Energy Efficiency Complexities - A Technical and Managerial Investigation

Management Accounting Research 24 (2013) 401416
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Management Accounting Research

journal homepage: www.elsevier.com/locate/mar
Energy efciency complexities: A technical and managerial

investigation
Tuija Virtanen a, , Mari Tuomaala b , Emilia Pentti a
a
b
Aalto University, School of Business, Department of Accounting, P.O. Box 21220, FI-00076 Aalto, Finland
Aalto University, School of Engineering, Department of Energy Technology, P.O. Box 14100, FI-00076 Aalto, Finland
a r t i c l e
i n f o
Keywords:
Energy efciency
Energy efciency indicator
Performance management
Work motivation
Sustainable development
a b s t r a c t
Increased concern about sustainability issues has been voiced in the accounting literature.
Although environmental performance is only one dimension of sustainability, it is nevertheless a key factor, especially in sectors such as the process industry, which consume
substantial volumes of materials and energy. Energy itself is important because its production is a major cause of carbon emissions. Hence efforts to reduce its use are important, and
here energy efciency measurement and management play a key role.
Although the conceptual challenges posed by energy efciency measurement are well
known in the technical literature, there has been little discussion of energy efciency
management. This paper examines the complexities involved in the measurement and management of energy efciency. In particular, it examines how these complexities impede
effective use of management control systems to impact the ability and motivation of
employees to work toward the goals of sustainable development. The study is a crossdisciplinary one, and combines technical energy efciency research and environmental
management accounting research in performance management. The study provides practical knowledge of what happens in organizations pursuing sustainable development, in
this case environmental performance. The paper demonstrates a performance indicator
that does not allow proper energy efciency performance management because it is still
technically underdeveloped. Setting targets for the indicator is especially problematic.
2013 Elsevier Ltd. All rights reserved.
1. Introduction
The accounting literature has demonstrated a considerable increase in concern over the issues of sustainability
and the roles that accounting practice plays in it (e.g.
Bebbington and Gray, 2001; Gray and Bebbington, 2000;
Epstein and Roy, 2001; Burritt, 2004; Schaltegger and
Burritt, 2010; Burritt and Schaltegger, 2010; Gray, 2010;
Burritt, 2012; Hopwood et al., 2010a,b; Ferreira et al.,
2010; Henri and Journeault, 2010; Gray, 1992). Within
the accounting literature, research activity has focused on
what sustainable development means for business and
accounting (e.g. Gray, 2010). Sustainable development is
Corresponding author. Tel.: +358 40 724 2917; fax: +358 9 4313 8678.
E-mail address: Tuija.Virtanen@aalto. (T. Virtanen).
1044-5005/$ see front matter 2013 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.mar.2013.06.002
development that meets the needs of the present without compromising the ability of future generations to meet
their own needs (WCED, 1987, p. 43). The relationship
between environment and development has given rise to
the call for sustainable development (Bebbington, 1997,
2001).
From the philosophical perspective, sustainability
accounting appears to be a source of the problems that
lead to unsustainable development (see e.g. Gray and
Milne, 2002; Gray, 2010). In contrast, a managementoriented path to sustainability accounting recognizes the
importance of management decision-making and views
corporate sustainability accounting as a set of tools that
helps managers deal with a variety of decisions (Burritt
and Schaltegger, 2010; Gabel and Sinclair-Desgagn, 1993;
Spence and Rinaldi, 2012; Hopwood et al., 2010a,b). Developing pragmatic tools for sustainability accounting seems
402
T. Virtanen et al. / Management Accounting Research 24 (2013) 401416
to be a real challenge. To date no clear approach to sustainability accounting has emerged from corporate practice
(Schaltegger and Burritt, 2010) and our understanding of
how sustainable development is operationalized in rms
is limited (Bansal, 2005).
A prerequisite for the long-term survival of individuals and organizations is a society that is economically,
environmentally, and socially sustainable. These spheres
are closely related and actions and impacts in one sphere
affect sustainability in the other spheres (Hopwood et al.,
2010a, pp. 45; Dyllick and Hockerts, 2002). Perhaps the
most signicant linkage between the three spheres of sustainability derives from environmental sustainability, in
particular, climate change (Hopwood et al., 2010a, p. 5).
The issue of interest is the prospect of global climate change
induced by the emission of greenhouse gases (GHG) from
fossil fuel combustion, principally carbon dioxide (CO2 )
(Hammond, 2007). E.g. the European Council has made a
commitment to reduce the overall greenhouse gas emissions of the Community by at least 20% below 1990 levels,
to use 20% renewable energies and to increase energy efciency by 20% by 2020 (EC, 2009a). It is acknowledged that
the resource use and waste production resulting from economic activity and consumption are the principal probable
source of unsustainability (e.g. Gray, 2010).
With increasing awareness of environmental issues and
rising interest in the relationship between environmental
performance and economic performance, a need for environmental management accounting (EMA) research has
emerged. As part of broader management control systems,
EMA assists businesses in relation to resource allocation
and decision-making (e.g. Ferreira et al., 2010; Burritt,
2004). According to the International Federation of Accountants Statement: Management Accounting Concepts, EMA
is the management of environmental and economic
performance through the development of appropriate
environment-related accounting systems and practices
(Burnett and Hansen, 2008). Eco-efciency claims that it
is possible to increase productivity and thus reduce costs
while simultaneously improving environmental performance (Burnett and Hansen, 2008; Bebbington, 2001). The
eco-efciency paradigm has signicant implications for
EMA. To support eco-efciency and internal decision making, an EMA system must identify and report two types
of information: (1) physical information relating to uses
and ows of materials, water, energy, and wastes, and
(2) monetary information relating to environmental costs,
earnings, and savings (Burnett and Hansen, 2008; Ferreira
et al., 2010; Bartolomeo et al., 2000).
Since the middle of the 1990s, implementation of
environmental management systems (EMS) has been a
common practice used by organizations to show their
commitment to environmental issues and sustainable
development (Albelda, 2011). The two most frequently
used guidelines for EMS design and certication are
the international standard, ISO 14001, and the European standard, the Eco-Management and Audit Scheme
(EMAS) (Morrow & Rondinelli, 2002). According to these
standards, EMS is the part of the total management
system that includes organizational structure, planning
activities, responsibilities, practices, procedures, processes
and resources for developing, implementing, achieving,

reviewing and maintaining environmental policy (ISO
14001, p. 4). An EMS primarily emphasizes the process that
helps organizations to achieve their own environmental
objectives and targets (Albelda, 2011). To be relevant on
the macro level, however, EMS should be applied over a
longer time by many companies to further reduce diffuse
emissions or resource consumption. A broader application
of EMS could also help organize the entire value creation chain under environmental efciency criteria (Steger,
2000).
There is increasing interest concerning the integration of sustainability issues with strategic management
and performance measurement in management accounting literature (Albelda, 2011; Gond et al., 2012; Berry
et al., 2009). In response to the growing importance of
environmental and social issues, sustainability-oriented
performance measurement systems (e.g. Bebbington,
2009; Epstein, 2008; Frame and Cavanagh, 2009; Russell
and Thomson, 2009; Searcy, 2012) have been developed. The step from corporate strategy to the design
of sustainability information management is supported
with approaches like the sustainability balanced scorecard
(Figge et al., 2002; Epstein and Wisner, 2001), eco-control
(Henri and Journeault, 2010), or sustainability management control (Schaltegger, 2010). These approaches try to
condense strategically relevant sustainability issues into
key performance indicators (Burritt & Schaltegger, 2010).
The results by Henri and Journeault (2010) emphasize the
importance of integrating environmental matters into the
existing management control systems. However, the use
of environmental indicators in performance measurement
systems remains at an early stage of development (Burritt,
2004).
The focus of research has shifted from whether or not
corporations should engage in sustainability to how it can
be achieved in practice (Searcy, 2012). However, there is
limited academic research that attempts to explore EMA
empirically or focus on its effects on internal processes
and outcomes within organizations (e.g. Ferreira et al.,
2010). Behavioral considerations are important when looking at the way environmental accounting information is
used (Burritt, 2004). Therefore, case studies on the performance management aspects of EMA have been suggested
(e.g. Burritt, 2004; Ferreira et al., 2010; Burnett and Hansen,
2008).
There has also been a call for a cross-disciplinary perspective on EMA studies (Burritt, 2012; Albelda, 2011;
Burritt, 2004; Milne, 1996). Resolving the ecological crisis
and attempts to face the challenges of the costs, risks, benets, and opportunities related to climate change require
shared contributions from various academic disciplines
(Maunders and Burritt, 1991). Cross-disciplinary research
can be applied in solving complex and multi-dimensional
problems of this kind (Wickson et al., 2006; Milne, 1996).
This case study is a cross-disciplinary work and provides a practical example of how companies which are
consumers of substantial amounts of materials and energy
enhance sustainable development. The study combines
two disciplines: EMA research in performance management and technical energy efciency research. The paper
examines how complexities in the measurement and management of environmental performance may impede effective use
of management control systems in affecting the ability and
motivation of employees to work toward the goals of sustainable development.
To achieve this research goal, energy efciency management is examined in the energy-intensive process industry.
The industry is characterized by highly energy-intensive
production combined with high production volumes. The
case company operates in the petrochemical industry. The
company was an appropriate choice for the study due to its
high annual energy consumption and high annual energy
costs. Improving energy efciency was among the highest
management priorities in the company, which had invested
actively in energy efciency.
This study consolidates the role of management
accounting in a context of sustainable development. More
specically, the paper contributes to the EMA literature
by providing new empirical evidence on current practices
in performance measurement to direct managerial effort
toward improving energy efciency. Furthermore, it has
managerial implications, as it presents an example of how
to integrate environmental matters into management control systems. It demonstrates the challenges posed by the
use of a technically complex performance indicator, the
energy efciency indicator, to support management. We
nd that the indicator does not allow proper energy efciency performance management. This is due to several
challenges that arise from the fact that the indicator is still
underdeveloped technically.
The rest of the paper is structured as follows: Section
2 presents management accounting research in fostering sustainable development. In Section 3, the method,
the research context and the principles in energy efciency measurement are described. Section 4 presents the
empirical results of the case study. Section 5 discusses the
challenges posed by energy efciency performance measurement and management. Section 6 concludes the study.
2. The role of management accounting in fostering
sustainable development within organizations
2.1. Performance management and controllability
The importance of embedding sustainability within the
strategic objectives of the organization is a prerequisite
for development by the organization of effective processes
and practices for sustainability management (Hopwood
et al., 2010b; Gond et al., 2012). Furthermore, the alignment
of strategy, structure, and management control systems
is essential to both coordinate activities and motivate
employees toward implementing a sustainability strategy (Epstein and Roy, 2001). In order to change corporate
culture and to improve environmental performance, companies should also make sustainability performance an
integral part of the performance evaluation (Epstein and
Roy, 2001). By providing feedback regarding the differences
between environmental goals and outputs, performance
measurement systems are used to facilitate single-loop
learning on environmental issues (e.g. Abernethy and
Brownell, 1999). On the other hand, by motivating
403
continuous improvement, performance measurement systems also contribute to the development of new environmental actions, which are associated with double-loop
learning (Argyris and Schn, 1978).
Capturing the essence of strategy in a performance
measurement system and implementing a successful strategy is challenging (Ittner et al., 2003; Neely et al., 2000).
Performance indicators should be designed to t the organizations structure and the decision-making responsibility
of individual employees. The indicators used typically vary
across organizational levels. According to Merchant and
Van der Stede (2007, p. 30), at higher levels most of the
key indicators are dened in nancial terms, e.g. stock
price or return on equity. Lower-level managers, on the
other hand, are typically evaluated in terms of operative,
quantied information in reaching day-to-day decisions.
Non-nancial and qualitative factors play a vital role in
affecting sustainability issues (Hopwood et al., 2010b).
Results measures are useful only to the extent that they
provide information about the desirability of the actions
that were taken. In most organizational situations, however, numerous uncontrollable factors affect the measures
used to evaluate managerial performance. These uncontrollable factors hinder efforts to use results measures for
control purposes (Merchant and Van Der Stede, 2003, p.
30). The notion of controllability has received a great deal
of attention in the accounting literature (e.g. Choudhury,
1986; Antle and Demski, 1988; Gosh, 2005). Mainstream
accounting literature assumes that adherence to the controllability principle has a positive effect on efforts taken by
employees. However, empirical studies indicate that the
controllability principle is not always strictly applied in
practice (Giraud et al., 2008; Dent, 1987; Merchant, 1987;
Otley, 1990; Simons, 2007; Burkert et al., 2011). In particular, it cannot be introduced into complex organizations
without problems (Giraud et al., 2008; Simons, 2007). Some
of the research on this topic (e.g. Choudhury, 1986; Giraud
et al., 2008) maintains that there is not a direct link between
actual controllability and employee effort. E.g. Giraud et al.
(2008) indicate that companies tend to hold managers
responsible for factors that they can inuence more than
for factors that they can totally control. If managers can
materially inuence the effects of a factor on performance,
they should be held accountable for the effects of that factor, regardless of whether that factor is itself controllable
(Merchant and Otley, 2006).
Burkert et al. (2011) enhanced understanding of the
effects of applying or not applying the controllability
principle at different hierarchical levels. They found that
non-application of the controllability principle allows toplevel managers to direct their attention toward critical
performance areas which they cannot fully control, but
which are important to the organization. Top-level managers seem to be better able to cope effectively with
uncontrollable factors than lower and middle-level managers. The literature provides some indication as to why
this is so. For example, managers self-image, motivation
and attitude toward risk vary with hierarchical level. Moreover, top-level executives are constantly confronted with
high uncertainty, implying that they are used to dealing
with uncontrollable factors and they may have to adapt
404
to uncontrollable environmental changes by revising their

strategies and plans (Otley, 2005, p. 92). Instead, lower and
middle-level managers benet the most from application
of the controllability principle in terms of alleviating role
ambiguity.
Furthermore, Simons (2007) used two related concepts
span of control and span of accountability to provide
insight into the applicability of the controllability principle in complex organizations. Span of control was dened
as the total resources under a managers direct control
(Simons, 2005, 2007). Span of accountability represented
the range of tradeoffs inherent in the measures for which
a manager is accountable (Simons, 2005, 2007). According
to the controllability principle, the span of accountability
should align with the individuals position in the organizations hierarchy: the higher the position and hence the
wider the span of control, the wider the span of accountability should be.
Managers usually set the span of accountability equal
to the span of control only for routine work and functions
with clear and measurable goals. However, there may be
good reason for managers to hold subordinates accountable
for variables outside their control, especially if they want
their subordinates to act as entrepreneurs (Simons, 2005,
2007). Entrepreneurship has been dened as the process
by which individuals pursue opportunity without regard
to the resources they currently control (Stevenson and
Jarillo, 1990). Managers may utilize the entrepreneurial
gap a span of accountability wider than the span of
control e.g. to motivate independent employee initiatives, to support new, innovative strategies, or to stimulate
work across boundaries, functions, and business units
(Simons, 2005, 2007). Successful embedding of sustainability requires a space where innovation and new ways
of thinking are encouraged within organizations (Bhimani
and Soonawalla, 2010). In addition, effective and enduring
cross-functional processes are vital for fostering sustainability (Bartolomeo et al., 2000).
2.2. Work motivation
Reward and compensation systems focus on motivating
and increasing the performance of individuals and groups
within organizations by achieving congruence between
their goals and activities and those of the organization
(Bonner and Sprinkle, 2002). Corporate reward systems
that measure performance and encourage employees to
pursue sustainability are necessary to improve social and
environmental impacts, to communicate the value of sustainability to the organization, and to hold employees
accountable for their contribution to the sustainability
strategy. However, it is not clear how to identify those
incentive systems. The challenge is to look past nancial
performance toward a more thorough integration of social
and environmental performance (Epstein, 2008).
In the literature, motivation is divided into intrinsic
and extrinsic motivation (Merchant, 1989). An employee
is intrinsically motivated if the content of work is experienced as interesting and motivating. In turn, an extrinsic
motivation steers the work if it is done because of
the instrumental value of the work (e.g. Kominis and
Emmanuel, 2007). Individuals can be motivated both

intrinsically and extrinsically through leadership that
inspires empowerment, as well as by the implementation
of incentives that are aligned with strategic measures of
performance. However, reward systems and performance
measures often fail to align with the organizations mission
and strategy. Most jobs require multiple tasks and require
decisions based on a variety of different factors. An organization that implements its reward systems on the basis
of narrow, specic performance measures will motivate
behavior that is geared toward excelling in those particular
measures. In that case, incentives motivate performance
that is incomplete or in conict with the organizations
overall strategy (Epstein, 2009).
Traditionally, management control research has
emphasized the role of formal performance evaluation
and incentive systems in motivating employees. The
problem with many incentive systems is putting too much
emphasis on pay-for-performance without considering the
risks involved (Epstein, 2008). A challenge with incentive
systems is also their potentially negative effect on intrinsic
motivation. Improving sustainability performance can
provide signicant personal rewards for many employees.
More focus on the use of informal systems and the role
of behavioral aspects is critical in providing employees
with the intrinsic motivation to achieve individual and
organizational goals (Epstein, 2009).
The use of non-nancial measures instead of nancial
measures has been proposed. It has been argued that nancial measures do not activate sufciently on the operational
level or reveal the cause-and-effect relationships (Fisher,
1992). Instead of being limited to a diagnostic purpose
that serves the implementation of an intended strategy,
non-nancial measures may have a more active and constitutive role to play in the management process (Vaivio,
1999). Target setting is a key aspect in implementing performance indicators. Lacking knowledge of appropriate
performance levels may lead to overly low or high performance targets and decreased motivation (Vaivio, 1995). In
particular, the lack of measurement history makes it difcult to set targets for non-nancial measures (Tuomela,
2005).
According to Burkert et al. (2011) and Giraud et al.
(2008), application of controllability has been considered advisable from a motivational perspective because
it ensures managerial effort on the job and circumvents dysfunctional behavior. By increasing the outcome/contribution ratio, the controllability principle also
increases the perceived fairness (Giraud et al., 2008). The
idea originates from the expectancy theory (Vroom, 1964),
according to which motivation depends on the expectance
that the effort made will result in a performance sufcient
to trigger the granting of rewards. The results by Giraud
et al. (2008) also show that managers adopt a different
position depending on the types of uncontrollable factors.
Managers are more willing to accept a lack of protection
from unfavorable external factors than from internal factors (see also Merchant, 1989). Economic downturn is an
example of an uncontrollable external factor.
Various motivational theories, some of them emphasizing intrinsic and some extrinsic motivation, can be
applied to examine the role of work motivation in fostering sustainable development. According to the theory
of intrinsic motivation (Deci and Ryan, 1985), intrinsic
motivation is based on the human need for competence
and self-determination. If rewarding informs a person
of his/her competence, the rewarding is experienced as
motivating. On the other hand, if the rewarding is experienced as control exercised by an outsider, the feeling
of self-determination decreases. In this case, rewards
decrease intrinsic motivation. Furthermore, according to
the equity theory (Adams, 1965), individuals evaluate their
input/output equation in relation to others. If an employee
experiences that he or she receives less compensation than
the others, it will cause dissatisfaction and decrease motivation.
The goal setting theory (Locke & Latham, 1990) states
that the actions of individuals are guided by conscious goals
and intentions. According to this theory, a person is motivated best when the goals are specic, challenging, and
accepted, and he/she is committed to their attainment.
However, the side effects of goal setting have been pointed
et al., 2009). For example, goals could be
out (e.g. Ordnez
set too narrowly, there may be too many goals, or the shortterm goals may receive too much attention at the expense
of the longer-term goals. Goals can also inhibit learning
and co-operation, thus reducing intrinsic motivation. In
real life, performance depends on a number of exogenous
factors over which employees have limited to no control
(Manzoni, 2010). The expectancy-valence model (Kominis
and Emmanuel, 2007) indicates that intrinsically satisfying rewards, e.g. the design and structure of the managers
job environment and interest in their daily tasks, have as
signicant an impact on motivation as extrinsic rewards.
Also, Kunz and Linder (2012) found that both intrinsic
and extrinsic motivation correlate signicantly with the
intention to engage in additional work effort. The results
contradict the previously mentioned ndings according
to which extrinsic rewards can undermine the perceived
value and motivational effect of intrinsic rewards.
The role of subjectivity in the evaluation process has
also been discussed. Manzoni (2002) tried to nd the right
balance between completeness and controllability. He suggested that the link between goals and rewards should
be complemented with managerial subjectivity. His work
with successful executives showed that people should be
encouraged to take risks and innovative thinking should be
rewarded, even if measurable results were not delivered.
Subjective rewards encourage people to share their ideas,
encourage learning, and protect against gaming. The ndings correspond to the interactive process of Simons (2010).
Furthermore, Kolehmainen (2010) argued that subjectivity
may be a central feature of a dynamic strategic performance
measurement system.
405
3. Research design
space conditioning, and lighting. In aggregate, the industrial sector uses more energy than any other end-use sector,
consuming about one-half of the worlds total delivered
energy (EIA, 2011, p. 107). Five industries from the process
industry sector account for more than 60% of all energy
used in the industrial sector. The industries and their corresponding shares are the following: chemicals 33%, iron
and steel 14%, nonmetallic minerals 7%, pulp and paper 4%,
and nonferrous metals 3%. The largest industrial consumer
of energy is the chemical sector, which accounted for 22%
of total world industrial energy consumption in 2008. The
same industries emit large quantities of carbon dioxide.
Energy accounts for 60% of the industrys operating costs
and an even higher percentage in the petrochemical subsector, which uses energy products as feedstock (EIA, 2011,
p. 109).
In the process industry, goods are typically produced in
bulk quantities. The process industry is a large-scale, complex economic processing system, which contains within
it distinguishable smaller interacting subsystems, such as
processing technologies (Al-Sharrah et al., 2010). A number of processes are serviced by a common utility system.
The issues related to energy efciency measurement and
management are similar throughout the process industry
and results obtained from the petrochemical industry can
also be applied in other process industry sectors such as
chemicals, pulp and paper, and metallurgy.
The research took place in a single case organization
in Finland, Borealis Polymers. The case company operates
in the petrochemical industry. Its operation is characterized by high production volumes combined with high
annual energy consumption and high annual energy costs.
Increased energy efciency is among the highest management priorities in the company and it has invested actively
in energy efciency. Borealis Polymerss production site in
Finland employs about 850 people. The Borealis Group is
one of the largest manufacturers of polyolen plastics in
Europe and one of the ten largest in the world. The Borealis
Group has operations on three continents and it employs
5500 people. In 2008, Borealis Groups primary energy consumption was 15,100 GWh (Borealis, 2010).
Borealis in Finland is a fully integrated petrochemical
complex comprising several plants. The plants include the
following: a cracker for the production of olens (ethylene,
propylene and butadiene), a phenol and aromatics plant
(that produces phenol, acetone, benzene and cumene),
two plants for PE (polyethylene), and one plant for PP
(polypropylene). The olen plant and the phenol & aromatics plant together comprise Hydrocarbon Operations,
which is the most energy-intensive production unit. The PE
and the PP plants together comprise Polyolen Operations.
There were also two less energy-intensive production units
and four support units at the same site. Plant Availability
and Engineering was responsible for maintenance operations.
3.1. Case study plant
3.2. Method
The process industry was selected on the following

grounds. Energy is consumed in the industrial sector for a
wide range of activities, such as processing and assembly,
The qualitative case study method was used to conduct the research. It is regarded as particularly useful when
the concepts and variables are difcult to quantify and
406
when the phenomenon under study is difcult to investigate outside its natural settings (Ghauri and Grnhaug,
2005). These conditions apply to the subject of our study.
In terms presented by Keating (1995), this study deals with
theory renement and is more specically a theory illustration case. It uses a case study in the area of performance
management to illustrate energy efciency, which is a complex, cross-sectional phenomenon, and its measurement
and management.
The empirical evidence was gathered through a series
of in-depth interviews with participants from the case
organization. The main interest was in the views of personnel on energy-related issues; this supported the choice of
interviews. Semi-structured interviews were carried out to
obtain data on the energy efciency management system,
on the indicators used in the plant, and on the perceived
challenges in both.
The research began with a preliminary discussion with
the Energy Specialist (subsequently called Manager D)
and the Controller (subsequently called Manager F) of the
case company to survey the topics related to energy efciency that might be of interest. Based on the discussion,
the groups of employees relevant for participation in the
research were identied. Accordingly, two slightly different interviews, and accordingly, two sets of interview
frameworks were constructed i.e. one for the management level and one for the technical ofcials and oor-level
employees. The interviews were conducted at the turn of
20082009. Altogether 22 representatives from the case
company participated in the research. All the interviews
lasted from 45 min to 2 h.
The rst group of interviewees consisted of 8 persons from top and middle management. Their interview
questions focused on the strategic importance of energy
efciency, as well as on measuring and rewarding energy
efciency in the company. A list of the participants is provided in Appendix A. There is an interview framework in
Appendix B.
The second group of interviewees consisted of technical
ofcials and oor-level employees, i.e. operators and shift
managers from the companys Hydrocarbon Operations. In
total, 8 technical ofcials, and 6 operators and shift managers were interviewed in 4 group interviews. A list of the
interview groups is provided in Appendix C. The interview
framework is in Appendix D. The group interviews emphasized questions dealing with the ability of employees to
affect the consumption of energy or the measurement of
energy efciency.
A semi-structured interview combines a predetermined set of questions with an opportunity for
the interviewer to explore particular themes or responses
further (Ghauri and Grnhaug, 2005). This approach
proved applicable in our study. The interview was stopped
when the interviewer felt that she had exhausted her questions and was no longer receiving any new information. All
the interviews were recorded and transcribed in order to
reveal their details as accurately as possible. In the analysis
of the interview data, rst, common, recurrent, and emergent themes were identied. Considerable emphasis was
put on studying the details of the management system in
regard to energy. The material obtained was rich in regard
to opinions dealing with the employees perceptions

regarding the strategic importance of energy efciency,
the energy efciency indicator, and their ability to reduce
consumption. The empirical data were then arranged to
correspond to the major themes and analyzed against the
literature ndings. In the analysis, three main discussion
themes emerged: the technical complexity of the energy
efciency measurement, energy efciency performance
management and the motivational perspective.
3.3. Energy efciency measurement
Directive 2006/32/EC (Article 3b) generally denes
energy efciency as a ratio between an output of performance, service, goods or energy, and an input of energy.
Energy efciency measurement and management is usually based on the use of indicator specic energy efciency,
SEC. Its use is widespread in the manufacturing industry although varying terminology exists. SEC is the ratio
between the total energy used and the useful output of the
process measured in physical units, most commonly tons of
product (for example GJ/t). The specic energy efciency,
SEC, formula can be written as (EC, 2009b, p. 19):
SEC =
energy used
products produced
(1)
The indicator SEC covers the total energy used and

normally it is a summary of fuels, electricity and steam
consumption. Various forms of energy have a different
energy value (exergy) (see e.g. EC, 2009b, p. 28 and Ahtila
et al., 2010, p. 341). Therefore, all energy used should be
converted to primary energy i.e. the energy before any
conversion. This is done by taking into account the efciencies of the energy conversion processes. Denition
of the conversion factors is a very challenging operation
from a thermodynamic perspective and to cope with that
fact, xed co-efcients are normally used in industry. This
causes an error in the results. Also, as energy information
(fuel, steam, and electricity) is summarized, the source of
the information is lost.
The difculty of measuring plant-wide energy efciency
is acknowledged in the technical literature. For example, Tanaka (2008a) states that a comparison of energy
use in different units (normally all featuring a different
useful output) and aggregate efciency for the whole
of manufacturing is effectively impossible without conversion of the physical values into common values. Most
often, this is the same as the monetary value of production but other more company-specic approaches are also
used. Moreover, designing indicators for different purposes
and organizational levels is not simple when the production facilities are interlinked. Tanaka (2008b) states that in
integrated facilities the material and energy streams are
interconnected and there are interactions which make the
cause-and-effect relationships difcult or even impossible
to interpret.
Energy efciency is indirectly affected by several factors, most notably the capacity utilization rate (see e.g.
Ahtila et al., 2010). In principle, the lower the volume of
production, the lower the volume of energy consumed.
However, as the production rate decreases the energy
efciency may also decline since the process is no longer

operated in an optimal way or at design capacity. Also,
ambient conditions, quality of materials and end products,
and operator actions affect energy use. Hence the energy
efciency must be evaluated together with several other
parameters. The challenge is to consider all relevant factors
and their interconnections with energy efciency. According to the energy efciency literature, the target levels
are perhaps the most accurate as the expected behavior
is modeled or the historically achieved best performance
is used as a reference. But modeling or measuring may not
always be possible or meaningful (e.g. too time consuming)
(Sivill et al., 2009). This makes it challenging to identify the
potential for improvement. This applies on both the production unit level (production-unit SEC) and on the plant
level (plant-level SEC).
4. Empirical results
Section 4.1 explains the case companys energy efciency performance management and reward system.
Section 4.2 is dedicated to the material obtained in the
interviews. The empirical data dealing with the employees
perceptions of the strategic importance of energy efciency, the energy efciency indicator, and the employees
ability to reduce consumption correspond to the theory
Section 2.1. Findings regarding motivation and rewarding
were placed at the end. They correspond to the theory Section 2.2.
4.1. Energy efciency performance management and
reward system
4.1.1. Energy management system
Borealis Polymers has signed the Energy Efciency
Agreement launched by the Ministry of Employment and
the Economy of Finland for the term 20082016. This voluntary agreement obligates energy-intensive companies to
develop their energy efciency with continuous improvement (see EK, 2012). In fall 2007, Borealis developed its
own energy-efciency strategy to continuously reduce the
environmental impacts of its operations. Following the new
energy efciency strategy, Borealis Polymers introduced
an energy management system, which was linked to the
existing ISO 14001 Environmental System.
4.1.2. Energy efciency indicators
Measuring energy efciency was based on a physical
(non-nancial) energy efciency indicator, SEC. Two different types of SECs were in use: (1) the SECs of the production
units, subsequently referred to as SECPU s and (2) the plantwide (the production-location-wide) SEC, subsequently
referred to as SECPW (see Appendix E).
SECPU s were used to monitor the production energy
efciency of each of the production units but also the efciency on a product family basis. The product family
consisted of the same or similar products manufactured
elsewhere on the owners sites. The plant-wide SECPW was
a sum of all SECPU s. In order to summarize the SECPU s,
the production tons (the denominator) of the SECPU s were
replaced by weighting factors. The weighting factor for
407
each unit was obtained by dividing all production tons of

the case site by the production tons of the specic unit.
The other energy-related physical (non-nancial) indicators included CO2 emissions, aring tons, and the OAE
(overall asset effectiveness). The CO2 emissions originate
from burning fuels in a process. The OAE is an indication of
the capacity utilization rate. Flaring means the burning of
gases and occurs as a consequence of process failures and
interruptions. In addition to these gures, the company followed nancial energy information. This included the costs
of fuels, steam, and electricity per ton of product produced.
4.1.3. The scorecard system
Performance was measured following with the principles of the Balanced Scorecard (BSC) (Manager B,
Hydrocarbon). The system featured the four principle areas
of the BSC, namely nance, customers, processes, and
learning.
The unit scorecards were applied in production and
support units (Fig. 1). The production unit scorecards
involved the oor-level employees i.e. the shift managers
and operators. The energy-related SECPU , CO2 emissions,
aring tons, and the OAE were monitored in the scorecards
of the Olen and the Phenol & Aromatics units. The energyrelated SECPU , aring tons and OAE were followed in the
PE2 and the PP units (all except the CO2 in PE2 and PP units).
No energy-related information was monitored in the Plant
Availability and Engineering unit (see Appendix E).
Management had its own business incentive plans.
Energy related indicators (SEC, OAE, CO2 and aring)
were monitored in two management groups: Asset Development and Operational Excellence (Fig. 1). In general, the
role of the Asset Development group was to participate in
the investment decision-making and the role of the Operational Excellence group was to ensure asset efciency.
The scorecard indicators were monitored on a monthly
basis in each production unit. The values were monthly
averages. The Leader Team at the case site reviewed energy
performance and SECPW twice per year as part of the energy
management system. Financial energy efciency indicators
were not included in any of the scorecards.
The reward system of the oor-level employees working in Hydrocarbon Operations was based on SECPU and
OAE. No other employee group was rewarded on the basis
of SEC. The bonuses were paid at the turn of the year on
the basis of the average SECPU of the previous year. The
rewarding of the Operational Excellence group was based
on the OAE. No other energy-related indicator was a basis
for rewarding on the management level. In addition to the
scorecard-based rewards, Borealis had an initiative reward
system that was designed to search all improvement ideas
of individual employees, including the energy efciency
ideas.
4.2. Findings related to the use of the energy efciency
performance management and reward system
4.2.1. Employees perceptions regarding strategic
importance
Energy efciency was regarded as a strategic choice
and an important factor in the companys competitiveness.
408
Fig. 1. The interview groups and their energy-related scorecard indicators. Underlining means that the indicator was a basis for rewarding.
Regarding the overall strategic guidelines, Borealis had an

Energy & CO2 Committee the purpose of which was to
provide strategic energy and CO2 guidance to the energy
and environment platform and procurement functions. The
members of the committee were the CEO (chair) and all the
relevant (executive) vice presidents.
Rising energy prices were seen as a reason why energyrelated issues have become more important:
Because the meaning of it [energy] has increased
nancially, it has become a big topic on the management agenda. As a consequence, new indicators are
being developed and the indicators are followed more
closely.(Manager A, Polyolens)
However, several managers stated that energy efciency issues had not been emphasized enough. People
who worked on energy efciency projects felt that improving energy efciency was important. According to Manager
F, energy efciency was not highlighted as much as it
could have been, although the company had been able to
improve its results slightly every year with regard to the
goals.
. . .It [the role of energy efciency in the company] has
now been bothering me somewhat, of course. It has not
been given as high a priority as it deserves. (Manager
F, Polyolens)
For the oor-level employees, the importance of energy
efciency was not entirely clear:
If it [energy efciency] is an important matter, it has

not been able to get a visible position in the company.
Or maybe it has, but I have just missed it. . . (Technical
Ofcial A, Hydrocarbon)
Based on the answers, the focus was more on other areas
like quality and safety. But as Technical Ofcial G from Phenol and Aromatics stated, if quality was compromised in
order to save energy, it might rebound in energy consumption (e.g. due to re-circulation to previous stages) in some
other part of the process.
Energy efciency issues did not touch all the relevant
employee groups. For example, Manager E stated that the
Plant Availability and Engineering employees felt that they
were excluded from energy efciency issues. However, it
was expected that the energy management system would
spread energy efciency thinking to all the parts of the
organization:
. . .when the system [energy management system]
starts to roll, then it should kind of force it [the energy
efciency] to all the units collectively and everyone will
have to think from their own perspective what they can
do for it. (Manager E)
4.2.2. Employees perceptions regarding the energy
efciency indicator
According to Manager A of Polyolens, the use of the
energy-related indicators was not fully adopted in the organization:
409
These indicators are still searching for their form and

they havent been operationalized everywhere in the
company. (Manager A, Polyolens)
aspects for measuring would have motivated operators and

shift managers to improve energy efciency despite the
economic situation:
Technical Ofcial A of Hydrocarbon stated that

although SEC is just a number, it is clear and everybody understands it directly. However, this view was
not shared throughout the organization. The SEC was
known to be an indicator that was affected by several
factors:
At the operator level, it [energy efciency measurement] should be connected to selected aspects of
measuring instead of the indicator SEC. We could choose
places in the unit that we can truly affect, and then measure those. (Manager F, Polyolens)
Actually, it is not totally clear. . .what issues affect it. . .

No-one has come at least directly to explain those matters to us. (Shift Manager A, Olen)
For example, due to the recent economic downturn, the capacity utilization rate had been low. As
production decreases, energy consumption does not
decrease in a linear manner. Instead, the specic energy
consumption (the value of SEC) increases. Also, the
accuracy of measurement was questioned by Operator 1 and Shift Manager B from Phenol and Aromatics,
who brought up their concern about possible measuring error. SEC is also an aggregate measure, where the
use of various energy qualities is summarized. SECPW
summarized the SECPU s of the individual production
departments.
If you have such an indicator as we have, Energy-KPI
[SEC], which is kind of like an index number or a ratio,
it wont help the operator greatly if you say that it has
risen from last month by 10%, unless he or she knows
whether it has been steam or electricity and in which
part of the plant. (Manager A, Polyolens)
Summarizing energy efciencies at the production site
level was not considered an effective practice. According
to Manager D, there was no real energy efciency indicator
for the total production location, i.e. the case site, because
of the volume differences (see Section 5.1).
Integration of the processes posed challenges. According to Operator 1 from Phenol and Aromatics, energy can
be saved in one place, but the gain might be lost in another
because the production units were integrated.
4.2.3. Opinions on the ability to reduce energy
consumption
According to Manager F of Polyolens, electricity consumption cannot be much affected by the operators. This
means that normally, the energy consumption of the electrically operated process equipment is relatively constant.
According to Manager F, the operators can inuence, e.g.
the consumption of heat (steam, warm water, etc.). The
operators at the Olen plant discovered they could affect
energy efciency by adjusting the use of steam and temperatures in the process and by monitoring the operation
of the furnaces.
This work is about controlling and watching. We monitor numbers and lines so that they wont release too
much. This is control room work. (Operator 1, Olen)
The operators and shift managers requested concrete
aspects for measuring. It was apparent that more concrete
Now we have this big lump [current SEC], like gigajoules per ton, so why not these small, concrete things.
Maybe we have tried to reach for the sky too much with
this thing. (Technical Ofcial A, Olen)
As a result, the operators regarded their ability to
inuence the indicator as fairly limited. It was concluded that the indicator had a minor role in day-to-day
activities:
If Im honest, our possibilities to inuence these are so
small that what comes, comes. We just have this percentage that we can affect. (Operator 1, P&A)
Yes, we have the energy efciency indicators, like
megawatt-hour per ton. But there is still a problem
with the cause-and-effect relationships: How can I contribute and how is it operationalized in what everybody
does? (Manager C)
The operators considered it rather difcult to reduce
energy consumption when operating at or near full capacity. They pointed out that neither had any systematic
calculations on the energy saving potential of their work
been made. It also seemed clear that the operators in particular would have needed clearer instructions on how to
improve energy efciency and to replace the current operating method:
We run the process like we have always done it. If in
the past it has been said to be ne, then we continue
working in a similar manner unless someone shows calculations pointing out that the existing way is not ne.
But if no-one shows any other way then. . . we dont
know how to calculate it. (Operator 1, P&A)
A management challenge arose as the operators had
their own ways of running the process: some wanted to
try to reach the optimal level, which would make the process more sensitive; others wanted to make sure they had
enough operating margin:
The challenge is, of course, also in making this kind
of shift work function as a whole. They have their own
assumed best ways of doing things. In this plant that
Ive mentioned they have a custom that when the shift
changes this is maybe a bit exaggerated but its true
then the on-coming shift changes the ratios or any
values to what they consider correct. (Manager C)
Each unit set their own SECPU targets. The operators,
however, did not consider the targets achievable. In addition, some matters that were beyond their control, such as
the economic situation, seemed to have the greatest impact
on the indicator. The operators were disappointed that the
ongoing economic downturn was not taken into account in
410
setting the SEC target. This had a substantial effect on their

motivation to improve energy efciency:
. . .we saw already at an early stage that we had no
chance to reach those targets. The target was way too
high, and that isnt particularly motivating. (Operator
2, Olen)
The economic downturn should have been taken into
account in the management system:
What do we need to do to reach those gures [targets]
that we have. It seems so utopian. (Shift Manager A,
Olen)
Now that this recession came and products didnt sell,
no-one came here to tell us that now we should save
a lot of energy. More like, if you write in one of those
weekly agendas that cut all unnecessary reuse and
return and focus on energy efciency, who is motivated
by that to do anything about it. Its read briey that. . .
oh, okay. . . it is that thing. Thats it. (Shift Manager
B, P&A)
In addition to simply keeping track of the indicator values, Manager C pointed out that everybody
should be involved in thinking and improving energy
efciency in the spirit of continuous improvement in
groups consisting of operators and supervisors. Collectively, the basic problem could be better understood
and thus a solution reached. According to Manager
C, sharing opinions about energy issues was important:
Very often it happens that we feel that we have
a similar view of the problem. But most probably there are also differences in understanding.
(Manager C)
4.2.4. Findings related to motivation and rewards

All the managers agreed that measuring and rewarding energy efciency is an important part of energy
efciency improvement in the company. Manager F of
Polyolens emphasized that people are motivated quite
well by issues that are reasonable. According to him,
energy efciency is probably one of the most reasonable
issues.
Some managers believed that rewarding had an effect
on the behavior of employees:
I believe that any criterion in the scorecard with a big
enough weighting in rewarding is interesting from the
employees viewpoint. Of course, the closer it is to the
work of the employees, the better. (Manager G)
However, it was brought up that the indicators should
be clearer. Setting the goal for the measure was also a problem in motivating, as already discussed in the previous
section. According to Manager A of Polyolens, problems
arise when the (original) physical measures are developed
into an indicator value (SEC).
According to the Manager A of Polyolens, the goal
for which the bonus is granted is sometimes reached half
way through the year. Then it is challenging to improve
efciency during the second half of the year. Some managers saw that money was a big motivator for most of the
employees:
About 80 percent of the employees are just doing their
work, 20 percent of the operators are proactive and
intrinsically motivated about their work. (Manager A,
Polyolens)
However, Manager F of Polyolens emphasized more
the intrinsic motivation of operators. According to him,
motivation arises from the desire to do a good job and
improve work performance:
For example, initiatives rarely go through, if someone
is developing them only to be rewarded. (Manager B,
Hydrocarbon)
According to the Shift Manager from P&A, energy efciency is a part of the job: you cannot do this any way you
like. Still, he stated that the bonus is a motivational factor:
. . .if you could [exert an] inuence, if you knew how to
improve energy efciency, then you would certainly do
it. It is anyway almost 400 euros per year. (Shift Master,
P&A)
Manager F suggested that personnel can act by making initiatives which can be transferred into projects to
improve energy efciency:
. . .one way is probably to be aware of these issues,
think about them actively and do these initiatives and
improvement suggestions. And that is something, I
think, that we havent done enough of. (Manager F,
Polyolens)
All the technical ofcials felt motivated to improve
energy efciency. They said that the motivational contributors were educational background and a need to do a good
job. Rather than being motivated by the importance of measurement and the prospects for rewards, the ofcials were
motivated by pure interest in their job:
Of course, I would say it [energy efciency] is part of
this work. You dont have to think about it separately.
It should be in the backbone of every engineer, at least,
because of the nancial matters, environmental matters
and others that are emphasized these days. (Technical
ofcial H, Phenol and Aromatics)
So far that it is possible to [exert] an inuence, then of
course. If youre going to work here, you need to be a
little bit motivated. (Technical ofcial E)
The technical ofcials considered rewards more important for the operators:
It is probably so that in the operator-level the monetary
rewarding is more inuential. Probably, also there we
can nd those for whom the content of work and the
meaningfulness of work have a bigger effect. (Technical
Ofcial B, Olen)
The technical ofcials saw that immediate feedback
was important for operators. Verbal feedback was considered effective compared with the scorecard system
and nancial rewarding since the scorecards were not

updated frequently enough, i.e. the information came too
late:
Yes, the money motivates somewhat, when it is part of
the merit pay. But for employees it must be even better,
if they have feedback right away. Feedback, even when
oral, if it comes straight away. It would be the best. Like,
if it comes once a year, it is a bit late. (Technical ofcial
G, Phenol & Aromatics)
5. Discussion
5.1. The technical complexity of the energy efciency
measurement
The energy efciency measurement system of the case
company follows the one presented in the technical literature. The indicator SECPU covers fuel, steam, and electricity,
which should be converted into primary energy before
summarizing. No unambiguous procedure is available for
converting (see e.g. EC, 2009b, p. 24). However, none of the
interviewees brought up this question since the company
had xed coefcients in use. Also, as energy information
(fuel, steam, electricity) is summarized, the source of the
information is lost. This was brought up by one of the operators who requested the original data.
The specic energy efciency was monitored on two
levels: the SECPU on the production unit level and the
SECPW on the plant-wide level. The SECPW was a summary
of SECPU s. The difculty of constructing the plant-wide
energy efciency indicator SECPW is acknowledged in the
technical literature (see e.g. EC, 2009b, p. 33) and is caused
by the fact that all production units feature a different
useful output. At the case plant this issue was termed a
volume difference. The problem was overcome by replacing the production tons with a weighting factor. The
challenge arises from the fact that all products are manufactured in a different type of production process, and
summing up their energy efciencies does not produce
a theoretically sound result. Also, integration of the production units caused problems. This was noticed by the
employees and the issue was brought up by an operator
who commented that energy saved in one place might be
lost in another.
An energy efciency indicator is indirectly affected by
several factors, most notably the capacity utilization rate
(see e.g. Ahtila et al., 2010), which is referred to in the
company as overall asset effectiveness of OAE. Difculties in coping with the variables affecting measurement
were acknowledged and the overall problem of dening
the factors affecting energy efciency measurement came
up in several comments. The operators mentioned that the
process of forming the indicator value was not clear. It
follows that the operators did not know how to improve
the indicator values nor could they assess the potential for
improvement.
The above challenges are due to the technical difculties
in constructing and using the measure. They will not be
solved until the indicators have been improved and this
may take several years.
411
5.2. Energy efciency performance management

In the case of Borealis, energy efciency measurement
was part of the performance management process. Energy
efciency was considered a strategic objective and it was
discussed in the management groups. Also, Borealis had
an Energy & CO2 Committee, the purpose of which was
to provide strategic energy and CO2 guidance. The committee consisted of top managers. The company had also
introduced an energy management system in order to
spread energy efciency thinking throughout the organization. However, the employees commented that the
importance of energy efciency could have been emphasized more. Hence, the critical and strategic nature of
energy efciency had not been communicated clearly
enough from the corporate level to the lower levels of the
company.
In order to direct corporate culture toward fostering sustainable development, sustainability performance
should be made an integral part of performance evaluation. Performance measures should also accurately reect
what is required of employees. In the case company, energy
efciency was not included in the scorecards of all units.
Energy-related information was monitored in production
units as part of the scorecard system and it was a basis
for rewards for Hydrocarbon oor-level workers. However, on the management level energy-related indicators
were monitored only in Asset Development and Operational Excellence and they were not a basis for rewards.
Hence, it seems that the energy efciency measurement
system could have been used more effectively as an instrument for sharing information and facilitating learning in
environmental issues.
Good measures should be congruent, i.e. they should
reect progress toward achievement of the organizations
objectives (Bonner and Sprinkle, 2002). In the case company, energy efciency improvement target was congruent
with the organizations objectives. However, the targets for
energy efciency could not be expressed in a precise manner (see Section 5.1). In addition, for managers to be able
to use performance information proactively, information
must be relevant and up to date (Otley, 2005, p. 94). The
problem with the energy efciency indicator was that it
was difcult to analyze what had been achieved with the
indicator values and to determine the potential (target) for
improvement. This was due to the technical challenges.
Managers are often held accountable for issues they cannot control (e.g. Giraud et al., 2008; Simons, 2007; Burkert
et al., 2011). One reason for this is that it may be difcult
to separate the controllable and uncontrollable effects on
the performance measures. Managers may have to respond
to uncontrollable changes by bringing their strategies and
plans into line with the new situation. Therefore, in those
cases, managers are held accountable for achieving the
desired results instead of implementing predetermined
plans (Otley, 2005, p. 92). It seems that controlling the
results is also important for oor-level workers, as they
regarded their abilities to inuence the indicator as limited.
The operators proposed that they would rather be accountable for more measurable results, such as the functioning
of production equipment.
412
On the basis of the evidence it seems that within the

case organization the operators have been given a great
deal of the responsibility to lower energy consumption,
although they did not know how to control it. Burkert et al.
(2011) found that application of the controllability principle is more important for lower and middle managers than
top managers. One could therefore argue that the controllability principle is even more important to the oor-level
employees, e.g. the operators.
The earlier literature (e.g. Simons, 2007; Burkert
et al., 2011) states that controllability principle cannot
be introduced without problems into complex organizations, and that non-application of it allows for directing
top-managers attention toward critical performance areas
which are not fully controllable. Top-level executives
should adapt to uncontrollable environmental changes
(Otley, 2005) and revise strategies (double-loop learning). Being accountable for energy efciency would force
managers to more actively seek, e.g. technologies and
investment alternatives that facilitate the development
enabling lower energy consumption. Therefore, putting
more pressure on energy efciency issues at the management level would be advisable in order to encourage
improvement efforts within the organization.
5.3. The motivational perspective on energy efciency
performance management
The case evidence supports the view that the employees
were at least to some extent intrinsically motivated to work
toward environmental goals. The operators seem to be
empowered to do their work. They had their own assumed
best ways of doing things, but in addition, they asked
for small and concrete issues in which they could truly
affect energy efciency measurement. Being able to contribute the cause-and-effect relationships (Fisher, 1992)
would have increased their motivation. Furthermore, the
technical ofcials also felt motivated to improve energy
efciency. For them the motivating factors were educational background and interest in the job.
As for extrinsic motivation, the evidence suggests that
money was a relatively big motivator for the operators.
The technical challenges of the energy efciency indicator,
however, reected on the use of the indicator as a basis for
rewards. If rewards are expected to have a positive impact
on an individuals motivation, the way in which the quality
and quantity of performance are evaluated is crucial (Steers
et al., 1996). In the case company, targets were not considered achievable and some matters beyond the control of the
operators seemed to have the greatest impact on the indicator. Bonuses were paid at the turn of the year based on
the average SECPU of the previous year. However, the economic situation affected the measurement result since the
capacity utilization rate affected energy efciency. Hence
the operators could not motivate themselves to improve
energy efciency.
Reward-based external motivation can be analyzed
through several motivation theories. Each of them provides
a slightly different perspective on the subject. According to
the goal setting theory (Locke and Latham, 1990), specic
and challenging goals are the best motivators. However,
it is not possible to set very specic goals for energy efciency. According to the expectancy theory (Vroom, 1964),
motivation depends on the expectance that the effort made
will result in a performance level that triggers the granting of rewards. Based on the evidence, low expectancy
of reaching targets reduced the motivation of operators.
Greater accuracy and transparency in energy efciency
measurement and the management system would increase
reward-based motivation on the part of the employees.
Application of the controllability principle seems advisable
from these motivational perspectives. It ensures managerial effort on the job and circumvents dysfunctional
behavior (Burkert at al., 2011; Giraud et al., 2008). Furthermore, individuals evaluate their input/output equation in
relation to others on the basis of the equity theory (Adams,
1965). An effective performance management system is
driven from the top down (Moon and Fitzgerald, 1996).
Consequently, oor-level workers will only take the energy
efciency issue seriously if they see that it is also taken seriously by managers. These aspects support the view that
all employee groups should be responsible for energy efciency improvement.
The traditional incentive models have been challenged
by emphasizing the role of managerial subjectivity in performance evaluation (Manzoni, 2002; Kolehmainen, 2010).
Directing the attention of managers beyond what they can
strictly control and introducing subjectivity into the evaluation process emphasizes innovative thinking, sharing of
ideas, and learning within organizations. In the case company, an initiative reward system was built to search ideas
for improvement in various aspects of the process, including energy efciency. It was hoped that a reward system
of this kind would motivate employees to improve energy
efciency. It was, however, pointed out by one manager
that not many initiatives had been done.
6. Conclusions
There is an emerging discussion on how organizations
contribute to the objectives of sustainable development.
The paper investigated energy efciency performance
management in the energy-intensive process industry. Efciency was measured by the indicator for specic energy
efciency, which is the ratio between the amount of energy
used and the products produced. The paper examined
how complexities in the measurement and management
of energy efciency may impede effective use of management control systems to affect the ability and motivation of
employees to work toward the goals of sustainable development. The research was conducted as a case study at
Borealis Polymers in Finland, a company representing the
energy-intensive process industry.
The paper contributes to the management accounting and environmental management accounting literature
in the area of performance management and management control systems (e.g. Henri and Journeault, 2010;
Ferreira et al., 2010; Epstein and Roy, 2001; Albelda, 2011;
Burnett and Hansen, 2008). It provides empirical evidence
on the current practices within organizations in the use of
performance measurement systems to direct managerial
effort toward sustainable development and demonstrates
a performance indicator that does not allow proper energy

efciency performance management. This is due to several challenges that arise from the fact that the indicator
requires further technical development. First, the energy
efciency indicator is affected by various factors and the
energy efciency of the total production site builds up in a
complex manner. Hence employees on all levels have difculties in understanding how the indicator value is formed.
Second, and partly as a consequence of the rst challenge,
target setting for the indicator is problematic since no practical method exists for setting relevant target levels. In
particular, the use of the indicator in the evaluation of total
site energy efciency is challenging.
Widening the span of accountability (Simons, 2005,
2007) would motivate employee initiatives and increase
interaction between organizational levels that would stimulate learning and motivation to improve sustainable
development, and furthermore energy efciency in organizations. Also, cross-functional processes are vital for
fostering sustainable development (Bartolomeo et al.,
2000). In the case company, operators had been given a
great deal of the responsibility for lowering energy consumption. Energy efciency was included in the scorecards
of the oor-level employees in some production units. It
was not included in all scorecards throughout the organization. As energy efciency improvement is a complex task
and the target is hardly measurable, the study suggests that
more employee groups, including management, could be
held accountable for issues of energy efciency. The contribution of managers would be positive as the managers
are able, e.g. to favor investments that contribute positively
to sustainable development.
A further contribution is made to the sustainability
accounting literature (e.g. Hopwood et al., 2010a,b; Burritt
and Schaltegger, 2010; Schaltegger and Burritt, 2010;
Burritt, 2004) by providing a practical example of the
difculties connected with a sustainability target and its
three dimensions (economic, social, and environmental)
and organizational boundaries. The three elements of sustainability are known to overlap and this overlap is also
obvious in the case example. Energy efciency decreases
energy consumption and this leads theoretically to primary energy savings and to reductions in CO2 emissions.
Fewer emissions, a cleaner environment and conservation
of natural resources can be seen as clear environmental
benets. These same achievements contribute positively
to the social performance dimension when viewed from
the long-term perspective. For example, the risk of climate change, which will presumably affect peoples lives,
will be smaller. Finally, the economic performance dimension comes into the question as energy efciency results in
reduced energy costs. However, achieving this may require
capital investments. Hence, integrating the environmental
and social targets with the economic target seems to be a
challenge.
The paper contributes to the technical literature (e.g.
Ahtila et al., 2010; EC, 2009b; Tanaka, 2008a,b) by conrming the earlier documented conceptual challenges
in energy efciency measurement, but goes further by
explaining their managerial consequences. In particular,
the study provides knowledge of the role of management
413
control systems in the development of energy efciency

indicators. Several sustainability indicators have been
developed for various industrial elds, e.g. petrochemical
industry (e.g. Al-Sharrah et al., 2010). This study provides both knowledge and practical information regarding
a measure that is an important indication of one of the
dimensions of sustainability, namely environmental performance.
Furthermore, the prior technical literature has sought
to identify the reasons for the slow progress in regard
to energy efciency. For example, several organizational
and behavioral factors have been identied as barriers to or drivers of energy efciency in companies
(Sardianou, 2008; Sola and Xavier, 2007; Thollander and
Ottosson, 2008). This paper goes further by explaining
those organizational and behavioral factors. The ndings are generalizable throughout the process industry,
i.e. in large-scale, complex economic processing systems
that comprise smaller interacting subsystems. Most of the
ndings are also relevant more generally in manufacturing, since there the ratio between the energy used and
products produced is a common energy efciency measure.
The study has implications for management practices. It provides empirical evidence of a performance
indicator such as the energy efciency indicator, which
builds up technically in a complex manner. The indicator is affected by many factors and information about
their contribution to the indicator value would be benecial to energy efciency performance management.
The indicator should be developed further in a crossdisciplinary manner. The potential for energy efciency
improvement should also be increasingly communicated
in organizations and all employee groups, including
managers, should be responsible for energy efciency
improvement. Future research in sustainability accounting needs to develop pragmatic tools, such as those
integrating sustainability targets with performance management.
Postscript
Since the data collection for this study at the turn of
20082009, Borealis has introduced a revised SEC in which
the loss in tons of production caused by the economic
downturn has been reported monthly to correct the production and energy consumption gures.
Acknowledgements
The personnel of the case mill, Borealis Polymers Oy,
are gratefully acknowledged for making themselves available for the interviews. In particular, Mr. Matti Marttila
contributed a lot during the process. We thank the two
anonymous reviewers for their comments and suggestions toward the earlier version of this paper. Also Seppo
Ikheimo, Simon Cade

z, Terhi Chakhovich, Teemu Malmi,
Minna Suutari, Mikko Sandelin and participants at the
annual EAA conference in Ljubljana 2012 and the MAR conference in Helsinki 2012 are gratefully acknowledged for
their valuable comments.
414
Appendix A. Interviewees: managers

Technical ofcial A, Hydrocarbon, 29.10.2008
Manager A, Decision Support, 29.10.2008, 11.11.2008 (and
several informal discussions)
Manager B, Hydrocarbon, 12.11.2008
Manager C, Quality, 12.11.2008
Manager D, Health, Safety and Environment, 10.10.2008
(and several informal discussions)
Manager E, Plant Availability and Engineering, 24.11.2008
Manager F, Polyolens, 24.11.2008
Manager G, Human Resources, 26.2.2009 (by phone and
e-mail)
Technical Ofcial E
Technical Ofcial F
Group 2: Operators, Olen (3.2.2009)
Shift Manager A
Operator 1
Operator 2
Group 3: Technical ofcials, Phenol & Aromatics
(5.2.2009)
Technical Ofcial G
Technical Ofcial H
Appendix B. Interview framework: managers

Group 4: Operators, Phenol & Aromatics (5.2.2009)
(1) Prole (shortly)
- Responsibilities, tasks, reporting relations
- Work history
(2) Research topic
- Do you think the subject of the research is relevant?
- What kinds of results would you expect to nd?
- Can employees at plants enhance energy efciency?
- What is the signicance of performance measurement in their work?
(3) Energy efciency and performance measurement in
general
- What is the status of energy efciency in the company?
- How do you feel the measures activate people on
average?
- What are the benets to the company from measuring
energy efciency? What kinds of forums are used to
discuss energy-efciency measures?
(4) Motivation
- How do you feel measurement of energy efciency
inuences the motivation of employees?
- Should more attention be paid to the motivation of
the employees in the company?
- What kinds of effects does good work motivation
have on energy efciency?
(5) Rewards
- Do rewards have positive or negative inuences on
employee motivation, or both? (short-term and longterm)
- Rewards and other management systems?
- Rewards in enhancing energy efciency?
- How could rewards be developed further?
- What role do intangible rewards play in enhancing
energy efciency?
Appendix C. Interviewees: technical ofcials, shift
managers and operators
Group 1: Technical ofcials, Olen (3.2.2009)
Technical Ofcial A (whole Hydrocarbon)
Technical Ofcial B
Technical Ofcial C
Technical Ofcial D
Shift Manager B
Operator 3
Operator 4
Appendix D. Interview framework: technical
ofcials, shift managers and operators
1. How is the use of energy measured and how is energy
efciency monitored at your plant?
2. What kinds of issues have an effect on the use of energy
at your plant (or energy-efciency measure)?
3. Can you inuence the use of energy or the results of
energy-efciency measurement with your own work?
4. Can you give examples where you have inuenced
energy efciency in your work?
5. For what reasons would you like to inuence energy
efciency?
6. Do you feel yourself motivated to enhance energy efciency?
7. Can you name practical examples of how the use of
energy or energy efciency could be measured in a new
way?
8. How are you rewarded for energy efciency?
9. How signicant are these rewards for your motivation
to enhance energy efciency?
Appendix E. Case-specic acronyms
Acronyms related to energy efciency indicators
SEC is the specic energy efciency
SECPU is the SEC of the production unit
SECPW is the production-location wide SEC
CO2 is carbon dioxide
OAE is overall asset effectiveness
Flaring is the burning of gases
Acronyms related to the technical production process
Hydrocarbon Operations comprises the olen plant and
the phenol & aromatics plant.
The olens plant produces ethylene, propylene and butadiene.
The phenol and aromatics plant produces phenol, acetone,

benzene, and cumene.
Polyolen Operations comprises the PE and the PP plants.
PE means polyethylene.
PP means polypropylene.
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Contents lists available at ScienceDirect

Management Accounting Research

Energy efciency complexities: A technical and managerial

T. Virtanen et al. / Management Accounting Research 24 (2013) 401416

and resources for developing, implementing, achieving,

T. Virtanen et al. / Management Accounting Research 24 (2013) 401416

T. Virtanen et al. / Management Accounting Research 24 (2013) 401416

to uncontrollable environmental changes by revising their

Emmanuel, 2007). Individuals can be motivated both

T. Virtanen et al. / Management Accounting Research 24 (2013) 401416

3.1. Case study plant

The process industry was selected on the following

T. Virtanen et al. / Management Accounting Research 24 (2013) 401416

to opinions dealing with the employees perceptions

The indicator SEC covers the total energy used and

T. Virtanen et al. / Management Accounting Research 24 (2013) 401416

efciency may also decline since the process is no longer

each unit was obtained by dividing all production tons of

T. Virtanen et al. / Management Accounting Research 24 (2013) 401416

Regarding the overall strategic guidelines, Borealis had an

If it [energy efciency] is an important matter, it has

T. Virtanen et al. / Management Accounting Research 24 (2013) 401416

These indicators are still searching for their form and

aspects for measuring would have motivated operators and

Technical Ofcial A of Hydrocarbon stated that

Actually, it is not totally clear. . .what issues affect it. . .

T. Virtanen et al. / Management Accounting Research 24 (2013) 401416

setting the SEC target. This had a substantial effect on their

4.2.4. Findings related to motivation and rewards

T. Virtanen et al. / Management Accounting Research 24 (2013) 401416

and nancial rewarding since the scorecards were not

5.2. Energy efciency performance management

T. Virtanen et al. / Management Accounting Research 24 (2013) 401416

On the basis of the evidence it seems that within the

T. Virtanen et al. / Management Accounting Research 24 (2013) 401416

a performance indicator that does not allow proper energy

control systems in the development of energy efciency

Ikheimo, Simon Cade

T. Virtanen et al. / Management Accounting Research 24 (2013) 401416

Appendix A. Interviewees: managers

Appendix B. Interview framework: managers

T. Virtanen et al. / Management Accounting Research 24 (2013) 401416

The phenol and aromatics plant produces phenol, acetone,

Deci, E.L., Ryan, R.M., 1985. Intrinsic Motivation and Self-determination in

T. Virtanen et al. / Management Accounting Research 24 (2013) 401416

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