Sustainable business practices are nearing the so-called "tipping point" as they get close to becoming standard practice at multinationals, according to two reports released this week.
Analyst firm Verdantix expects 2013 to be the pivotal year. After analyzing spending patterns of about 2,500 global companies, they found that investments in sustainable business programs will be 50-100% higher in 2013 than in 2011.
Companies with revenues above $1 billion in Australia, Canada, the UK and the US will spend $60 billion on sustainable business programs in 2013.
"Spending on sustainable business initiatives such as energy efficiency, sustainability assurance and cleantech innovation is positively correlated with global economic growth," says Verdantix Director, David Metcalfe. "By 2013 a powerful mix of market drivers, led by the forecasted global economic rebound, will significantly increase strategic investment in sustainability programs. The arrival of the 2013 tipping point will be good news for cash-strapped cleantech innovators and struggling sustainability entrepreneurs."
Verdantix also tracked the rise of the Chief Sustainability Officer (CSO) – the executive-level position being established at a growing number of companies to lead the strategic development of an enterprise-wide sustainability program.
Firms as diverse as AECOM, Alcoa, Capgemini, Orange, SAP, Smithfield Foods, UPS and Vedanta Resources have added a CSO with budget and authority in the last four years.
The core idea of sustainable business has also gained traction with enlightened Board members, Verdantix says, noting that companies are going beyond the need to address climate change. Multinationals now see those practices as a critical means to maintain competitive advantage, especially as it relates to global economic growth and natural resource costs. They increasingly view negative environmental impacts as serious risks to their business.
The recession also changed the competitive playing field. Cost control has been most important during the recession and spending on sustainability moved sideways. Policy decisions were delayed or dropped. But today executives face a new business context: booming demand in Asia, proven benefits from cleantech innovation, evidence that sustainability offerings drive topline growth and a toughening policy stance on energy and climate change around the world.
Diligent Attitude Towards Energy Consumption
Similarly, a study from Deloitte shows that energy efficiency has taken on new importance for multinationals in the US.
They found that 52% of companies are working to reduce their energy costs by an average of 25% over the next two to three years.
Concurrently, an increasingly sophisticated consumer demographic is looking for household energy savings in a tight economy. According to the study, 68% of consumers are taking extra steps to cut their electric bills because of the recession.
Deloitte and research firm The Harrison Group polled 3,200 household decision-makers and more than 400 business decision-makers responsible for their company’s energy decisions or energy policy.
According to the data, American businesses and individuals are in the midst of "the birth of the resourceful energy user," says Greg Aliff, vice chairman and U.S. energy & resources leader for Deloitte. "We are seeing a profound and, in many ways, grassroots movement toward energy conscientiousness among businesses and consumers."
The Deloitte study shows that about 45% of Americans have directly felt the pain of the recession, due to factors such as job loss or income reduction. While almost 70% of consumers say they lowered their electricity bills during the recession, 95% of those say they plan to keep it that way even as the economy improves.
The same holds true for businesses – 90% of companies have specific goals regarding electricity consumption and energy management practices. 56% have goals aimed at improving profitability through electricity reduction, and nearly a third of companies plan to generate electricity on site through measures like installing solar panels.
The Deloitte survey concludes that cost consciousness and social awareness are the twin drivers behind corporate energy management.
70% of companies report the desire to cut costs as the driver behind their energy management goals, and 53% say their companies have set energy-related goals at least in part because it’s "the right thing to do."
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The problem with all these studies, encouraging as they seem to be – is that the overwhelming majority of smaller companies (which account for most of our GDP and nearly all of our new jobs) don’t even know what sustainability means. The challenge we all face is how to get the message down and out from the Fortune 500 to everyone else in the business world who either doesn’t “get it” yet or isn’t clear how to get started with a sustainability program.