Moving the Needle Toward Sustainability

Bruce Rayner, Contributing Editor, Enterprise Efficiency OEM | 1/6/2012 | 8 comments

Bruce Rayner
I’m a strong supporter of businesses that are making a concerted and sincere commitment to reducing their environmental footprint -- carbon, waste, water, etc. With the climate challenges that the planet’s 7 billion people face, corporate action is essential.

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.

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Bruce Rayner   Moving the Needle Toward Sustainability   1/10/2012 2:00:46 PM
Re: Moving the Needle Toward Sustainability
Dave - you're absolutely right about Wal-Mart. The company has revenue of about $1 billion a day and has relationships with thousands of direct suppliers. Each of these suppliers has a network of suppliers and on and on. The multiplie effect of driving sustainability deep into the supply chain has the potential to have a profound impact. But it requires the carrot and stick - enforcement and encouragement - to make it work. 
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Bruce Rayner   Moving the Needle Toward Sustainability   1/10/2012 1:53:29 PM
Re: That’s a lot of greenbacks
Rowan - while you may not be optimistic, I think the study by Roth implies that going green doesn't have to be highly visible or even concrete - like a wind turbine or solar farm - to be considered green. It could be as simple as reducing the distance a product moves from where it's manufacturered to where it's consumed. If you cut the distance, you've created value by reducing energy use. But you'll never see it. Green can be invisible but it's value is recognized. 
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Bruce Rayner   Moving the Needle Toward Sustainability   1/10/2012 1:49:02 PM
Re: That’s a lot of greenbacks
David- from my reading, I beleive the $10 trillon figure includes all of the above. That is, greener versions of everything. If you think about greening the supply chain yo've got services, transportation, packaging, and then the materials of the products being shipped. That covers a lot of ground. 
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Rowan   Moving the Needle Toward Sustainability   1/10/2012 4:52:55 AM
Re: That’s a lot of greenbacks
Yeah, if you can make it an easier sell, that's win-win for everyone. I know lots of people who are optimistic about the green economy. I am not one of them, but I'd prefer they be right.

I would love for the supply chain to be greener. Energy is obviously extremely important, but I don't think people know how potentially devastating common electronics can be in terms of poisoning their direct environment. So sustainable hardware solutions? Very very very good thing to be working towards.
David Wagner   Moving the Needle Toward Sustainability   1/9/2012 6:41:59 PM
Re: That’s a lot of greenbacks
$10 trilion? Is that $10 trillion in new products or does that include greener versions of old products? Because the exciting thing to me is the idea of adding $10 trillion to the global GDP while also making the planet safer. How much of the global GDP is eliminated by creplacing things with cleaner products? I'm all for it either way, but the math is imortant to know.
The_Phil   Moving the Needle Toward Sustainability   1/8/2012 4:12:17 PM
Re: That’s a lot of greenbacks

Unfortunately, much like a lot of things in business, if you know it's the right thing to do BUT it costs you, most people will avoid it & take the easy route.
Da-11   Moving the Needle Toward Sustainability   1/8/2012 2:20:33 PM
That’s a lot of greenbacks

Given the shaky nature of current environmental concern; that's a lot of money to be spending. I've always been of the opinion that it's better to err on the side of causation with regard to current environmental concerns; at the worst prevailing opinions could be wrong but at least you'd have a cleaner environment for your troubles. But at that price tag I'm a little less sure in my not so grand convictions.

Dave Sasson   Moving the Needle Toward Sustainability   1/7/2012 10:16:56 AM
Moving the Needle Toward Sustainability

Hi Bruce, it is good to see that sustainability initiatives are becoming front and center in both, from more energy efficient products to corporate processes and operations, such as sustainability improvements within the supply chain.  Wal-Mart was an early advocate of sustainability internally and externally, introducing a sustainability scorecard to their suppliers early on to rate and track suppliers on how well they were doing and offering incentives in doing so or more like penalties for not doing so. 

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