Green Economy: Search for growth hits progress on environment
Developed by a New York start-up, a controllable radiator cover means residents of homes heated by old steam systems no longer have to waste energy in winter by opening windows to cool off. Radiator Labs is among many companies that see business opportunities in green technologies. But while both start-ups and multinationals are capitalising on these, policy makers have been slower to act. “Ten years ago I would have said that policy leaders were out front and companies were following regarding the recognition and acknowledgment of sustainability,” says Mindy Lubber, president of Ceres, a US-based coalition of investors and environmental groups. “That has flipped substantially.” In Europe and the US, governments have been scrambling to recover from the global economic crisis. Despite evidence that limiting global temperature rises could be cheaper than adapting to them, policy makers have focused on reviving sluggish growth, rather than implementing measures that promote a low-carbon economy and resource conservation.
In emerging markets, too, growth can trump green. In China, where senior leaders have grasped the importance of combating climate change and shifting the country’s energy mix away from coal, national policies can hit roadblocks at the local level.
“The framework and recognition are there,” says Peter Lacy, managing director of strategy and sustainability services for Accenture in Asia-Pacific. “But once it gets down to the province, city and county level, there are real world challenges and trade-offs between the environmental agenda and economic development.”
Even for companies that have adopted ambitious environmental goals, it is hard to balance the drive to expand business activities with the desire to reduce impact.
Unilever, which has the goal of doubling its business while halving its environmental impact, recently reported that the total greenhouse gas footprint of its products (including consumer use) had risen by 5 per cent since 2010 as a result of its acquisition of Alberto Culver, the beauty products business.
While, in 2013, Unilever’s CO2 emissions from energy in manufacturing were 32 per cent below its 2008 levels per tonne of production, acquiring a new enterprise has meant the company has taken on all the carbon emissions associated with that business, adding to its overall levels.
Yet evidence is mounting that environmental sustainability does not necessarily have to involve economic trade-offs. In California, for example, the solar industry has grown by about 8 per cent since 2012, representing the addition of about 3,500 jobs, a rate almost five times faster than the statewide growth rate, according to research by the Solar Foundation.
While industry groups have often resisted tighter environmental regulations, reports from Citi Investment Research and Ceres, found that stricter fuel efficiency standards would in fact boost sales for US car manufacturers by driving demand for hybrid, plug-in and electric vehicles.
Meanwhile, investors are reaping returns from environmental sustainability. Companies participating in Carbon Action, part of CDP, an investor engagement initiative, found that investments in energy efficiency and carbon reduction were generating an average internal rate of return of 33 per cent, delivering a payback in three years.
As well as growth in the sale of technologies and systems that combat climate change, demand is also likely to grow for those that help the world adapt to its effects. This is the view of Richard Tol, a professor at the University of Sussex and Vrije Universiteit in Amsterdam who has served on the UN’s Intergovernmental Panel on Climate Change since 1994.
“If you’re a civil engineer and you protect coasts, then climate change is a golden opportunity,” he says. “This is one of the reasons that the Netherlands is emphasising climate change, because it’s an export opportunity.”
For governments to capitalise on these economic opportunities, they may need to break down walls between departments.
Environment, energy and agriculture ministries – all of which play a critical role in promoting clean technologies and sustainable growth – are not always adept at co-ordinating their activities.
One approach is to combine different departments, as the US state of Connecticut has done. In July 2011, it brought together the departments of environmental protection and public utilities to create the Department of Energy and Environmental Protection.
Rachel Kyte, who oversees the World Bank Group’s work on climate change adaptation, mitigation and climate finance, says that policies fostering the green economy also require the participation of finance departments.
“We have a clear message to the ministries of finance: this is your business,” she says. For Ms Kyte, accelerating private sector adoption of sustainable business practices will mean governments sending clear policy signals. “The recipe is to price carbon and price it quickly,” she says.
Examples of green innovation are proliferating, but some believe that more policy levers need to be introduced before a broader swathe of industry can be persuaded to embrace clean technologies and business models that minimise use of resources and cut gas emissions.
Ms Lubber at Ceres is among those who would like to see policy makers create more incentives for the corporate sector. “Capital markets are logical and if you send the right signals, they respond efficiently,” she says.
For some leading companies, however, policy is less of a driver than the recognition that sustainable business practices strengthen their resilience and boost profits. Ikea, for example, has found a compelling case for investing in renewable energy. The retailer has made a commitment to own and operate 137 wind turbines around the world and install solar panels on its buildings.
For others, opportunities lie in moving into new business areas, as Honda is doing. The car manufacturer is developing a “Honda Smart Home” to demonstrate how zero-carbon living could integrate different forms of energy generation and use, including rooftop solar panels as a means of charging an electric vehicle.
Fonte: Financial Times
