U.S. Sustainable Business Spending Will Double To $60B By 2014

The U.S. sustainable business market will double to $60 billion in 2014 from $28 billion in 2010, according to a new report.

Analyst firm Verdantix evaluated 1,833 firms with U.S. revenues of at least $1 billion and determined that sustainability spending will increase by 11% in 2010 compared to 2009.

This positive trend will continue with a year-on-year increase of 16% in 2011 accelerating to growth of 24% in 2012. Over the 2009 to 2014 period the compound annual growth rate will be 19% across all 20 industries covered by the market forecast.

“In the US market, executive awareness of the business benefits of sustainability is on the rise” commented Verdantix Director, David Metcalfe. “The elevation of sustainable business decisions to the C-Suite drives increased expenditure across all sustainability issues. But the US market is still 2 years away from rapid growth due to the sluggish global economy, delayed federal regulations and a lack of mature programs in firms with revenues of less than $10 billion.”

Based on research of over 1,250 US corporate sustainability programs, the Verdantix model defines sustainable business spending across 29 initiatives. These include spending on energy efficiency, carbon management, sustainability strategy, risk management, cleantech innovation, sustainable operations, human capital investments and industrial emission reductions.

The report, "US Sustainable Business Spending 2009-14," finds that the US sustainable business market will exceed $32 billion in 2011, grow to $40 billion in 2012 and hit $49 billion in 2013.

Compound annual growth rates (CAGRs) for the 29 sustainability initiatives covered by the forecast vary from 4% to 50% over the 2009 to 2014 period. Spend on electric vehicles and infrastructure will grow at a 50% CAGR to $2.8 billion in 2014 and for smart grid the CAGR is 39% and energy and carbon data management 34%.

From an industry perspective, over the 2009 to 2014 period, power utilities and automotive firms will increase spending at a compound growth rate of 24%, high-tech engineering at 22% and industrial engineering at 21%. By contrast, compound growth rates for banks and retailers will reach just 14% over the 2009 to 2014 period and media and insurance firms just 15%.

“Expectations for US economic growth between 2010 and 2014 are in the 1% to 2.5% range. So the 19% growth rate for sustainable business spending makes sustainability an attractive market” stated Vanessa O’Connell, author of the report. “Despite the positive growth rates this is a small market compared to the overall size of the US economy. Big variations in sustainability spend, program maturity and organizational design will make sales and marketing a challenge in the sustainability market over the next 2 years. From 2013 we expect to see more consistency in sustainable business strategies and more centralized budgets managed by Chief Sustainability Officers.”

The Verdantix model is based on analysis of market drivers including energy and climate change policy at federal and state level, competitive dynamics within industries, innovation diffusion, risk drivers, oil, natural gas and electricity price forecasts, and US and global GDP growth forecasts. The findings are validated with detailed case studies on corporate sustainability strategy covering firms like Citigroup (NYSE: C), FedEx (NYSE: FDX), Google (Nasdaq: GOOG), Hilton Worldwide, Intel (Nasdaq: INTC), Johnson Controls (NYSE: JCI) and PG&E (NYSE: PCG).