Moving the Needle Toward Sustainability

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So I read with interest "Five Megatrends Creating 2012's Trillion Dollar Global Sustainable Economy," a post by Bill Roth, founder of Earth 2017. Roth is a former senior vice president of energy services for PG&E, former COO of Texaco Ovonics Hydrogen Solutions, and former president of Cleantech America.

The piece argues that "sustainable product solutions" will generate $1 trillion in revenue worldwide this year, and that figure could reach reach $10 trillion by 2017. Those are big numbers. The International Monetary Fund estimates the size of the 2011 global economy at $70 trillion, so $1 trillion is more than just a rounding error.

And Roth’s contention that the revenue will grow by a factor of 10 in the space of five years? It’s truly mindboggling -- until you start to consider the multiplier effect, where the actions of a few ripple through the economy and impact millions, or, more accurately, 7 billion.

Two megatrends on Roth’s list are particularly relevant to OEMs and are fueling the growth of sustainable product solutions. The first is investment in energy efficiency in response to rising oil and electricity prices. Roth cited a Deloitte study in which more than half the US companies surveyed said they are trying to lower energy costs by an average of 25 percent in the next two to three years.

This trend extends to products. In a corporate sustainability report published back in September, Dell said that its desktops and laptops are designed to use 25 percent less energy than those it made in 2008, and by improving server performance per watt, customers lower the energy consumption of their datacenters. In addition, Dell said it has completed more than 170 efficiency improvement projects over the last four years, including lighting upgrades, installing sensors and timers to conserve energy, and HVAC modifications.

Dell (which sponsors this Website) is a pretty typical example of a responsible corporation. Most public companies are working to improve energy efficiency to cut costs, both within their own operations and in the products their customers buy. Multiply Dell by thousands of companies across the planet, and the ripple effect becomes clear.

The second relevant megatrend Roth identifies is the greening of the supply chain. Over the last decade, companies have been expanding their corporate social responsibility (CSR) programs, which previously focused inward on operations, to include suppliers and supply chain service providers.

The Sustainability Consortium is perhaps the most significant example of this trend. In 2009, Wal-Mart provided the initial funding to create the consortium, which recently released a report analyzing the environmental impact of products in 10 consumer categories, including laptops and TVs. Dell, HP, Panasonic, and Samsung are among the consortium’s 80 members.

Another driver of supply chain greening is the Electronics Industry Citizenship Consortium, whose Code of Conduct includes environmental criteria.

These and other CSR standard organizations are starting to have a profound impact on how OEMs select and police their suppliers and drive systemic change through their global supply chains. I have no idea whether these efforts add up to $1 trillion of revenue. But at least they are moving the needle in the right direction.