Businesses worldwide are investing in LED fixtures. Starbucks as done it so have Google, Glaxo Smithkline, Staples and Wal-Mart among others. If you think they are doing it as a part of Corporate Social Responsibility (CSR) initiatives – you are right, but only partially. A triple bottom line approach, attractive return on investment, excellent light quality, lower fixed costs, tax credits, green brand image, safety concerns and threat of potential lawsuits are all encouraging companies to invest in this energy efficient technology.
Saving the environment and improving the bottom line
There is sound business sense behind these investments. They help save money on electricity bills, replacement costs and air conditioning bills.
In its 2009 sustainability report Wal-Mart said that its LED refrigerated case lights provides more than 70% savings over fluorescent lighting. Additionally, they don't contain mercury, perform better in the colder temperature and also produce less heat than fluorescent lights.
There is another reason why LED’s are preferred for refrigerators – The mercury contained in CFLs. Should the CFL break accidentally in the refrigerator thousands of dollars' worth of groceries will become ‘mercury contaminated waste’ and far from selling it stores would have to shell out money for its safe disposal.
Wal-Mart and other commercial establishments have been using LED’s in signboards for years. The most important reason – they last for years and do not need replacement as often as bulbs do. This significantly reduces downtime and lowers maintenance costs. Signboards that are operational 24 hours a day are also prime candidates as the energy savings alone would pay for themselves in six months!
Excellent Light Quality
Light from warm LED bulbs are indistinguishable from that produced by incandescent bulbs. If you prefer cool daylight, these bulbs can provide that as well. They produce rich full spectrum light that has excellent color rendering index.
Terrence DeWolfe of GSK says "We benefit from reduced consumption, with no change in lighting quality. LEDs are a great way to integrate good financial sense with good corporate citizenship."
High ROI, NPV Positive Investment
Commercial LEDs have an ROI close to 80% per annum. No business can say no to such high rates of return.
Unlike other high return avenues like the equity market, the investment is not fraught with risk. The return depends largely on your usage pattern. The more you use your lights – greater is your return.
For companies, the investment is considerably less risky than any other operational and business change. The discounts rates used to evaluate the investments are therefore logically only marginally above those on government securities. These projects therefore have very high positive Net Present Value.
Lower Fixed Costs
Lower operational costs due to significantly lower electricity bills mean lower fixed costs. A Starbucks Store for example will have all its lights switched on irrespective of occupancy. The same holds true for malls, schools, hospitals and stores. This has a direct impact on the degree of operational leverage of the business. Starbucks suffered during the recent recession. In June 2008 it reported a 13 week net loss of $ 6.7 million versus a net income of $158.3 million for the preceding year. The message was loud and clear. Starbucks needed to improve its cost structure to tide over economic blips in the future. They needed something that could boost the bottom line in both good times and in bad. It was therefore a natural choice.
Tax credits and Depreciation Benefits
Investments in green technologies like energy efficient lights improve the bottom line, makes the company eligible for tax credits and depreciation benefits.
Savings from Lower Wattage Energy Backup
Tube LEDs than half the electricity as fluorescent tubes. A 15 watt LED tube can replace a 32 watt florescent tube (add 4 watts for ballast draw) and produce more light. A LED Retrofit Kit saves about 75% over their Metal Halide or HPS counterpart. Companies that want to ensure uninterrupted lighting benefit from the lower power demand of these bulbs. A seven times smaller backup generator or energy storing battery device is enough to ensure uninterrupted performance when LED bulbs are used. The same logic applies for remote locations like oil rigs or mineral prospecting teams that are dependent on oil based mobile generators or irregular energy sources like wind and solar energy.
Value of a Green Brand Image
Investments in energy efficient technologies help develop a ‘green’ brand image. This is a great asset for any business. Studies have shown that a company’s score on ‘environmental consciousness’ had a direct correlation with attributes like ‘trustworthy’ and ‘cares for ‘customers’. GE’s brand value increased by $ 6 billion since 2005 after ‘Ecomagination’ was launched. By contrast the brand value of ‘Coca Cola’ decreased by $ 5.1 billion between 2003 and 2007 over concerns of non sustainable business practices. Since then Coca Cola has invested in green initiatives and seen its value rise by 2%.
In today’s environment a green brand image is rapidly becoming a necessity. 48% of the retailers including the likes of Wal-Mart have a focus on ‘green’ strategies. The rest must follow suit or risk being sidelined in a highly competitive world.
Safety from Potential Lawsuits
MacDonald's was sued for serving coffee that was too hot. The jury awarded $2.86 million to the plaintiff. Portland Public School has been sued by the mother of a former student for $400,000 as compensation for injuries from broken glass. TGI Friday has been sued for injuries from broken glass bulb. Though the court dismissed the suit TGI Friday had to incur legal costs and hassles of defending a law suit they could have done without Mercury has been implicated in poor brain development and Alzheimer like symptoms. In Japan, Chisso Corporation agreed to pay more than $32 million in costs, $22,600 as lump sum payment to each affected person and $ 190 per month as medical allowance to each person for causing mercury poisoning to thousands. Waters & Kraus filed a suit for mercury poisoning over the use of mercury in vaccines.
The problem with mercury containing CFLs is that the mercury is in vapor state and once the CFL ruptures there is no way to know where the mercury finally settled. The only way to ensure safety and to clean the mercury is to hire a specialized professional service or to use a special mercury detector.
Some types of light bulbs may be prone to explosion. Actor Teri Hatcher suffered eye injury from glass bulb fragments. Between 1992 and 1998, the Consumer Product Safety Commission received 260 reports of incidents related to fires due to exploding bulbs. Several people had died or had been injured in these incidents. Wal-Mart was sued for $11 million by a family over an incident in which a 4 year old girl died in a fire after a halogen bulb exploded. Bulb explosions have also been implicated in incidents in NASA and at Sylvania’s manufacturing facility.
No business can afford to ignore the safety of its customers or employees. LED lights are cool to touch, do not shatter like glass bulbs and do not contain mercury. Besides the safety from potential lawsuits the peace of mind that they bring to any commercial enterprise is invaluable.
Dental fillings contained mercury. Once safer ceramic fillings became available mercury containing amalgam fillings became obsolete. The same applies to lighting technology too. Safer and more economical industrial LED products are slowly but surely becoming the gold standard for indoor and outdoor lighting applications