Earning a licence to lead in the low-carbon economy: a call for collaboration

As excitement builds for the 2012 Olympics, there’s great expectation as to which teams will emerge as the leaders, which will be the new challengers and which will trail at the back of the field. In a few months, the results of four years of rigorous training and preparation will be presented to the world.

There’s a similar excitement in the air around the emergence of the low-carbon economy. Although the exact shape and timing of the ‘third industrial revolution’ is undefined, in the last few years a core of businesses have been refining business models to carve out a leadership position within it – either by supplying clean tech solutions, or by investing in them – to instill sustainability across their value chains.

At the supply side, the falling cost of renewable technologies, such as wind and solar, combined with diminishing government incentives, is driving faster roll outs. According to the IEA, every year for the past five, wind power supply and capacity has risen by 25 percent and solar by 50 percent.  Simultaneously, demand for smart grid technologies, such as energy storage, which reduce renewable intermittency and increase reliability, is symbiotically increasing. Many early stage technologies, such as pyrolysis, or fuel cells, having passed the investment test, are now being commercialised for applications from zero carbon vehicles to energy from waste. From an economic perspective, the prospect of a new wave of green collar jobs to support the cleantech market couldn’t have come at a better time.

As well as the potential for technologies to reduce domestic impacts, export markets for low-carbon technologies are also offering potential for green growth. For example, with China set to impose a carbon tax on its largest greenhouse gas emitters by 2015, technologies such as Carbon Capture & Storage (CCS) look set to play a vital role in reducing the carbon intensity in the East. By 2025, the CCS sector could be worth more than £10 billion a year to the UK economy.

At the demand side, a core group of corporations, such as Unilever, Walmart and Kingfisher have taken action by adopting the latest technologies and sustainable practices to reduce their impacts and increase efficiency. So far, around 40 percent of the FTSE 100 have set emissions targets in place as a benchmark for their efforts – which often leaves many CEOs surprised and delighted by the sheer ingenuity of their organisation in meeting them. Many multinational supply chains, already honed for driving efficiency and long-term value, have now adopted ‘carbon’ as a criteria for meeting those aims.  This in turn is driving down the emissions from the chain of custody of their suppliers.

But unlike the Olympic teams, the final stage of development of the low-carbon economy is likely to be driven by collaboration amongst the leaders. Having put in the hard yards independently, the best way for organisations to augment the low-carbon economy, is by jointly driving awareness for sustainable practices into mainstream business thinking.

Improving efficiency puts cash savings on the bottom line, and limits long-term risk, and so most multinationals already address the (direct) carbon emissions of their sites. However, the greatest contributor to corporate carbon footprints is ‘cradle to grave’ (indirect) emissions in products and services. Reducing these supply chain emissions associated with products unlocks low-carbon choices for consumers and allows companies to engage with customers at a deeper level. Marks & Spencer’s

Plan A campaign, for example, was directly responsible for £50m of profit in 2009, through cost savings and the introduction of new product lines.

But supply chains are complex and expensive to improve, and often carbon intensive suppliers charge less – as a result, only 40 percent of multinationals are reducing their supply chain emissions. But, what’s the incentive to invest in innovation to reduce the environmental impacts of products, if other brands are selling products consumers are perfectly happy to buy?

Some brands are nervous about sustainable products appearing too niche. Without evidence of wider demand the risk of investment is high. Secondly, if sales volumes do not reach sufficient sales quickly enough to provide further investment in distribution and awareness, the pilots are not scaled up. It’s a vicious circle, which brands cannot break in isolation; the cycle needs to be broken by a surge of momentum by multiple brands. In this way, consumers can be educated about their own impacts, as well as their main source of influence – spending power. Only through jointly educating the public can companies deliver the transparency needed for responsible decision making which will firmly differentiate  the leaders from the laggards.

Through collaboration, the communication power of brands that drove us to our current levels of resource scarcity, has the power to unleash the green market – by providing low-carbon, qualitative choices, thereby enabling consumers to live low-carbon lifestyles.

Exciting times are ahead as the low-carbon economy is forged before our eyes. The assimilation of low-carbon and renewable technologies are creating the ‘how.’  And increased brand loyalty and trust created by embedding sustainability into the corporate DNA is the ‘why.’  Now it’s up to companies to start making their own transition to the low-carbon economy – already there’s a shrinking window of opportunity to earn the licence to lead it.