Can Green Business Survive the Meltdown?
Posted on Leading Green: October 8, 2008 10:43 AM
If your company is responding to the financial crisis by cutting forecasts, scaling back operations, or slashing jobs, greening your business may not seem as high a priority, especially if your sustainability strategy calls for new capital investment. Yet today's economic turmoil should shine new light on what really makes a business sustainable (the nearly spontaneous combustion of huge institutions founded 100-plus years ago will do that), while differentiating true leaders from charlatans and copycats. Here are some thoughts on what will change, what won't, and how to stay the course.
How will the downturn and credit crunch affect green business?
What will change: With the current focus on bailout and recovery, the green hype of the last year is sure to wane. Many of the unsubstantiated "me too" green campaigns we've seen in recent months will go away. And the tolerance of superficial environmental activities—which has been eroding amid increasing consumer, government, and media scrutiny of corporate greenwashing—should slip even further as priorities adapt to a challenging economic reality. This is just fine; the green space has become saturated with undifferentiated initiatives and misleading messaging that can undermine the many credible, substantive efforts out there. This crisis will allow companies that are making real investments in sustainable innovation to gain competitive advantage.
What won't change: Downturn or not, the macro trends driving green aren't going away. It pays to keep them in mind whether your company is making changes, proceeding with caution, or continuing full steam ahead:
• Energy/infrastructure. Even though oil prices have come down from their summer peak, let's not forget that they have tripled in the last five years and may continue to climb once the worst of this crisis passes. And even with lower prices, events like Hurricane Ike remind us of oil's price volatility and of the fragility of our national energy infrastructure. That's why both presidential candidates have made energy security a priority, and luminaries including Tom Friedman and Bill Clinton have called for investment in clean energy as a way out of our fiscal crisis.
• Climate. On Sept. 25, Northeastern states held their first carbon auction under the Regional Greenhouse Gas Initiative, a mandatory cap-and-trade program. As other regions implement similar schemes in the coming years, a national cap-and-trade program is inevitable. Again, both Obama and McCain support climate change legislation that would put caps on GHG emissions.
• Transparency. As headlines report bank failure upon bank failure, the public is calling for increasing transparency and disclosure in the financial sector. Concurrent with this news, and somewhat overshadowed by it, came the release on September 22 of the Carbon Disclosure Project's Global 500 and S&P 500 reports. These surveys provide a partial yet substantive answer to the call for corporate transparency on climate change risk and response. While we know that disclosure has always been a driver of green business, in the wake of this crisis we are likely to see a concerted push for transparency across a wider range of business activities.
What to do: As it becomes harder to generate and borrow capital, every expenditure must be considered carefully. If you're dumping money into a halfhearted green PR campaign, now might be the time to rethink that initiative and instead invest in a substantive green plan that will yield immediate and long-term financial benefits. In the near term, focus on energy and materials efficiency: You can harness low-hanging fruit to cut costs without sacrificing anything. Consider this small example from Wal-Mart: by upgrading the light bulbs in the displays of ceiling fans alone, the company saves $7 million per year in energy costs. And as you think about long-term growth, investing to create cleaner, greener products and services is a smart strategy both to hedge against risk and to prepare your business for changing expectations.
So yes, the financial crisis will change the green landscape. Yet even amid economic uncertainty, a relevant, credible, and differentiated green strategy will still be a path to business success.
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