Energy

Managing energy use effectively enhances business efficiency and conserves natural resources. Reducing fossil fuel combustion enhances air quality, decreases fine particulates that contribute to adverse health effects, and reduces the generation of greenhouse gas (GHG) emissions, which contribute to global warming and resulting climate change. Limiting the use of non-renewable energy sources also helps preserve their availability for future generations.

While energy conservation benefits the environment, it also makes good business sense for Baxter, since energy is among the company’s most significant manufacturing costs. Since 2005, while Baxter increased sales 30% through 2010, the company held absolute energy usage from operations, excluding company operated vehicles, to a 4% increase. However, due to sharply increasing energy prices, Baxter’s corresponding energy costs rose 38% during that period, to $159 million in 2010. This underscores the importance of Baxter’s ongoing energy conservation efforts, which have saved the company an average of more than $28 million annually since 2005.

Baxter’s corporate energy management group oversees the company’s global energy conservation activities and reports energy usage, cost and efficiency improvements quarterly to senior management. Since 2005, Baxter has increased the number of annual facility energy reviews, established and provided training on facility “Lean” energy standards and promoted best practices in energy management across the company. In addition, to encourage the implementation of energy efficiency projects, Baxter has lowered its minimum required internal rate of return by approximately 5% for energy projects.

Lean Energy Program

In 2007, Baxter launched a “Lean” energy program for the company’s principal manufacturing facilities. The program includes four sets of Lean energy standards – Pre-requisite, Bronze, Silver and Gold. Each category defines 25 to 30 requirements a facility’s energy program should meet to quality for that level. As illustrated in the table below, Baxter met or exceeded each of its targets for 2010 in this area, and achieved significant gains compared to 2009.

Level of Achievement	Number of Sites Meeting 100% of Requirements at this Level (2010)	Average % of Requirements Met by Site (2010 target)	Average % of Requirements Met by Site (2010 actual)	Average % of Requirements Met by Site (2009 actual)
Pre-requisite	61	100%	100%	100%
Bronze	40	85%	98%	94%
Silver	18	75%	89%	76%
Gold	5	50%	54%	33%

Baxter has seen a clear correlation between a site’s maturity level in the Lean energy program and its performance toward the company’s energy-reduction goal.

Biennial Global Energy Conference

Baxter Facilities Engineering Services, with the support of the company’s Manufacturing Council, coordinates a biennial Global Energy Conference for Baxter facility energy managers. Unlike prior years, Baxter held this conference virtually in 2010 to reduce cost, decrease GHG emissions associated with travel and educate the network of energy managers about virtual meeting technology. (See Case Study: Baxter's Energy Managers Convene Virtual Conference.)

Performance

Baxter extended its commitment to reducing energy usage from operations from its original 2010 goal of a 20% reduction indexed to revenue, compared to 2005, to a 30% reduction by 2015, also indexed to revenue and compared to 2005. Energy usage from operations includes the energy used by Baxter-managed and Baxter-operated facilities.

From 2005 to 2010, energy consumption for Baxter operations increased by 4% in absolute terms and decreased by 20% indexed to revenue. This performance achieved the company’s 2010 energy improvement goal and puts Baxter on-track to meet its 2015 goal.

Energy consumption increased in the Asia Pacific region during this time period due to continued production growth in Baxter's China and India operations. Additionally, the installation and commissioning of a natural gas-fired combined heat and power system (cogeneration) at Baxter's Castlebar, Ireland, facility in early 2010 raised energy consumption in the Europe, Middle East and Africa region. Cogeneration systems increase a facility's overall energy footprint since losses previously attributed to the generating utility are now accounted for by the facility. However, the overall efficiency of energy utilization is increased since the facility can capture and use the waste heat from electricity generation. Not taking into account those losses, Baxter would have seen an approximate 0.4% reduction in energy usage globally compared to 2009 and indexed to revenue.

The following graphs show the overall breakdowns of electricity and steam consumption by major usage category for Baxter manufacturing facilities. The company considers these data in targeting new energy-saving technologies, determining where to focus energy balances and setting requirements in the Lean energy program. See Energy Conservation Initiatives below for examples of projects to enhance efficiency in some of these areas.

Energy Conservation Initiatives

Baxter’s global energy management initiatives have saved the company more than $28 million annually since 2005.

Energy efficiency gains achieved in 2010 are due to systematic implementation of energy conservation projects. About every three years, Baxter reviews the primary and secondary utility systems at each manufacturing facility and large office to identify opportunities for improvement, covering steam generation and distribution; water usage; electricity distribution; compressed air consumption; lighting; and heating, ventilation and air conditioning (HVAC).

Baxter’s Facilities Engineering Services provides quarterly updates to the Baxter Manufacturing Council on identified projects with acceptable return on investment (see Global Energy Management Activities section below for a description of the council). Examples of Baxter facility-based energy-conservation projects implemented in 2010 include the following:

• Multiple locations – Baxter’s facility in Suzhou, China, installed 956 light emitting diode (LED) light fixtures, which will save an estimated 91,200 kWh of electricity annually. The company’s Rieti, Italy, facility installed LED fixtures in its new laboratory suite, projected to reduce electricity use by 25,000 kWh each year. Baxter’s facility in Marsa, Malta, converted 90% of its light fixtures to LED, and will save an estimated 187,000 kWh and $36,000 yearly.
• Brazil – Baxter’s facility in Sao Paulo, Brazil, installed a ceramic roof that reduces solar heat gain and decreases building heating and cooling losses, and will save an estimated 84,600 kWh of energy yearly. The facility also expanded its use of solar tube lighting above the production mezzanine area, which will save another 500 kWh annually.
• Spain – Baxter’s facility in Sabiñánigo, Spain, installed a sterilizer heat and water recovery system that will save approximately 7 million kWh of natural gas and $227,000 annually.

Global Energy Management Activities

Baxter’s Manufacturing Council sponsors the company's global energy management activities, which are part of an integrated energy-conservation, cost-reduction and GHG emissions reduction program. The following groups participate in this program as noted:

Group	Energy Management Activities
Facilities Engineering Services	Chairs Baxter’s Energy Steering Committee, comprised of corporate, regional and facility representatives Develops energy-conservation and energy cost-reduction strategies Manages global energy-conservation programs, conducts energy balances and drives the Lean energy program Tracks and reports facility energy usage, costs and progress against goals each quarter Monitors global energy availability and price trends Coordinates companywide technical resources, Web resources, regional training and Baxter’s biennial Global Energy Conference
Environment, Health and Safety	Represented on Baxter’s Energy Steering Committee Ensures environmental factors are considered in energy management strategies, initiatives, GHG-reduction efforts and company policies Manages Baxter’s global climate change response strategies and GHG-reduction activities Tracks and reports company GHG emissions Manages Baxter’s participation in the Chicago Climate Exchange (CCX, now IntercontinentalExchange) and supports Baxter’s participation in the EU Emissions Trading Scheme
Corporate Services and Administration	Seeks cost-competitive energy sources, in partnership with Baxter's Purchasing and Supplier Management organization Manages natural gas purchasing for Baxter locations in the United States Purchases renewable energy for specific Baxter facilities and products Manages “carbon-neutral” status of corporate headquarters
Purchasing and Supplier Management Organization	Manages program to work with major Baxter suppliers to improve energy efficiency, reduce GHG emissions and enhance other supplier “green” initiatives Provides assistance in energy purchasing Manages energy efficiency of Baxter-operated vehicles, including car sales fleet and truck distribution fleet Champions green building technologies and renewable energy projects for supply chain distribution locations
Facility Energy Managers	Implement facility-level energy-conservation, cost-reduction and GHG-reduction strategies Apply available Baxter technical resources and best practices, participate in regional training and attend company-sponsored biennial Global Energy Conferences Identify and implement energy-conservation projects Evaluate viable renewable energy options Set annual facility energy usage and cost-reduction goals Manage facility energy performance