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EY study: Why do you need a Chief Resource and Energy Officer?

Date: 10/15/2013
Source: EY
Commodities and natural resources drive roughly 10% of global GDP and underpin the performance of most industries. While this figure for the economic value of the natural resource industry is significant, perhaps even more significant would be the impact on GDP from constraint on the availability of a critical commodity or resource. Indeed, environmental, natural resource and water issues dominate the top 50 risks identified in the World Economic Forum’s Global Risks 2013 report.

In this context, according to the EY study Do You Need a Chief Resource and Energy Officer, it is a compelling case for elevating corporate resource management to the highest levels of executive management through a C-suite position with the global perspective and remit to manage resource risk strategically — call it a chief resource and energy officer (CREO).

Energy security concerns, rising and volatile energy prices, growing food challenges and water scarcity are creating new risks and new opportunities that no business can afford to ignore. These risks fall into four main categories:

• Weaker financial performance due to resource and energy price increases and volatility
• Business disruption resulting from resource or energy insecurity
• Brand equity erosion because stakeholder expectations related to resource and energy use have not been met
• Regulatory compliance costs and potential penalties

CREO: a new role or an additional one?
Yet a number of factors work against strategic resource and energy management. As companies grow, operational complexity often multiplies faster than do skills or the capacity to keep pace. This can make it difficult for busy executives to keep on top of areas outside of their traditional portfolios.

Gaps in knowledge and responsibility can lead to fragmented understanding a company’s entire resource needs. A COO charged with managing physical plant and vehicle fleets, for example, may be paying the power bills for a data center but lacking the know-how to alter the center’s design in the way the CIO might.

The absence of a single high-level focus on these cross-functional issues can lead to missed opportunities for energy reductions, efficiency gains and cost savings. As a formal position, the concept of a chief resource and energy officer is both young and rapidly evolving. Prior to 2000, few, if any, references to “chief resource officer” could be found in major US media. Even today, among the more than 225 million members of LinkedIn, the world’s largest professional networking site, fewer than Even today, among the more than 225 million members of LinkedIn, the world’s largest professional networking site, fewer than 60 list such as a title, and many of these relate to human resources, not natural resources.

CREO responsibilities may be at first assumed by one or more existing senior management positions — the chief operations officer, chief financial officer, chief sustainability officer or a senior supply chain executive — with the appropriate expansion of competencies and responsibilities.

CREO models
Our research shows that a variety of CREO models are emerging, varying by industry and corporate structure, with the common aim of empowering cross-functional resource management — from raw materials in the supply chain to green building technology to enterprise data management and stakeholder reporting. In addition to an eventual stand-alone position, immediate models for the CREO role include more empowered versions of the existing C-Suite positions:

Chief sustainability officer. If the CSO has the authority beyond moral influence to make operational decisions, this individual can be highly effective in assuming the additional role of CREO. For example, a large transportation services company with major fleet and physical plant investments has elevated its chief sustainability officer to act as overseer of energy, resources and operations across the enterprise.

Chief operations officer. The COO already heads operations and thus is a natural fi t to oversee energy and resource consumption. But this responsibility requires a broader view of resource risk and an understanding of resource reporting requirements. At one large fi nancial services provider, the senior executive in charge of energy reports to the COO, with a dotted line to the CSO.

Chief financial officer. The CFO brings a focus on risk management and an existing competency in reporting that can be extended to the internal and external reporting frameworks for managing resources. In many services companies, such as software and fi nance, there is already a tendency to house resource and energy management within the fi nance function. The growing global movement toward integrated reporting, with its attention to sustainability risk factors, only increases the importance of CFO insight into corporate resource and energy use.

The CREO agenda
The CREO role focuses on the following resource agenda:
• Diagnose – current and anticipated resource and energy use and related risks
• Design – create an improvement agenda, optimising resource and energy procurement and consumption, market by market.
• Implement – optimise the company’s capital stock and increase shareholder value by understanding the specific improvement opportunities and implement savings where possible.
• Sustain – the benefits of resource and energy optimisation requires continuous measurement and improvement. It also requires culture change within the organization and the supply chain.

Although the CREO may not be a new stand-alone position in the C-suite in the immediate term, while real-world experience with the position is gained, it is an additional role that must be assumed by one or more of the existing C-level executives.

Given the increasing risks of resource volatility, chief executives and top leaders should no longer be wondering ‘should we prioritise these issues?’. Instead, they should be working to answer the questions ‘who will lead this effort and how?’ and ‘when do we start?’
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About EY Romania
EY is one of the world's leading professional services firms with approximately 167,000 employees in 700 offices across 140 countries, and revenues of approximately $24.4 billion in 2012. Our network is the most integrated at global level and its vast resources allow us to help our clients benefit from every opportunity. In Romania, EY has been a leader on the professional services market since its set up in 1992. Our over 450 employees in Romania and Moldova provide seamless assurance, tax, transactions, and advisory services to clients ranging from multinationals to local companies. Our offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau. From 1 July 2013, Ernst & Young becomes EY, the logo has been modified in response to this change and the company's new tagline becomes "Building a better working world". The new visual identity reflects the new strategy of EY, Vision 2020. For more information, please visit www.ey.com.


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