Will 2013 see the global sale of more sustainable goods and services reach $2 trillion? 2011 was a milestone year for sustainability with the sales of (more) sustainable goods and services reaching $1 trillion globally. My economic forecast is that in 2013 we have the potential to double that, achieving $2 trillion in global sales of (more) sustainable goods and services. These record sales will be driven by three consumer and business mega-trends:
1.Business Nakedness – You are naked! Get buff!
The C-suite is embracing this reality in today’s digital and connected world.
Nothing a business does goes unnoticed or unreported by consumers, workers or investors. Whether it is a deadly garment factory fire in Bangladesh, pink slime or the BP oil spill, the evidence is overwhelming that corporations are facing unprecedented global public exposure. Getting your business “buff” means re-engineering it to focus on the authenticity and transparency expectations of your customers, investors and workers. This re-focusing is a company’s most prudent and cost-effective course of action. The C-suite understands this imperative. In 2011, 38 percent of businesses surveyed by SCA had a sustainability initiative. Today that number is 64 percent.
This trend will only grow as investors accelerate their assessment of a company’s CSR liabilities in their equity analysis. KMPG reports that the world’s largest corporations have a $2 trillion off-balance sheet liability tied to their environmental impacts. This scale of liability is equal to 50 percent of their EBITA profits. An investor lawsuit is in the future for any CEO or CFO that ignores this liability and fails to report it in their 10K and working to mitigate these liabilities. In response, the C-suite is taking actions like the greening of their supply chain and the redesign of their products using sustainable best practices.
2. Sustainability supports everyday low prices
To win price competitive advantage, companies are now using sustainability to drive down business costs. Walmart’s sustainability strategy is based upon the idea that sustainability absolutely supports everyday low prices. Companies from Ford to DuPont are reporting how their sustainability initiatives cut both costs and reduce waste streams – winning them price competitiveness and customers.
A second and even more promising business trend is the use of sustainable best practices to design products that cost less and improve the health of people and the planet. The recent launch of the Starbuck’s $1 recyclable cup is just one of a growing number of examples. Starbucks’ cup promotes customer loyalty while also reducing waste streams. The auto industry has embraced this sustainable-product-design strategy offering fun-to-drive cars that use less fuel, emit less greenhouse gases and utilizing recycled and recyclable materials within the car or truck. The result is record auto industry sales fueled by these newly designed vehicles. GM just reported a milestone of selling over 1 million cars with more than 30 MPG fuel economy during 2012.
3. Consumers believe climate change is real and damaging
This is the megatrend of megatrends for the sustainable economy. The Yale Project on Climate Change Communications reports that 74 percent of Americans now believe climate change is real and harmful to them. And consumers are taking action. Here are a few examples:
- The number of Americans who say they “always” or “often” walk or bike instead of driving is at its highest recorded level.
- 57 percent of Americans now report that most or all of the light bulbs in their home are higher efficiency CFLs – up from 40 percent in November 2008
Three Americans in ten say that in the past 12 months they have given business to a company as a reward for their steps to reduce global warming.
This is the megatrend no business or investor can afford to ignore. The revenue success of every company is now being determined by its ability to offer consumers price competitive sustainable products that satisfies the consumer’s search for “in me, on me and around me” solutions.
The $10 trillion global sustainable economy
The sustainable economy is driving toward $10 trillion in annual global revenue as early as 2017 due to two key pricing megatrends. The first pricing megatrend is that the economics of unsustainability continues to rapidly rise. Examples abound from higher corn prices to our pain at the pump. Consumers are also making the connection between cheap products, like the dollar menu item in fast food restaurants, and external costs like increased obesity and diabetes levels among children. A great example of how consumers are reacting to this growing understanding of the true price of unsustainability is the recent report that half of all moms are reducing their purchase of snacks, processed foods and soda.
The second major price megatrend is that the price of sustainability is rapidly falling. Digital has revolutionized the music, movie and paper industries delivering lower prices and waste streams. If oil had experienced the same drop in costs as solar panels it would be selling for $10 per barrel. LED lighting is on the cusp of explosive revenue growth as its manufacturing costs benefit from Moore’s Law. The clear trend-line is that companies and technologies offering “cost less, mean more” solutions will grow market share.
This article is the last of a three part series on the 2013 Sustainable Economy. Please visit 3 Drivers That Will Push Sustainability into an Investment Megatrend in 2013 and 5 Sustainability Trends That Will Shape Stock Valuations in 2013 to see the prior two articles.
Bill Roth is an economist and the Founder of Earth 2017 He coaches business owners and leaders on proven best practices in pricing, marketing and operations that make money and create a positive difference. His book, The Secret Green Sauce, profiles business case studies of pioneering best practices that are proven to win customers and grow product revenues.