Energy Efficiency Investments Declined Last Year

Last week the results of the third annual Energy Efficiency Indicator survey were released. The survey is conducted by Johnson Controls Inc. and International Facility Management Association.

For the second year in a row, the survey showed businesses are spending less on energy efficiency. However, 71 percent of survey respondents said they are paying more attention to energy efficiency than they were a year ago. Last year, 72 percent said they paid more attention to energy efficiency.

Although 58 percent said energy management is very or extremely important, only 46 percent expect to make energy efficiency improvements financed with capital expenditures, down from 56 percent in 2008. Sixty percent expect to spend less than ten percent of their facilities related budgets on energy efficiency.

Respondents cited limited capital availability (42 percent) and unattractive paybacks (21 percent) as the two biggest obstacles to enacting energy efficiency projects. Almost 50 percent require payback periods that are less than three years.

Sixty percent think that natural gas and electricity prices will increase over the next year, down from 80 percent in 2008. Thirty-one percent do not expect prices to increase.

The majority of respondents (85 percent) think that legislation mandating energy efficiency and carbon reduction is likely within the next two years. Forty-four percent said government incentives are extremely influential in making energy efficiency decisions.

"I think we'll see substantial change next year," said C. David Myers, president of Building Efficiency for Johnson Controls. "And I think that change will be action where activity was laggard this year. I also think there will be a better economic environment next year compared with what you see today."

Businesses Affected By Healthcare Costs

Healthcare costs continue to increase. Over the past decade, insurance premiums charged to employers increased 119 percent, four times faster than wage increases. During 2002 to 2007, health insurance premiums for employers increased almost five times faster than inflation.

For every $100 spent in the U.S. on healthcare, five countries (Canada, Japan, Germany, U.K., and France) spend only 63 cents, according to a recent study by the Business Roundtable. Most Americans, 170 million, receive health insurance through their employer. Based on a survey of  428 companies, 46 percent of employers plan to shift healthcare costs to their employees in 2010.

"While today's economic challenges span the globe, companies in other countries may be better able to weather the storm in part because the value that their healthcare systems deliver," said Business Roundtable Chairman Harold McGraw.

Another recent survey by the Robert Wood Johnson Foundation revealed that 36 percent (one in three) of small business owners said rising healthcare costs will likely cause them to cut some of the benefits for their employees. Almost half (42 percent) said "making health care more affordable" should be priority for federal government. 

The number of small businesses that provide health insurance is decreasing every year. In 2007 it decreased by 59 percent in 2007, in 2000 it decreased by 68 percent, according to the Kaiser Family Foundation.

“Many small business owners have already reduced their health benefits and asked employees to pay a larger share of the premium, and still they struggle with the ever-increasing costs,” said Risa Lavizzo-Mourey, M.D., president and CEO of the Robert Wood Johnson Foundation. “They want health care reform that reduces the burden on their business and where all Americans have affordable health insurance.”

Small businesses are more affected by rising healthcare costs. Small businesses pay 18 percent more for health insurance than large companies, according to a January 2009 study by the Commonwealth Fund. In 2006, 35 percent of businesses with fewer than 10 workers offered health insurance, but 98 percent of companies with 1,000 or more employees did.

What do CEOs really think of employer-based health coverage?

"There are employers that don't want the responsibility, and we are in that category," said Carl T. Camden, CEO of Kelly Services (KELYA). "My health-care costs total more than my profits. 

"CEOs overwhelmingly want out of this business," said Benjamin Sasse, an Assistant Secretary of Health & Human Services under President George W. Bush . "They just do not want to be seen as more willing to dump [benefits] than their competitors are."

"CEOs are focused on the bottom line," said Len Nichols, director of health policy at the New America Foundation. "They know high health-care costs put U.S. companies at a competitive disadvantage."

 

James Hagedorn, CEO of Scotts Miracle-Gro (SMG), said, "If someone said to me, 'you can pay the same amount [for health care] and we will redeploy to a national system,' I'm fine. Why would I argue with that?"

Obama Gives Bad & Good News

"The bad news is well known to Americans across this country," President Obama said during his weekly address. The good news is that the "House passed the American Recovery and Reinvestment Act, which will save or create three million jobs over the next few years."

What will the American Recovery and Reinvestment Act do for businesses? Obama spoke about how the Act will help businesses:

Soon my Treasury Secretary, Tim Geithner, will announce a new strategy for reviving our financial system that gets credit flowing to businesses and families. We'll help lower mortgage costs and extend loans to small businesses so they can create jobs. We'll ensure that CEOs are not draining funds that should be advancing our recovery. And we will insist on unprecedented transparency, rigorous oversight, and clear accountability -- so taxpayers know how their money is being spent and whether it is achieving results.