Materials and Energy Efficiency in SMEs

Efficiency performance contracts (EPCs) for small and medium enterprises (SMEs) are a marketbased approach that rewards suppliers for improving efficiency and reducing waste in SME operations through pollution prevention and energy efficiency (P2E2) innovations. They are similar to programs such as chemical management services, energy savings performance contracts, and resource management contracts that have been successfully used in larger enterprises. However, they are unique in that they combine a variety of "spends," such as tooling, chemicals, paint, and energy, in order to achieve sufficient economies of scale. In a pilot project combining tooling and metalworking fluid spends, the SME realized a 40% reduction in tooling costs while improving process efficiency and reducing tooling waste. Evidence suggests that similar EPC programs could successfully bring P2E2 innovations to many SMEs while simultaneously reducing costs and increasing profitability. However, significant barriers exist and EPC programs are unlikely to be adopted on a widespread basis without efforts by government or non-profit organizations to overcome these barriers. Most importantly, many suppliers are not willing to form the alliances necessary to make EPCs successful, particularly in the area of energy efficiency. Several steps to overcome these barriers are recommended.