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Business Tips

The true cost benefits of a sustainable business

Melissa Raby, a Ferguson author

by Kelly Thompson

 

We all know that buying and installing green products can reduce our impact on the environment, but did you know that another benefit of sustainability is saving money? When I tell people that yes, most of the time purchasing the more expensive green product instead of the cheaper inefficient alternative will save them money, I see a confused look on their face.

Before getting into the really good stuff, which is how green products can save you money, I want to briefly touch on the environmental benefit of sustainable business since I think it’s pretty important as well. To illustrate the large impact your one small product can have on the environment, we’ll use lighting as an example. The Office of Energy Efficiency and Renewable Energy performed a study on incandescent, compact fluorescent and LED lighting. As you can see from the below image, the newest version of LED lighting has a far smaller impact on the environment than any of the other products tested. Because sustainable products are more efficient and use fewer natural resources, they are almost always better for the environment.

Photo credit: The Office of Energy Efficiency and Renewable Energy

The really good stuff – Saving money

When you are looking for how much the product you are purchasing will cost you, you cannot simply compare the one purchase price to another. When doing a comparison you should look at the total cost of ownership, or TCO, over its lifetime because you pay for more than just the purchase price of the product. Because light emitting diode lamps, or LED bulbs, are such a great example, we’ll use them in our calculations here.

Total cost of ownership for lamps = purchase price + replacement costs + energy used + labor costs.

Keep in mind that this shows a lamp-for-lamp replacement, so if the fixture is also being replaced those costs need to be added in as well. Before we start working on the calculations, you’ll need the following information:

  1. The wattage, average hour life and cost of the existing bulb as well as for the comparable efficient LED. Let’s say we currently have 43 watt A19 incandescent bulbs that have a 1,000 average hour life and cost $1.51 each. The efficient alternative is a 10 watt A19 LED that has a 25,000 average hour life and costs $14.90 each.
  2. How many hours you use the bulb per day. We will use 12 hours here.
  3. Labor costs. For our purposes, we will say that we charge $25 an hour and a safe assumption is that it takes on average five minutes to change a lightbulb.
  4. Your electricity cost. You can usually find the kilowatt hours, or kWh, you pay on your electricity bill, or visit the U.S. Energy Information Administration for a list of average costs by state and the U.S. as a whole. Currently, commercial buildings in the U.S. pay $0.1019 per kWh, so that is what we will use for this exercise. To find the electricity costs we multiply the wattage by the life of the longest lasting bulb, divide by 1,000 to get kWh, and then multiply by your cost. For the incandescent that would be ((43 x 25,000) / 1,000) x $0.1019 = $109.54.

Did you notice the difference in purchase cost? That is where most people would stop and say, “No way am I paying that much more for one lamp.” Before you say it, hear me out and we’ll run the total cost of ownership calculations to see if you still think that.

To Get 25,000 Hours of Use The Current 43W Incandescent The New 10W LED
Purchase price $1.51 $14.90
Replacement bulb price 24 more bulbs = $36.24 $0
Labor cost to install first bulb $2.08 $2.08
Labor cost on replacement bulbs $50.00 $0
Electricity cost $109.540 $25.48
Total Cost of Ownership 199.37 $42.46

Purchasing the significantly more expensive LED over the incandescent is a no-brainer, and here’s why:

  • In this example the LED has a payback period of 5.6 months, meaning your customer will be saving money in month six until the lamp reaches the end of its life in an estimated 68 months.

  • You can see a total lifetime savings of $156.91 per bulb.

  • Let’s say we are interested in replacing 50 incandescent bulbs on the property. Then we can expect to save $7,845 over the life of the LEDs.

In summary, there is not only a financial savings but also an environmental benefit to sustainable business. If your customers are looking for ways to quickly save money on utility costs, reduce their environmental impact, and improve the overall look of their facility with the latest green technology, browse Ferguson’s selection of energy-efficient LED bulbs or LED lighting fixtures today.

Melissa Raby, a Ferguson author
Kelly Thompson

Kelly Thompson is LEED® Green Associate accredited, has worked in sustainability since 2011, and was a former committee Chair for the San Diego USGBC. She has published numerous articles ranging from green landscaping to conservation tips for apartment communities. Kelly has managed utility rebate and lighting audit programs, as well as participated in various environmental projects such as carbon footprinting, LEED building certification, and corporate social responsibility reporting.