In a competitive environment, firms are seeking to reduce costs, support sustainable growth and meet dynamic market demands.

Energy is an important component of production costs in many industrial sectors, although its share varies by industry. These differences are influenced by the type and complexity of production. Heavy industries, such as steel, cement and chemicals, tend to be more energy intensive due to the large-scale processes and high thermal demands. Light industries, such as electronics and textiles, typically involve lower energy use per unit of output. Even within these broad categories, energy intensity – a measure of the energy required to produce a unit of economic output – also varies significantly. This reflects differences in technologies, operational practices and management approaches.

There are significant differences in energy intensity levels within the same industry across IEA countries. For example, the most efficient cement sector was 52% less energy intensive than the least. While industrial structures differ by country, considerable variation also exists at the facility level, even among sites producing the same or similar products. Benchmarking shows that energy intensity in electric arc furnace steel production can vary by up to 67%, and in ammonia production by 144%, within the same country. Firms with higher energy intensity may be incurring unnecessary costs, not only for energy, but also for raw materials, production processes, and waste management, which can all be improved with investments in efficiency.

An analysis of 10 000 industrial facilities in the United States shows that, adjusting for facility size and other factors, the energy required to produce the same sales volume varies significantly within the same subsector and to manufacture equivalent products. For example, energy consumption can vary by a factor of five times to manufacture plastic bags, and by a factor of seven times to produce bricks, with similar figures observed for other types of products, from milk to ceramic tiles to plastic bottles.

While some of these variations can be due to differences in products and other factors, such wide disparities highlight the potential for many firms to reduce energy expenditures through improved energy efficiency.

The potential for energy savings varies by sector, subsector and facility. From process optimisation to capital upgrades, industrial facilities can achieve significant energy savings across a range of investments. Firms that implement a culture of energy management (an approach explored in section 2.2) can uncover average savings of between 5% and 11% for heavy industry and between 10% and 18% in lighter industry in the early years of implementation, and cumulative savings of upwards of 40% to 60% over the longer term.

At the country level, these savings can add up to significant economic benefits. In IEA countries alone, if all firms matched the energy consumption of the 25% least energy-intensive firms in their respective subsectors, energy costs could be reduced by up to an estimated USD 600 billion. While not all firms can achieve the performance of the top 25% – variations in product composition, specifications and value can also influence energy performance – the magnitude highlights significant potential.

At the firm level, such savings can represent significant increases to the bottom line. For firms with higher energy costs and lower profit margins, such as iron and steel, building materials, and pulp and paper, saving 10% in energy is equivalent to the profit achieved with an increase of 4% to 16% in sales. Similarly, for an average small or medium-sized EU industrial firm with a profit margin of 10%, annual energy savings of EUR 5 000 would be equivalent to the profit made from EUR 50 000 in additional sales.

A 2025 survey of 1 000 industrial facilities around the world, prepared by the IEA, also confirms that firms are realising financial returns from investments in energy efficiency. About 70% of respondents reported a return on investment (ROI) of above 10% for the efficiency measures that they implemented over the last five years. These strong returns are not only reinforcing past investment decisions but are also shaping firms’ views on the role of efficiency in enhancing competitiveness. Nearly 80% of respondents indicated that energy efficiency would provide a competitive advantage to their firm over the next five years.

Accordingly, many firms have made energy efficiency part of their strategic plans in an effort to improve their competitive position. For instance, the EP100 initiative brings together firms that have made public commitments to double their energy productivity or other energy efficiency related goals.

Despite this momentum, challenges remain. Upfront cost can be a significant barrier to implementing energy efficiency measures, especially for capital-intensive measures in heavier industry, which leads firms to often favour the most profitable measures with a shorter payback.

Investments in energy efficiency deliver multiple benefits that extend beyond energy cost savings, from increased energy security to lower emissions. At the industrial firm level, these benefits can translate into reduced costs and improved profitability and can also include:

• Increased productivity, such as higher equipment utilisation rates and increased production capacity, as a result of more efficient processes and lower production costs.
• Improved resource use, such as reduced equipment downtime and unplanned shutdowns, lower maintenance costs and potentially reduced staff requirements for operation and monitoring. For instance, a pilot assesment in European companies found that in nearly 40% of cases, companies implementing efficiency measures reported reduced unplanned downtime. Moreover, in an IEA survey of 1 000 firms, respondents estimated that 13% of unplanned downtime can be reduced as a result of energy efficiency measures.
• Reduced waste production, such as less use of raw materials and processing chemicals.

Efficiency has also been linked to improved labour benefits. A survey of over 15 000 European firms shows that energy efficiency investments were associated with labour productivity increases of between 1.4% and 3.6%. These benefits are often tied to improved indoor environments, such as better lighting, air quality and thermal comfort, which are linked to enhanced worker satisfaction and reduced absenteeism.

Case studies, such as those prepared by the Clean Energy Ministerial, showcase examples of firms that have recorded multiple benefits from the implementation of energy management measures, from a tyre manufacturer in India that recorded lower water consumption to a German polymer manufacturer that saw lower waste-disposal costs alongside energy cost savings.

For many firms, these broader benefits can outweigh the direct reduction on energy bills. An IEA analysis of 3 300 cases in small and medium-sized enterprises (SMEs) shows that when all benefits are included, total savings more than double. Across a range of studies, the value of efficiency was shown to increase by 40% to 250% when including the multiple benefits beyond energy savings. 

Firms face various economic, institutional and informational barriers to the implementation of energy efficiency measures. These include limited access to financing, long payback periods for certain measures and lack of clear information about energy consumption. However, firms can start to reap the competitiveness benefits of energy efficiency with a series of “quick wins”.

Quick wins are easy-to-implement measures that can provide significant savings while avoiding the most common barriers. They typically have low upfront costs and require limited intervention, which can translate into payback periods of less than two years, reduced risks and more easily perceived benefits.

A key way to find potential quick wins is to conduct an energy audit or review to understand how energy is being used and to identify quick fixes, which can include both maintenance activities and replacing equipment. A complementary nighttime audit can also reveal energy consumption unrelated to the production process.

A set of quick wins that apply to most industrial facilities can include:

• regulation of heating, ventilation and air conditioning (HVAC)
• reduction of losses in compressed air systems
• automation and sectorisation of lighting systems
• power management of equipment
• repair and maintenance of insulation materials
• right-sizing and linking assets to match load
• installation of light-emitting diode (LED) lighting systems
• replacement of aged motors with high-efficiency models
• implementation of variable speed drives for motors
• encouraging behavioural changes, such as switching off equipment when not in use

Although they are simple to implement, these measures can deliver wide-ranging benefits. High efficiency LED lighting can reduce energy consumption by 90%, while extending product lifespan. In motor systems, particulary for low-efficiency models, lifetime energy costs often far exceed the initial investment. In such cases, efficiency improvements can yield returns up to seven times the capital cost. Replacing conventional boilers with heat pumps can improve efficiency by a factor of four, while also reducing reliance on fossil fuels. Even very low-cost actions, such as correct compressor loads, can reduce energy consumption in compressed air systems by more than one-third. Similarly, better maintenance scheduling can help reduce unplanned downtime.

Some of these quick-win measures can be found in the majority of facilities, especially in smaller organisations. An analysis of industrial firms in the United States found that more than 70% of facilities could implement quick-win upgrades to lighting and air compressors, and that around 45% of facilties have the potential to achieve savings through upgrades to motors.  

Implementing quick wins is the easiest and fastest way to improve a facility’s energy efficiency. Achieving maximum improvements, however, requires more ambition.

Deeper upgrades entail more significant, longer-term changes to equipment or processes and deliver more substantial improvements to energy and process efficiency. While quick wins can be enabled through easy-to-implement changes like adjusting existing controls or maintenance scheduling, deeper upgrades generally require investment in newer equipment and adjustments to production processes. Examples include:

• reusing waste heat from operations
• redesigning processes to reduce energy use and/or production line bottlenecks
• advanced automation and controls to optimise energy use
• building insulation and fabric improvements
• closed-cycle water usage
• installing thermal energy storage systems      
• integrating energy flows via sector coupling

 While initial investment costs and payback periods vary depending on project complexity, the magnitude of savings can be significant.

An analysis of a broad set of industrial energy efficiency measures indicates that quick-win interventions delivered average cost savings of around 2% per measure. In comparison, deeper system upgrades achieved average savings of 5% per measure. Another study found that, while there were notable gains to be made from optimising the motor alone, upgrading the entire motor system resulted in savings that were 50% higher. Meanwhile, industrial heat pumps can reduce energy use of process heat by more than 30% in some cases.

Despite their higher potential, deeper upgrades face greater barriers to implementation. In the United States, quick-win measures were implemented in around half of the observed cases. However, only a third of deeper upgrade opportunities were pursued, despite the higher potential for cost savings. Factors such as higher upfront costs, additional complexity and modification of existing production processes can all be additional barriers.

Targeted policy support, as outlined in Chapter 4, is essential to accelerate uptake, especially for capital-intensive measures. Linking such policies to clear energy efficiency targets and robust tracking mechanisms can help ensure higher efficiency

Energy management – a well-recognised strategic approach of adjusting and optimising energy consumption – is a key lever for industrial competitiveness. By embedding a culture of continuous improvement and securing strong management commitment, companies can reduce costs and improve resilience.

This strategic approach applies across both light and heavy industry and follows repeating cycles of key steps: quantifying energy demand and setting strategic goals, implementing targeted measures, and tracking progress through ongoing monitoring and benchmarking.

The ISO 50001 standard and certification provides an internationally recognised framework for such systems, but other flexible approaches also exist, such as the 50001 Ready programmes available in Canada, Saudi Arabia and the United States, that support ongoing energy management without requiring full certification.

The implementation of energy management systems can lead to significant savings. In the first three years of ISO 50001 adoption, companies report average savings of 11%. Across light and heavy industry, firms implementing ISO 50001 achieve consistent energy savings, averaging 4% annually every subsequent year. Over time, these gains can compound to deliver major performance improvements. An analysis of energy management systems in Italy shows a growing number of firms reporting energy savings over time. In 2021, around half of firms reported savings of 4% to 10%, up from less than one-third in 2016. Light industry often sees faster and more cost effective improvements, while heavy industry benefits from greater absolute savings.

Case studies from the Clean Energy Ministerial’s Energy Management Working Group illustrate how long-term commitment to energy management has yielded substantial results around the world. For instance, over nine years, an Irish food manufacturing facility improved its energy efficiency by 45%, while an Indonesian sports footwear manufacturer cut its energy demand by 37.5%. A Chinese firm making household electrical appliances achieved a 43% energy efficiency improvement over five years.

Firms that achieve the greatest efficiency improvements are typically those that have embedded energy management as a core element of their business strategy. For these companies, energy efficiency is recognised not only as a tool for reducing consumption, but also as a driver of continuous improvement and other benefits. 

In 2025, the IEA carried out a survey of 1 000 industrial firms across 14 countries to find out more about private sector perspectives on the role of efficiency in competitiveness. Around 80% of firms indicated that energy efficiency is key to maintaining their competitive edge. Respondents reported that more efficient energy practices led to a broad range of benefits, including reduced maintenance, operational costs and unplanned downtime. Nearly 40% of respondents indicated that energy efficiency is their first line of action against rising energy costs.

Challenges remain, especially for smaller organisations. Less than a third of the companies in that survey had carried out an energy audit in the past five years. For companies with fewer than 100 employees, only 15% had carried out an energy audit in the last five years, and 17% had not implemented any major energy efficiency measures in that same period. Several persistent barriers can hinder implementation:

Upfront cost barriers: In a 2024 survey of over 1 200 companies committed to energy efficiency, more than half of the respondents identified upfront costs as the biggest barrier to implementing energy efficiency improvements. In the United Kingdom, a survey of manufacturing firms showed that funding access was twice as likely to be a barrier for SMEs than for large companies. Addressing this barrier requires targeted financing instruments, such as energy performance contracts and green loans with lower risk premiums, and easily accessible information on existing financial supports. It can also be helpful to tailor policies to address the limited capacity of SMEs, as in Japan and the Netherlands where governments have established dedicated SME energy efficiency programs that offer technical assistance and simplified access to funding.

Information barriers: Firms report that a lack of data to make the business case or lack of understanding of available options can be significant barriers to action. Policy makers can help close this gap by supporting the development and adaptation of benchmarking frameworks and standards, such as the Top Runner Programme and best available technologies (BATs), which demonstrate the most efficient technologies for different processes.

Skills barriers: As firms invest in energy efficiency improvements, it will be essential to find qualified workers to install and maintain equipment and systems. However, firms may face challenges due to skills shortages in key energy efficiency occupations, such as electricians and installers of HVAC and heat pumps. The 2024 survey of companies committed to energy efficiency revealed that 30% of businesses identified a lack of digital skills in their workforce as a barrier to enhancing energy efficiency, and 25% of businesses also perceived workforce resistance to new technology as an obstacle. An integrated policy approach, as explored in Chapter 4, can help overcome these barriers.