San Francisco and London - Despite ongoing uncertainty about the global economic situation, spending by the world’s biggest companies of developing or acquiring cleantech solutions is robust and primed to accelerate. This is according to a new survey of more than 300 executives worldwide from corporations with revenues in excess of US$1bn (two-thirds of the respondents were from corporations with turnover in excess of US$5bn), conducted by leading professional services organization Ernst & Young.
Cleantech Matters, Ernst & Young’s third annual Cleantech insights and trends report, highlights the critical role corporations will play in shaping the industry’s next stage of development as it looks to find ways to bridge the chasm between the laboratory and the marketplace.
The findings offer further evidence that the world’s largest corporations are speeding up their adoption of cleantech products and services to create a competitive advantage through resource efficiency and sustainable growth. Their investments are targeting cost efficiencies, new revenue streams and internal objectives for sustainability and climate change.
As Gil Forer, Global Director of Cleantech at Ernst & Young explains.
“The increasing interest and activity of multibillion-dollar companies around the globe underscores the growing market opportunities in cleantech. Making good on those opportunities will likely depend on identifying new partnership models that enable corporations and emerging cleantech companies to meet their own objectives while facilitating the arrival of a low-carbon and resource-efficient economy.”
“Also, the rising demand for finite natural resources, spurred by growth in population and in the numbers of middle-class consumers in emerging-market countries, is driving the need for corporations to establish a resource-efficiency agenda to ensure sustainable long-term growth and competitive advantage.”
Adopting cleantech in core operations
For many companies in the survey, spending on clean technology has risen as high as 3-5% of annual revenues, demonstrating the growing importance of a cleantech action plan focused on enabling resource efficiency and sustainable growth.
Two-thirds of the survey’s respondents indicated that cleantech has become a corporation-wide initiative championed by senior management, and 85% reported significantly or moderately accelerating the pace of their company’s strategic response to climate change compared with two years ago.
Not surprisingly, the largest corporations have led this wave of activity by employing cleantech solutions or partnering with or acquiring cleantech companies. Consumer products and other industries with high energy consumption - as well as high consumption of water and other natural resources - are setting the pace in establishing cleantech action plans as part of their overall resource-efficiency and sustainable-growth agendas.Forer comments on how the importance of Cleantech is now recognized in the boardrooms of global corporates: “Importantly, cleantech innovation is being used in companies’ core operations; it’s not a mere science experiment left to the Research and Development (R&D) function. Investments are having the most impact on areas with high energy consumption, such as manufacturing, transportation and logistics and information technology systems.”
Cleantech thriving during the recession
The economic downturn has done little to blunt corporations’ appetites for clean technologies - in fact, the survey shows it may have had the opposite effect. Nearly 55% of respondents indicated that recovering from the current crisis will speed the implementation of their company’s cleantech strategy.
As Forer explains predictions for future spending on cleantech were equally bullish. “The vast majority of respondents project their companies will spend at least US$10 million on cleantech investments by 2010, with 22% predicting a cleantech spend of at least US$100 million. More than three-quarters of the respondents expect their annual cleantech spending to rise over the next five years. The pump is especially primed for companies with lower annual revenues, who will try to catch up to their bigger competitors by quickening their adoption of clean technologies, along with seeking out partnerships and acquisitions involving cleantech companies.”
Making an impact on the bottom line
In recent years, the business case for corporate cleantech investments has evolved from a singular focus on the climate change agenda to a more comprehensive view of how cleantech can boost the income statement, whether through new revenues or resource efficiencies. The global financial crisis of the last two years has not only highlighted and driven the need to employ clean technologies as important tools for operational efficiency and cost reduction, it has also quickened their adoption.
The end result is that cleantech investments are guided more and more by efforts to heighten operational efficiency and cultivate new revenue streams. Underpinning these efforts is a greater awareness that cleantech delivers financial returns right away. Survey respondents rated “operational efficiency to reduce costs” as the most important factor in formulating their company’s cleantech strategy, with “meeting internal sustainability and climate change goals” and “increasing revenues through existing or new products and services” not far behind. And they ranked cost benefits as the top factor in determining their company’s spending on cleantech products and services, with 77% describing it as “very important.”