Turn Energy Efficiency Into Strategic Advantage
MIT Sloan Management Review ·
Grundini/Ikon Images The Research The authors interviewed 39 executives representing 10 countries and multiple industries and hosted an online workshop with 36 executives responsible for enterprise data to learn how their companies were using digital technologies and data to address their sustainability challenges. In addition, they surveyed 360 respondents in Swiss manufacturing companies twice to […]
Grundini/Ikon Images
The authors interviewed 39 executives representing 10 countries and multiple industries and hosted an online workshop with 36 executives responsible for enterprise data to learn how their companies were using digital technologies and data to address their sustainability challenges. In addition, they surveyed 360 respondents in Swiss manufacturing companies twice to learn how those companies approach energy efficiency.
Businesses working to manage their spending on energy were dealt a blow in late February following military action by the U.S. and Israel against Iran. A predictable consequence of the conflict was a dramatic increase in the price of crude oil, the primary benchmark for global energy costs. The price of a barrel of crude oil shot up from $67 in early March to $112 in early April; by early June, it had come down to $80, still a roughly 25% year-over-year price increase.
Geopolitical conflict can bring exceptional volatility to energy costs, but steadily rising expenditures have been the underlying trend for companies since 2022, putting pressure on their profit margins. Energy is a central input in energy-intensive industries such as cement, chemicals, and metals, which account for roughly three-quarters of industrial energy demand . Companies that rely on global supply chains, and even companies that consume relatively less energy in their operations, like food processors, are feeling the effects of rising fuel and power costs.
The pressure to reduce costs is likely to drive more corporate efforts to improve energy efficiency. While that’s good for sustainability, our research suggests that energy efficiency can also deliver measurable cost savings, enhance resilience, and fuel growth. Attention to energy efficiency can lower per-unit manufacturing costs, reduce exposure to energy-price volatility, and sustain margins during energy shocks. The companies we studied have cut their energy use at some facilities by up to 50% and reported efficiency gains of 10% to 20% in their core industrial processes.
Upgrades to digital systems, manufacturing equipment, and facilities all played a role in those outcomes. The key to success, however, came not from any upgrade made in isolation but from having a comprehensive strategy that linked improvements together. Company executives made energy efficiency a clear priority, with defined accountability and performance targets.
From our surveys of Swiss manufacturing companies and interviews with executives across the globe, we identified three ways in which the most energy efficient among them manage their energy costs and take advantage of digital capabilities in that work.
First, they invest in collecting and analyzing data about energy use from everywhere in the company and its ecosystem and making that data visible to managers. Using sensors, dashboards, and centralized data platforms, they enable real-time energy management and cross-site benchmarking. Second, they redesign their operations and systems to optimize energy use, eliminate waste, and reduce dependence on energy-intensive inputs. By embedding advanced analytics and AI into daily workflows, they can improve continuously. And third, they are more likely to create products and services that support their customers’ energy efficiency goals.
Here, we’ll explore energy efficiency practices among the companies we studied and provide insight into how managers can adopt similar approaches.
Enterprise-level energy efficiency becomes feasible when the energy that business operations consume is visible in near real time. In our survey of Swiss companies, those in the top quartile on energy efficiency rated themselves more highly, on average, than those in the bottom quartile on integrating data collection, analytics, and reporting technologies across their operations. Executives we interviewed at those and other companies reported that they use those capabilities to systematically and continually track and analyze information on energy usage and share it with internal and external stakeholders. Specific practices included translating data into actionable insights for operations teams, frequently sharing energy metrics with senior leadership, and communicating successes to customers, investors, and regulators.
At Swiss specialty chemicals manufacturer Clariant, digital technologies are central to measuring and sharing energy usage data. One of its early initiatives was to install sensors to capture data on energy used by plant machinery. It also invested in operational dashboards for its sites to consolidate their data and uncover opportunities for efficiency improvements. The sustainable operations team now tracks high-frequency data from 80 manufacturing sites and stores it in a central data repository.
Increased visibility has helped to improve energy efficiency on several levels. Plant managers and site operations teams use dashboards to monitor energy consumption, emissions, and operational efficiency across Clariant’s production facilities so that they can identify potential improvements. Business and regional operations leaders use dashboards for cross-site benchmarking, revealing where they may be lagging behind comparable operations. The sustainable operations team monitors energy usage across plants and works with managers at each site to determine how to reduce their energy costs.
Clariant’s savings have been significant. At one plant in China, the energy used to produce finished goods was cut by about half from 2019 to 2021, and even further in subsequent years.
The company’s generative AI-based Clarita platform, introduced in 2023, is used across production sites to monitor energy consumption, identify inefficiencies, and recommend actions to optimize processes while continuously learning from operational data. At a production plant in Germany, local operations and energy efficiency teams used Clarita to identify abnormal steam consumption in a heating system by comparing real-time usage with historical baselines. The results led them to adjust operating parameters, which significantly reduced steam demand. Additionally, a mining site in Indonesia used the system to save energy by improving routines for scheduling and maintaining its equipment. (See “Can AI Save Energy?”)
Artificial intelligence is becoming one of the fastest-growing drivers of energy demand and one of the most promising tools for reducing it.
AI-related electricity demand is growing faster than overall electricity use. Demand from data centers rose by about 17% in 2025 and could double by 2030. On the other hand, the International Energy Agency predicts that widespread adoption of AI to optimize energy use could improve industrial energy efficiency by up to 10% globally by 2035, with significant cost savings in power generation from reduced fuel use and improved system performance. The gains will depend on sustained deployment in operational settings rather than stand-alone use of AI tools.
Organizations have begun testing AI agents to improve forecasting, automate control, and continuously adjust performance in industrial processes, power systems, and settings such as buildings. Early research by the U.S. Department of Energy’s National Renewable Energy Laboratory shows that AI agents could help power companies manage the electrical grid. In commercial cooling, a Google experiment using AI agents has reduced energy use by about 9% and 13%, respectively, in two of its data centers .
The results so far indicate that AI improves energy efficiency when it is embedded in systems that monitor and adjust operations in real time. If companies build the digital and operational capabilities that allow energy use to be continuously measured, analyzed, and optimized, AI will be able to draw on those capabilities and reinforce them.
Despite having improved visibility into energy use, many companies we studied still struggled to reduce their energy costs because they did not use the insights from their data to change their production processes or to manage raw materials and fuels differently.
Those reporting the most action on energy efficiency in our sample closed this gap by embedding energy and resource management into routine operations and decision processes. For these companies, energy efficiency became part of daily performance tracking, with energy use measured and managed alongside productivity and cost metrics rather than treated as a separate sustainability concern. Then they deployed new technologies, such as equipment that manages its own energy use, along with heating and cooling systems that employed waste-heat recovery technology. They also redesigned manufacturing processes to use fewer materials and less energy.
Some companies are also moving to replace fossil fuel inputs (and their associated price volatility) with electricity and renewable sources, which are often more efficient.
Take, for example, Swiss industrial group Georg Fischer (GF), which makes equipment for transporting liquids and gases. The company has focused on designing operations to cut energy waste as part of a broader energy efficiency strategy, said Oliver Hilbrand, a plant manager. “Our goal was to significantly increase efficiency in all areas — from production to logistics to energy use,” he said.
At the Seewis, Switzerland, site where GF manufactures valves and actuators, it has deployed a combination of energy-saving technologies, including higher-efficiency machinery, smart lighting, waste-heat recovery, and better insulation. Additionally, the site gets 100% of its electricity from renewable sources. As of 2023, the plant had reduced its emissions from fossil fuels by about 63% compared with a 2019 baseline. While not a direct measure of fossil fuel use, a reduction in emissions indicates that a company is less dependent on it — and less exposed to fluctuating fossil fuel prices.
Meanwhile, GF is shifting to renewable electricity sources companywide. It is installing solar panels on factory roofs and buying certified renewable electricity from regional hydro and wind sources. These steps have not only reduced GF’s dependence on grid power generated by fossil fuels; they have also made it easier to predict future energy costs. Although renewable energy generation fluctuates across days and seasons, the cost per kilowatt hour of solar power is less volatile than that of oil and can be managed through local measures, such as storing solar power in batteries for later use during peak-rate hours. By 2025, GF was sourcing 62% of its total electricity from renewable sources.
Further, the company has applied circular-economy principles to reduce its consumption of energy-intensive raw materials, such as plastic and steel. If it can maintain quality and comply with regulations, the company mixes its scrap with raw materials to reduce raw material inputs. In 2025, it reported that it was recycling 68% of its waste, including scrap from production.
In addition, the company conducts life-cycle assessments to evaluate its energy footprint across the entire value chain, including raw material processing, product manufacturing, transportation, product use, and disposal. It discloses that data through Environmental Product Declarations verified by third parties, enabling it to benchmark against global standards and identify targeted opportunities for further improvements.
Among the companies we studied, we saw a third area of focus in energy efficiency emerging: developing products that use fewer resources and enable customers to reduce their own energy consumption. Those reporting more activity in this area were significantly more likely to be partnering with other companies to reduce energy use and environmental impact.
By offering more energy efficient products, companies can create more value for customers. For example, when GF customers upgrade their equipment, the company is able to quantify energy savings and other sustainability benefits they can expect to achieve. Meanwhile, ABB, a global provider of electrification and automation systems, has partnered with E.ON, an infrastructure services company, to offer energy efficiency services, such as appraisals, system design, and financing, with guaranteed savings. Those offerings reduce upfront barriers to investing in new equipment and shift performance risk away from the customers.
Companies can also capture value indirectly by embedding energy efficiency into their products, providing customers with self-service data, and using their strong internal energy efficiency performance to attract and retain customers.
ABB has developed a portfolio of digital tools that help customers manage their energy use more effectively. Analysis of the company’s installed base showed recurring inefficiencies in motors, pumps, and process equipment, along with limited visibility into the energy that equipment consumed. In response, ABB introduced a service that combines monitoring, analytics, and AI to identify inefficiencies and recommend actions. These systems connect equipment, track energy flows in real time, and coordinate operations across assets, enabling continuous adjustment. The company reported that its cement industry customers have achieved efficiency gains of 15%-18% . Data center customers are up to 25% more efficient. In addition, these tools enable customers to troubleshoot anomalies in their energy consumption 60%-80% faster.
Similarly, DMG Mori, a global manufacturer of computer-controlled machine tools such as milling and turning machines, developed its Greenmode offering after analyzing how energy was being consumed during machine operation at customer sites. The company observed that customers’ energy consumption was driven not only by machining but also by auxiliary systems, such as machine cooling, feed drives, and compressed air, and by prolonged idle times. Further, customers had limited real-time transparency into how much energy their machine tools used.
To address these issues, the company built features into its machines that help customers see their electricity consumption in real time and operate machine components according to when they are needed during production instead of running them continuously. DMG Mori data that has been certified by TÜV Süd, an independent testing and certification organization, shows that these measures have reduced machine energy consumption at customer sites by more than 30% , on average, and up to 40% compared with earlier-generation machines.
Our research points to a reinforcing cycle: Companies that make energy consumption visible across the enterprise gain the insight to redesign operations, and the savings from redesigned operations can be used to fund products and services that help customers do the same. Those that have made an organizational commitment to treat energy efficiency as a business priority set performance goals and manage for them. As long as fossil fuel costs remain volatile, companies that can continuously improve their energy efficiency will have the advantage over those that are forced to react to — and absorb — every shock.