Posted on Memo to the CEO: April 23, 2008 12:05 PM
Let's capitalize on climate change. No, we're not talking about exploitation. We're talking about embracing the issue, and responding to it within your company. If you do that, you will be helping the planet.
Right now, we live in a fossil fuel-based economy. Any alteration to the cost of those resources—both as sources of energy and as raw materials—will alter the competitive dynamics of nearly all sectors of the economy. Most observers believe that new regulations are pending that will create a market price for carbon. This will affect energy pricing and availability, creating a ripple effect throughout global value chains. And as in any market shift, there will be both risks and rewards, winners and losers, and no industry will remain untouched.
Myriad companies have capitalized on the increased visibility and forthcoming regulation of greenhouse gas (GHG) emissions by offering a suite of new products and services for a low-carbon economy. GE, for one, began its Ecomagination campaign in 2005. Revenues from GE's portfolio of energy efficient and environmentally advantageous products and services increased 20% the year after the initiative's announcement and rose to more than $12 billion while the backlog of orders increased to $50 billion.
In the same way, since the 1990s, DuPont has slashed GHG emissions drastically, saving more than $3 billion in the process. The company has since focused its efforts on developing products that reduce greenhouse gas emissions and announced goals to boost annual revenues by at least $2 billion from products that significantly reduce GHGs for its customers.
The financial services industry has joined as well. In 2005, Goldman Sachs was one of the first investment banks to release an environmental policy framework that specifically mentioned its lending guidelines. Not to be outdone, Bank of America announced a program in March 2007 that involved earmarking $20 billion in funds over 10 years toward financing green buildings and energy-efficient technologies, assisting companies in trading carbon-emissions credits, and providing financial and advisory services to businesses developing environmentally friendly products. Shortly thereafter, Citigroup announced that it would direct $50 billion over 10 years to address climate change through investments, financing, and related activities that support the commercialization of alternative energy and clean technology. And finally, in August 2007, Morgan Stanley announced a plan to spend $3 billion on initiatives related to GHG emission reductions during the next five years. Companies undoubtedly see future profits in investing in low-carbon products and services.
This is just a taste of what is to come. And as more companies make this shift, momentum will build. The strange truth is that while scientific assessments can still be met with skepticism in a wary public, business assessments that climate change is a real concern will sway minds.
We'll talk more in our next post about how to determine whether or not your company has an economic opportunity vis-à-vis your competitors to take advantage of climate change regulations. In the meantime, what are you doing to become a greener corporate citizen?
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.