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PURPOSE OF THE STUDY This study examines the decision-making in Finnish industrial companies with regard to energy efficiency investments. It aims to identify factors that hinder the implementation of energy efficiency investments in industrial sector. The focus is especially on the investment appraisal methods and the investment process participants influencing the investment decision-making. The results of this study may act as a guide for companies in improving their investment processes to support more equal and comprehensive evaluation among different kind of investments.

DATA The research was executed in two phases, firstly, by doing a survey questionnaire and secondly, by conducting follow-up interviews based on the findings received from the survey. Altogether 345 energy efficiency representatives in the Finnish industrial companies received the questionnaire and 107 replied with filled online form resulting in a response rate of 31 %. After statistical analysis, seven people were interviewed in order to gain broader understanding of the findings.

RESULTS The findings of this study indicate that the main reason why investment opportunities become rejected is the investment’s inability to match the financial profitability criteria set for evaluating capital expenditure. The most commonly used financial investment appraisal method for operational and energy efficiency investments is the payback period method followed by the internal rate of return and net present value methods. Strategic investment appraisal methods are still used infrequently.

Results indicate that companies that are using sophisticated financial investment appraisal methods and more specifically IRR when evaluating energy efficiency investments go on to implement more energy efficiency investments than other Finnish industrial companies. This study also suggests that having a financial expert involved in the investment process already from the planning stage increases the likelihood that energy efficiency investment will be approved in the decision-making stage. However, Finnish industrial companies’ investment project teams are usually not very versatile and consist mainly of technical experts.