What Does It Mean To Be Green?
12th July 2017
Rife with change, the 21st century appears interesting and unique from most perspectives. This seems particularly true for areas driven by technology, nature and in spaces where both converge. The spaces are many, ranging from households, businesses, airports and roads, to the sky and to outer space. Science also offers the following perspective: the earth’s climate has been changing since its beginning. The 21st century is no anomaly. Yet as a species, humans have no recollection of change that is seismic enough to wipe-out life as we know it even though life survived. What we do know is that to sustain life on earth, the living will have to keep adapting to change. So, now that we have moved from the geological age of the Holocene to the age of the Anthropocene, how do we adapt?
As the name suggests, rapid progress in technology since the Industrial Revolution, seems to have led humans to the Anthropocene, in which we have brought grave environmental consequences upon the earth and ourselves. The repercussions are just being realised. To name a few: we face volatility in global temperature, health risks through carbon emissions, water shortages, environmental degradation, population pressures, climate displacement, polluted oceans, and severely strained natural resources.
Awareness about climate consequences can be traced to corporate dialogue during the 1990s- perhaps even before- when companies like Toyota were exploring sustainable technology solutions for environmental issues at the time. Therein appear to be some of the first signs of adaptation to climate change. This is when talk of climate began footing in the ‘trend zone’. Today sustainability is more than a mega-trend, it’s a gaping reality. It is a key driver of innovation, technology, business competitiveness and business strategy. It also implies a movement away from fossil fuels and toward renewable energy, which has been heavily influenced by regulations and a need for more effective practices and support from policy.
Today, awareness about sustainable practices is perhaps most evident in the fact that it is moving beyond corporate and political dialogue, and into global consciousness as consumers experience the problems associated with climate change. Thus, while it is difficult to formulate a precise definition for clean technology, it is against this backdrop that I would attempt to do so.
Keeping the above factors in mind, traditional clean technologies focused solely on the functionalities of efficiency and sustainability, with big projects in the storage and generation of renewable energy. In 2004, investment in clean technology was at $60 billion. Over time it has evolved from a sector to an industry of $310 billion. Clean technology has also moved from a focus on just functionalities towards orienting value propositions and core business offerings towards effectiveness, efficiency and sustainability.
Interestingly, the word “clean” does not imply that these technologies use zero resources, so one must approach the definition with a degree of skepticism. While new developments in technology such as Tesla’s electric vehicles certainly do not give off emissions, they still use natural resources such as lithium in the production of their batteries and rely heavily on the generation of electricity for production processes. Within the chain, is is clear that electricity generation is unlikely to come from a country with 80-100% renewable energy generation. Hence, I would suggest that while clean technologies are aspiring to improve energy efficiency and reduce emissions, there are systemic factors at play that are complex and create a dismal picture for zero emissions to truly be realised. Nevertheless, while clean technology has been largely supported by governments and big corporations in recent times, it is now evident that consumers are also becoming aware of the industry’s opportunities.
Although the current environment for clean technology is still young in comparison to the market for fossil fuels, clean technology leverages knowledge and interconnectivity to incorporate sustainable practices across company value chains. While there is a focus on B2B channels (as mentioned above), B2C channels in clean technology are growing rapidly. Therefor, when understanding the definition of clean technologies, it is worthwhile mentioning that the end of the value chain is as important as the beginning.
The User Dimension
Although products and services may address issues of sustainability, companies need to remain competitive to conventional technologies and accrue commercial profits. With the key role played by the Internet in business models today, the definition of clean technologies must incorporate a dimension of user-orientation. Returning to the example of Tesla’s electric vehicles, a plausible reason for their success may lie in the fact that amongst environmentally conscientious users, emissions are much lower than those from cars using fossil fuels.
Another important focus today is on the “clean web”, as a relevant sub area of clean technology. With a higher global awareness about sustainable practices, the consumer is a more important entity than ever before, thus moving businesses models towards leveraging consumer data for closer engagement with end users. OPower and Nest in the U.K are examples of businesses that are guided by investment in data-driven technologies are either aimed at educating, informing and influencing consumers’ choices regarding sustainability.
The main offerings of these technologies then relate to internet and cloud based services, that rely on using data to maximise efficient resource allocation. These cases of interconnectivity, automation and energy optimisation provide good examples of how clean technology can directly influence the behaviours of end user, and the commercial value of data relating to their behaviours for utility companies.
Rethinking The Value Chain
That said, an important lesson comes from the following: although products and services may be more environmentally friendly, there are challenges involved with translating these into businesses. The value chain itself is no longer linear but is nearly a “value network”, with important areas such as consumer engagement, transparency, distribution and supply chains. A key focus here is on consumers, who come in different forms and do not have access to perfect information.
Hence, while companies may try and focus clean technology on user dimensions, there are often mismatches between companies and users. An example lies in the fact that some consumer preferences prioritise price, while others focus on features and yet others on experience. There is no anecdotal predictability in choice and to meet all three criteria is difficult. That is not to say that this is the only criteria but that it is possible to try and meet some, as seen in the example of the relatively low-priced Toyota Prius (whose environmental dimensions also drove its functionality through a no-noise engine).
Prioritisation
Another important lesson in clean technology also concerns the context in which it has been defined. While clean technology focuses on improving the value chain’s sustainability, it cannot be applied across the value chain without prioritisation. This is due to the fact that company resources are limited and clean technology has to meet the business model offerings of companies. Such practices include an internal focus and an external focus, which influence their global competitiveness and market positions.
Internal focuses may range from management decisions (e.g. creating sustainability roles in organisations) to implementing cost reduction in packaging and transport for products). External areas of the value chain that are relevant to clean technology concern regulations, emissions and resources. Such an example lies in Total Energy’s Carbon Capture Storage system.
Briefly put: the CSS is important in that it reduced Total’s carbon footprint, afforded a strategic advantage to the company and helped avoid regulation issues in Europe. However, it still bore considerable risk, was criticised by environmental agencies and did not avoid potential risks to health or the environment by injecting carbon back into the soil. Hence, in order to gain advantages in one area, Total has had to undertake risks and forgo other potential areas.
What It Means to Be Green
To further add to the fact that there are hard truths underlying efforts to improve efficiency and renewable energies, is the comprehensiveness of what it really means to be green. While incremental improvements in sustainability appear to provide more value than radical new innovations (whose value is only proved over time), environmental management is not necessarily a win-win situation. This relates directly to the section above (prioritisation), and the fact that shifts in the value chain are not always based entirely on the end of life perspective. In order to further explain this, we may use the example of recycling.
Through turning recycling into a trend, companies did not reap rewards for the investments they put into recycling products. It was recyclers who captured most of this value. Thus, companies began to realise that in order to capture value, resources should be invested in making packaging more compact and reducing transport loads, rather than investing in making products more green. More importantly, labels and marketing are more far more complex than they show. This begs the question of what it really means to be “green”.
Although a very detailed topic, it may be of benefit to approach this question by considering the standards by which a “green” company is measured, and how informative a “green” label is for consumers when faced with consumption decisions. It is also necessary to consider factors that influence companies to become “green”, such as competition and legitimacy.
Currently, companies that do well with managing their value chain and design their components in an environmentally friendly way, often hold a competitive edge over other players as this becomes a market for sustainability. Additionally, many companies gain legitimacy from organisations (e.g. Greenpeace) who have control over negative information and industrial rankings. Hence, in order to gain public legitimacy, being “green” is of value in the marketplace.
Also relating to the idea of green products is an example that is particularly relevant: micro- plastics. The abundance of micro-plastics in oceans has increased over time and is adversely effecting ecosystems. Sourced from multiple industries (including some environmentally-friendly recycled polyester materials that are made form recycled plastic bottles), micro plastics usually find their way into oceans through water supplies.
A particularly troubling effect comes from the fact that toxicity from these micro plastics travel up the food chain and integrate into the tissues of living organisms. Therefore, while products like recycled polyester are considered environmentally friendly, sustainable, use up less landfill and use fewer energy resource than other plastics, their “greenness” is lost somewhere along the value chain. It is important to consider all questions about sustainability when regarding “green” labels.
Regulations
In relation to the idea of “green” companies, is the fact that the reason for this growing sector is partially attributed to the key role played by regulations and compliance. While regulations are important for shaping the business environment and strategy of companies, their relevance to clean technologies varies.
In the case of green products, companies are often motivated to avoid the negative burdens of compliance issues (e.g. taxes and tariffs), so instead they may look for ways around policy. At times this may result in a simple trade between the emissions quota of different companies, and at other times it may actually shape investments in industries.
Although a simplistic explanation, a potent example of the role played by political incentives is the impact subsidies have had on solar power in Europe. With increased subsidisation in countries like Germany, investment in solar panels has grown exponentially, but as governments pull subsidies away, we would think that companies will experience high volatile in their costs. Falling prices in global supply coupled with the fact that demand is increasing, is projected to counter rises in price.
Another example of the role played by regulations is the fact that governments worldwide are discouraging fossil fuel electricity generation to encourage renewable energy. However, change is slow and instead utility companies are looking to shift power generation downstream (e.g. trading, consultancy for customers on energy use). Other systemic effects include low-carbon and energy sources, storage facilities, energy trading and smart grids that can help consumers manage their power consumption. These areas have been a focus towards the end of our course, and depict a key lesson in the combinatory effects of key players in industries and the growth of new technologies.
To conclude, sustainability appears to be a balancing act between social, environmental and economic factors which need to be accounted for from a business perspective. Furthermore, the link between sustainability and innovation lies in corporate sustainability today. While there is ample knowledge about how to make things more environmentally friendly and translate them into the business arena, there is still a need to make products and services more user centric. This lies in using business models to effectively capture the willingness and interest of consumers, while remaining competitive in current markets.
Moreover, the need to keep up with changing markets, regulations, technologies and mega-trends, is important for companies with long term visions. It is through knowledge, structures, business innovation and proactivity that companies may attain this, however the overarching framework that surrounds clean technology is complex and must be approached with a very analytical eye.
