Top management and the adoption of energy efficiency practices: Evidence from small and medium-sized manufacturing firms in the US

Abstract

Barriers to energy efficiency have been extensively discussed in the energy literature, but little is known about positive drivers. This paper investigates the role of top managers and more specifically of top operations managers on the adoption of energy-efficiency practices, based on 5779 energy efficiency recommendations made to 752 small and medium-sized manufacturing firms under the US Department of Energy's IACs (Industrial Assessment Centers) Program, through which teams of students and faculty from engineering schools provide free energy assessments. Top operations managers possess knowledge of production processes, for maximizing the effective manufacture and distribution of goods. We find that their involvement significantly increases the adoption of energy-efficiency initiatives, while involvement of general top managers without an operational role has little or no effect. Involvement of top operations managers increases the percentage of recommended energy savings that are implemented by 13.4% on average and increases the probability of adoption of more disruptive individual recommendations related to process and equipment change from 31% to 44%. Our findings imply that, in order to advance energy efficiency in SMEs (Small and Medium Enterprises), it may be advisable to target managers who are sufficiently senior but still in a clearly operationally-focused position.