Driving business growth with low-carbon strategiesEconomist Intelligence Unit
Climate protection is a business opportunity disguised as an environmental problem, according to scientist and energy expert Amory Lovins, head of the Rocky Mountain Institute, a non-profit organisation.
Today, a growing number of companies agree with this view, as evidenced by their business growth strategies. Whether it is the prospect of entering new markets, such as the supply of energy for electric vehicles, or of expanding into new geographic regions, the argument that decarbonisation offers business growth opportunities is becoming more compelling.
Of course, balancing growth with lower emissions is not easy, and in the past many companies have struggled to achieve this goal. Yet as renewable sources of energy such as wind and solar power become more economically and technically viable, some companies are looking forward to a new era in which low-carbon strategies and business expansion are not mutually exclusive.
Kellogg’s, a US-based multinational food manufacturer, is one example. “We see good opportunities to grow Kellogg’s brands as we invest in climate adaptation solutions such as climate-smart agriculture,” says Diane Holdorf, chief sustainability officer at Kellogg Company.
The company has committed to reducing energy use and greenhouse gas emissions in its plants by 15% per tonne of food produced by 2020, from a 2015 baseline. It is doing this by requesting renewable-electricity options from local utility companies and investing in low-carbon technologies, including biomass boilers in India and natural-gas fuel cells in the US. This not only diversifies its power sources but also makes its operations more resilient.
In addition, Kellogg’s has identified an opportunity to increase its sales by tapping into a growing cohort of consumers who are scrutinising the environmental footprint of the products they buy. “Consumers increasingly want to know how their food is grown,” says Ms Holdorf.
Other companies are also expanding their portfolio of sustainable products to drive revenue growth. For General Electric (GE), developing and marketing everything from compact fluorescent light bulbs to energy-efficient power-generation turbines through its Ecomagination initiative has helped the company to sell more goods and services. In 2015, its Ecomagination revenue had reached US$36bn, up sixfold from when it launched the initiative in 2005.
Similarly, Italy-based Enel Group has reshaped its strategy to focus on renewable-energy solutions. With almost 50% of growth-related capital expenditure now based on renewables – the utility company has found many opportunities for business expansion.
Enel Green Power (EGP) is Enel’s renewable-energy subsidiary with a power generation mix that includes wind, solar, geothermal, biomass and hydropower. This year, Enel established a new business line to develop innovative, digital solutions such as infrastructure that will make it easier for drivers to switch to electric cars from fossil-fuel vehicles. “We are proposing the generation of renewable energy in a large number of countries where drivers will have the opportunity to recharge their batteries with clean electricity generated by us,” says Antonio Cammisecra, head of EGP.
EGP has experienced a near-tenfold increase in growth since its inception in 2008 and is currently adding more than 2 gW of capacity a year.
However, Mr Cammisecra stresses the need to choose new markets carefully. “You have to exploit renewables where they are. We have a simple set of rules to define our strategy and we don’t go into markets where we have only one technology to exploit,” he says. “By combining technologies and natural resources, we can offer better products to customers because we are a more stable provider and can follow the demand curve more effectively.”
Even so, this has not limited EGP’s geographical expansion. Whereas in 2008 its operations were based largely in Italy and Spain, the company now has a presence in countries such as the US, Chile, Brazil, Mexico, South Africa, India and Australia.
Similarly, for Total, the French oil and gas multinational, the promise of solar technology has prompted major investments in countries including South Africa, Japan and Chile. Total is setting aside 10% of its annual research and development budget (which exceeded US$1bn in 2016) for the development of clean energy technologies such as carbon capture and storage.
Whether they are selling energy or food, an increasing number of companies see low-carbon strategies as having the potential to contribute to their expansion. “By taking action on climate change, we are laying a long-term path for business growth in a future with diverse and growing needs,” says Ms Holdorf.