FLIR Systems Energy Efficiency 2013
|Company||FLIR Systems, Inc.|
|Filer||California State Teachers' Retirement System|
|Subject(s)||Energy Efficiency (buildings); Energy Efficiency (industrial); Energy Efficiency (products); Energy Efficiency (utilities)|
|Resolved Clause Summary||Energy use management report|
Investments in energy efficiency are an attractive way to manage rising energy costs, can enhance a company’s role as a corporate citizen, and are usually quite profitable and low-risk. A 2008 McKinsey report (How the World Should Invest in Energy Efficiency) estimated that $170 billion could be invested in energy efficiency with an average internal rate of return of 17%. The report estimated that by 2020, these energy efficiency investments could produce over five times their cost in annual energy savings.
Companies are increasingly committing to energy efficiency initiatives. According to the Center for Climate & Energy Solutions: Johnson & Johnson achieved an internal rate of return 19% from recent energy efficiency investments; Alcoa’s Energy Efficiency Network has captured sustainable annual savings exceeding $20 million; between 1990 and 2006, IBM’s energy conservation measures saved $290 million; and between 1990 and 2008, DuPont estimates that its energy efficiency initiatives saved the company about $4 billion.
Evidence linking environmental considerations such as energy efficiency and value creation is increasingly being seen. An October, 2010 report from Thomson Reuters (ESG and Earnings Performance) concluded that, “U.S. companies with stronger ESG [environmental, social and governance] scores consistently beat earnings estimates more frequently than those with lower scores.” And according to an October 4, 2011 report from Goldman Sachs (Why ESG Matters), “Firms with leading ESG scores tend to generate higher and more durable returns on capital than sector peers.”
According to FLIR System’s 2011 Form 10-K, the Company acknowledges that part of its growth strategy is predicated on cost efficiency. On page 5 of this report, the Company states that their “ability to continue penetrating and expanding on our leading market position…is predicated on our success at reducing internal costs to manufacture systems.” On page 36 of this report, total operating expenses were identified as approximately $515 million. According to Honeywell’s Energy Management Solutions, energy expenses can account for more than 25 percent of a company’s total operating costs. For FLIR Systems, 25 percent of its 2011 operating costs is approximately $130 million.
FLIR Systems has not provided adequate disclosure in public filings, on its website, or through a report, that discusses the Company’s energy management strategy. An effective energy management strategy can yield a high return on investment while proactively responding to reputational risk.
Shareholders request that the Board of Directors issue a report describing the company’s short- and long-term strategies on energy use management. The requested report should include a company-wide review of the policies, practices, and metrics related to FLIR System’s energy management strategy. The report should be prepared at reasonable cost, omitting proprietary information, and made available to shareholders by December 31, 2013.