By: Tomohiro Ohsumi/Bloomberg News, NP
So far, we have examined how energy efficiency can cut costs and drive bottom-line profitability. But going green can also drive top-line revenue with explosive markets, committed green consumers and value-driven employees.
Companies are going green to position themselves as leaders in rapidly expanding markets. HSBC became the first major bank to become carbon neutral in 2005. In 2007, HSBC committed $90-million over five years to increase its energy efficiency. Along with the payback and it being the right thing to do, HSBC wants to be a significant player in green energy financing estimated to be worth $2-trillion by 2030. Installed wind power has been growing at a rate of more than 30% compounded annually for more than a decade, while for solar it’s more than 40%.
Following HSBC’s lead, Barclays Bank became carbon neutral in the U.K. in 2007. Why? Barclays wants a significant share of the carbon trading market, estimated to hit $2-trillion by 2030. The carbon market, at $8-billion globally in 2005, exploded to $125-billion in 2008 — a compounded annual growth rate of 100%.
Legendary Silicon Valley venture capitalist John Doerr sees green technology as the “biggest economic opportunity of the 21st century.” Leading by example is key if companies want a share of green markets.
Companies are going green to attract green consumers: The Natural Marketing Institute studies a segment of consumers who are committed to lifestyles of health and sustainability, a $209-billion market in 2008 that is predicted to grow to $845-billion by 2015. That’s a CAGR of 32%. Just how many markets are expanding this rapidly during this recession?
Four of five North Americans say they want to buy green products and services from green companies. But beneath the politically correct answer, commitment varies widely.
A composite picture of North American consumers, aggregated from half a dozen leading research firms’ findings: Alarmed about environmental state of the world, about 20% are committed. They buy green products and services and are willing to pay a premium of up to 20%. Committed consumers are active campaigners, whether in an environmental group or in their community. About 30% are concerned about environmental issues, will pay a smaller premium compared with the committed green products and don’t campaign. About 20% are cautious; they don’t feel any urgency around green issues and don’t feel that their lives will be affected. Disengaged, doubtful and dismissive segments each are about 10%; these segments are not motivated to buy green products unless they cost less.
Here’s the point: 20% are hard-core committed green consumers who buy products and services from leading green companies and continually promote their choices to family and friends. Beware if your company is a green laggard; this group will generate negative word of mouth for your products and services.
Committed and concerned consumers make up half of North Americans. Few companies can afford to ignore such a segment that has grown so quickly and is so large.
Companies are going green to attract employees. Here are staggering findings: MBA grads are willing to sacrifice US$13,700 annually to work for a socially responsible company (according to a Stanford University study) and more than 80% of entry level hires are looking to work for an environmentally friendly company.
The question is: Can your company afford to ignore trillion-dollar markets, explosive growth markets, committed customers who campaign for leaders and against laggards, and attracting and retaining dedicated employees?
Jim Harris is author of Blindsided!, a No. 1 international bestseller, and a Toronto-based management consultant. His new book, A Crisis is a Terrible Thing to Waste, will be published in 2010. You can reach him at jimh@jimharris.com.
