The Cleantech Competitive Advantage -one of Six Global Trends Driving Business Change

>> Sep 22, 2011

The cleantech-enabled transformation to a low-carbon, resource-efficient economy may be the next industrial revolution.

Ernst & Young's work on Six Global Trends Shaping the Business World  list those six trends as:

green dollars Emerging markets increase their global power

Cleantech becomes a competitive advantage 

Global banking seeks Recovery through transformation 

Governments enhance ties with the private sector

Rapid technology innovation creates a smart mobile world 

Demographic shifts transform the global workforce


We focus here on their report  on Cleantech becoming a competitive advantage .

As this transformation accelerates, global corporations are increasingly realizing that they must understand the impact of cleantech on their industries and develop strategic plans to adapt to this change.

Going big: the rising influence of corporations on cleantech growth, Ernst & Young's 2010 global survey of corporations with more than US$1b in revenue, showed that cleantech is an organization-wide or business-unit-level initiative for 89% of respondents; 33% spend 3% or more of total revenues on cleantech and 75% expect cleantech spending to increase over the next five years.




Governments also view cleantech as a national strategic platform for creating jobs, fostering innovation and establishing local industries. According to Bloomberg New Energy Finance, investment in cleantech surged 30% in 2010 over the previous year to US$243b, double the amount recorded in 2006 and nearly five times that of 2004.

But this is not enough.

There is still a large gap between the capital required and the capital available to fuel the transition to a low-carbon economy. Primary energy demand is expected to grow by 36% worldwide between 2019 and 2035, with the bulk of that new energy use (93%) coming from emerging markets.

china solar By 2035, China alone will see its energy needs rise by 75%, according to the International Energy Agency (IEA) report, World Energy Outlook 2010.

In the coming years, surging demand, energy prices, energy security concerns and scarcity of natural resources will encourage governments and companies to work harder to diversify their energy portfolio mix and to continue investments in clean energy innovation, deployment and adoption.

This inevitable move to a low-carbon, resource-efficient economy presents an opportunity to stake out and capture a strategic competitive position — not just for governments, but also for innovators, investors and corporations, too.

Looking ahead, we see a number of important changes:

The energy mix evolves

Renewable energy is still expensive in most places, which will limit its use in the short run. But as wind, solar and other renewable projects scale up, their prices will continue to fall.

wind uruguay The IEA predicts that power generation using renewables will triple between 2010 and 2035. Fossil fuels such as oil and coal will lose market share over time, as natural gas and nuclear power contribute to the diversified energy mix.

There has been a surge in construction of nuclear power reactors worldwide. Natural gas, a cleaner-burning fossil fuel, is expected to grow more important, serving as a bridge to a renewables-based economy.

Clean energy is a national competitive advantage

Many governments are aggressively implementing clean energy policies, setting emissions targets and providing incentives for cleantech investing.

China, Germany, India and Brazil are gaining leadership positions in solar, wind and biofuels.

The US remains a cleantech leader because of its entrepreneurial culture and vibrant venture capital environment. Policy-makers are betting that cleantech investments will yield other benefits such as job creation and innovation-led economic growth.

Notably, private investment is flowing to countries with comprehensive, clear and long-term energy policies aimed at incentivizing renewable energy use, promoting efficiency and reducing carbon emissions.

Companies make cleantech a strategic priority

Sensing commercial opportunity, companies increasingly are building cleantech into their growth strategies. Many are also "greening" their existing products in response to increasing consumer demand.

google home meter Others are moving into growth areas that fall outside their traditional lines of business, hoping to achieve first-mover advantage as the landscape evolves. For example, Google and Cisco have both entered the home energy management space.

In the past year, corporate activity in the cleantech marketplace has significantly increased through direct investments, partnerships and acquisitions of newly formed cleantech companies.

Raw materials are strategic assets, especially in a time of scarcity. To secure them, some governments have turned outward. China, for example, is now deeply invested in Africa.

Companies, meanwhile, are reconfiguring supply chains, seeking greater flexibility in an effort to mitigate the impact of raw materials shortages, higher commodity costs and price volatility. Some businesses are protecting their supply chains by acquiring their raw material suppliers. Steelmakers, for example, have recently bought several iron ore and coal mines in different countries to guard against supply chain disruptions.

Organizations are more transparent about sustainability

As concerns about resource scarcity, including energy and water, become more pressing, companies will face increasing pressure from their stakeholders to demonstrate that their businesses are sustainable.

Companies will also have to disclose the social and environmental impact of their business activities. Although most sustainability reporting is currently voluntary, the broad trend is toward greater disclosure.

These voluntary guidelines may soon become mandatory.

More than 3,000 companies worldwide issue such reports, following such voluntary guidelines as the AA1000 AccountAbility Principles Standard and the Global Reporting Initiative Reporting Framework.


Source: Clesias

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