping up - the rate of change means you can no longer wait five or more years to check your position.
- Partnerships are essential - from engineering to operations, HR and IT. Finance must empower and drive the partner mentality.
- Leaders need to push the organisation to change, even if it means making people uncomfortable or re-calibrating their KPIs.