Is There a Green Business Bubble?

The media calls and e-mails have been arriving fast and furious -- a dozen or more each week, even now that Earth Day is over. CNN, the New York Times, Business Week, Advertising Age, "Good Morning America," the Sundance Channel, Reuters, the Discovery Channel, Marketplace radio, and a slew of local papers. And a surprising number seem to have some variation of the same two questions:

Is all of this focus on the greening of business merely a fad? When will the bubble burst?

Such questions are understandable, albeit misguided. The world of green business appears to have come out of nowhere to grace the cover of every major magazine, business and otherwise, not to mention scads of other stories on inside pages. Where stories about business and environmental issues used to appear sporadically in the New York Times, Wall Street Journal, and other major publications, they are now daily fare, with sometimes as many as a half-dozen news stories, feature articles, and opinion pieces in a single daily edition.

For those of us who have been toiling in these fields for a long time, the greening of business is viewed as an "overnight success story" that was twenty years in the making.

Given our society's microscopic attention span, and the apparent need of the media to deflate trends they've helped pump up, coverage of green business would seem likely headed for a fall. And that might indeed happen, for any number of reasons. From the public's perspective, this would make it seem like the greening of business was yet another cynical fad that's now faded into the woodwork.

Such perceptions aside, the topic isn't going away any time soon. Here, in no particular order, are ten reasons why I think the greening of business will be an enduring issue for years to come, regardless of the media's attention span:

1. The problems aren't getting any better. This is fairly obvious, especially if you've seen The Movie. The environmental movement, it's been said, is rapidly morphing into the climate movement, and there's a parallel shift taking place on the business side. The motivations may be different -- for activists, climate has become a rallying cry that gives disparate groups a singular focus; for companies, it's about the need to squeeze efficiency out of every operational nook and cranny while reducing risk and enhancing image -- but the upshot is the same: Until the climate problem is under control, it will be Job One, environmentally speaking, inside most companies. And as concern, regulation, and market-based mechanisms to address climate change ramp up, this will be a key business focus for a long, long time.

2. The political will is finally emerging. Again, climate is the reason. In the U.S. and elsewhere, political leaders are realizing that this isn't a topic that will go away; indeed, it is gaining steam and could even be a focus of the 2008 U.S. election. That could increase public scrutiny of how company lobbyists are pressing for favorable treatment, and some of this pressure could come from companies otherwise seen as "leaders" in corporate climate action, leading to activist charges of greenwashing or worse. If there's evidence of a parade of public concern over climate change, politicians will certainly want to get in front of it, and companies may end up finding that there's simply no longer enough lobbying money to buy their way out of the problem -- or, better still, not enough politicians willing to be bought.

3. Consumers are waking up. This remains to be seen, of course, but there are encouraging signs that the American public is finally ready to vote with their pocketbooks, choosing greener products, or products from companies perceived to be green leaders. One thing is certain: the pipeline of greener products from household brands is filling up. We'll see a new wave of green product introductions starting later this year, including some from companies that haven't previously been in the green marketplace. If their products catch on, that pipeline could become a gusher.

4. The supply chain is gaining power. Wal-Mart, which is pushing its 60,000 suppliers to perform all sorts of sustainability somersaults, is one big reason, but they're hardly alone. Corporate and institutional buyers of everything from carpets to car parts are looking upstream for solutions, asking suppliers to, variously, reduce packaging, eliminate hazardous materials, use more organic or biobased ingredients, and take other measures to "green up" their products and operations. That's moving some markets toward cleaner production methods far faster than any mass consumer movement could.

5. The environment has become a fiduciary issue. The past twelve months has seen an almost weekly stream of stories and reports from large financial institutions -- banks, insurance companies, and investment houses -- talking about the risks of climate change, toxics, and other environmental issues to shareholders. And shareholders, especially pension funds and large faith-based institutional investors, are starting to hammer hard on companies to acknowledge, reduce, and report on their risk profiles in these areas.

6. The bar keeps moving. One theme of my presentations lately is the question, "How good is good enough?" Simply put, it bemoans the lack of standards or general agreement on what constitutes a "green business." That lack of standards frustrates many companies' efforts to be seen as "good guys"; instead, they never seem to be good enough. But there may be an upside to the lack of definitions: With no standards, the bar is free to drift continually higher. And that seems to be what is happening. For example, as more companies claim some form of carbon neutrality, the value of carbon neutral as a marketing claim becomes increasingly devalued. And as the bar rises, laggard companies, even if fully compliant on the regulatory front, are finding themselves further and further behind, from a reputational perspective.

7. Companies are moving beyond "sustainability." Given the rising bar, it would follow that companies are continually innovating, and that the cutting edge moves increasingly farther out. Within the next two years, it would not surprise me if being a "sustainable" company was no longer seen as a leadership goal. The real leaders will have focused their sights on being restorative -- for example, not being merely carbon neutral, but being carbon negative, taking more carbon out of the atmosphere than they put in.

8. More companies are telling their stories. It's no longer good enough for companies to be quiet and humble on things green. That doesn't necessarily mean they should be needlessly boastful, especially if it's not in their nature to do so. But doing the right thing and keeping it quiet is less of an option these days. Customers -- both consumers and business customers -- want green heroes, companies they feel are setting the pace. Companies holding on to the belief that walking more than talking can insulate them from criticism will find that the risks of being overly exposed may be outweighed by the risks of being seen as a laggard. Expect green advertising and marketing campaigns to mushroom in the coming months.

9. Clean technology is changing the game. The clean-tech boom (which, indeed, may be a bubble unto itself) is making it easier and cheaper for companies to transform their products, processes, and performance to use more renewable energy, biobased or lightweight materials, and fewer toxic ingredients. Given that some of the most promising, game-changing technologies are only just now reaching their intended markets, we are on the cusp of a new generation of clean-tech products and services. As they roll out, whether from startups or mega-conglomerates, they'll enable a wide range of new green products, services, and business opportunities.

10. There's money to be made. That's the real bottom line: The environment is now being seen increasingly as a potential value-add, not merely a cost to be minimized. Hence, green leaders are emerging throughout companies, not just in the environmental departments, as forward-thinking entrepreneurs (and intrapreneurs) identify and exploit new ways to leverage green thinking into new products and markets. As the number of success stories moves beyond hybrid automobiles and organic foods to include other categories products and services, green will be seen as a more "normal" part of the marketplace.

There's more. (What did I miss? Please weigh in.) I managed to get through all this without once mentioning China or India. They, of course, are also game-changers, as they move forward -- too slowly at times, leapfrogging the industrialized world at others -- in building their fast-growing economies.

And then there's the specter of surprises: another Katrina, a terrorist attack, refinery explosion, nuclear meltdown, deadly heat wave, infectious epidemic, discombobulating iceberg, or other catastrophe. Each of these could help move the role and responsibility of the private sector to be green leaders back into the limelight.

And once again, the media will likely "discover" the greening of business.

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Comments

[Jason Graham-Nye]

After reading the headline I thought the conclusion might go the other way. Given we have moved 10,000 miles to launch our own green business, I much prefer how this post ended up!

Cheers

Jason

[Clifford Waldeck]

Kudos to the Wal-Marts and others doing their part to better green their products, supply chains and operations. Their efforts truly helped build the bubble. I'm rooting for the small green businesses that will evolve into the business giants of the future. They'll solidify the bubble so it will never burst.

Go small green biz go!

Cliff

[David Biddle]

It can probably go into the tenth reason category, but the roll out of new technologies and new services is really gathering speed. If a carbon tax were to be implemented for transportation fuels and coal-fired electricity, the cost-competitiveness of state-of-the-art offerings from home PVs to Tesla Sedans for all would be more than obvious.

Even more important, however, is the fact that in the next 10 years, new energy systems are going to pop up the way PC chips did back in the late 70s. The goal is for all of us to get off the grid with independent, clean power. A fuel cell car that doubles as a household generator is a vision the way I remember folks talking about "super computers" the size of a three-ring binder. Mark my words, if the market conditions are right and we have leadership and a willingness to invest and take chances, change is going to come like we've never imagined.

[Bruce Harrison]

An inferred subtext is that this isn't a "green bubble" but an eco-geo platform. Original environmental drivers have coupled with energy drivers to create a base for (dare we say?) sustainable economic churn. No "bubble" to pop but of course there will be ups and downs, good stuff and stupid stuff, winners and losers...that's life. There will also be innovation, investment, technology and service development, changed attitudes, more players going in the same direction -- on and on in the new green, carbonized American economy.

[Grant]

I must admit, here in South Africa a number of these trends are also becoming visible. I am a little concerned that some "green" technologies are been driven harder than others. But I guess that's the free market! These are exciting times and I just trust that the media bubble that is likely to burst does not detract from the actual issue of climate change the need to do something.

[Bogman]

You paint a great picture, Joel. I hope it can happen in time. I go back and forth between hope and pessimism. The latest scientific reports that the Artic polar cap will be ice free in summer by 2020 rather than 2050 is disheartening, as well as the disappearance of the bees and, where I live, the worst drought on record.

I believe that people need to see green beyond the 'tree hugging' altruistic phase, as saving animals and plants apparently wasn't enough for its own sake, and as saving US -- humanity -- from food and water shortages, disease and catastrophic weather events.

Unfortunately, it will probably be another scare that gets people's attention. As I said, I hope it's not too late.

[Wyatt Brown]

There certainly is money to be made in survival!

Do-gooders aside, smart capital flows like water or electricity, down the most efficient and logical path.

This is the financial opportunity presented by a green-centric economy.

[Rich Engler]

#6 is a key issue: "What is Green?" will be a relative thing until everything is zero waste/zero hazard. We've got a long way to go.

I don't think that any business will be truly sustainable (#7) for a long time--we just don't have the technology yet (materials, energy, water, etc). At the same time, we are starting to see restorative technology. It all depends on where the market potential is. I, for one, am glad that business finally recognizes (#10) that doing "greener" right is profitable.

[Jason Gohlke]

Great analysis of why sustainable business isn't going anywhere any time soon.

You may be aware of the California League of Conservation Voters' upcoming event celebrating California's green tech revolution... if not, click my name for details.

[Peter Williams]

Joel

I think people may be misunderstanding the nature of a bubble. All Joel's arguments could be true (I happen to believe they are). But there could still be a bubble when too much investment (either VC or stock purchases) floods into an industry not yet ready and able to absorb it. Too much money chasing too few ideas pushes the price, in this case company valuations, up, and gives us a bubble.
Some counterpart of all Joel's arguments applied to the internet, and look what happened there!
To go further, it may well be that a bubble is part of an inevitable shake-out as expectations and reality come into line..?

[Catherine Barton]

As a change agent in a 60-year-old manufacturing company, I've never seen speedier progress take longer! While we've taken almost 18 months (and still going) to convert our Vertical Interior Product line to greener more sustainable raw materials, manuf processes and streamlined installation techniques (phew!) ..... I guess we're lucky to be working with companies like GE Plastics (bio-resins replacing PVC) and RIT's Sustainable Systems Research Center to help us in our ongoing efforts. Greatest lesson learned to date: It's an ongoing effort - Becoming Green not Being Green is what we are challenged with!

[Andrea Learned]

I found this article, thanks to a friend - and just wanted to chime in on point #3: consumers are waking up. They are, and from my perspective women may be the key consumers driving businesses to get up to speed faster on sustainability/environmental concerns. The very good linear reasons/rationale for addressing sustainability haven't motivated businesses enough (or quickly enough), but the less linear/more emotional aspects of it may finally cause real change.

[Mary]

I'm with Andrea on this one, women will drive the difference, and we need better reasons that market fluff.

I differ with your asumption that "no bar" is better. Isn't "no bar" what got us into this mess? As a consumer, I take the "trust, but verify" approach. Give me third party, quantified proof that the life cycle of a product is really carbon neutral.

[Hun Boon]

People can only recognise climate change if it hits them in the face, which was what has been happening over the past few years.

We have been preaching the green message for years. The only difference is that people are finally starting to listen and act.

[Georjean Adams]

Another key factor to add into the "top" are the values of the next generation of employees. Those much needed good and great employees will only work for companies that are ecosystem smart.

[regina]

In order to become restorative businesses I believe businesses need to get beyond "how do I make my current activities greener?" to "what would my business be if it were sustainable and restorative?"

[diddy]

Media and the US public love disasters, and if they can't find a real one, a predicted disaster will do. And if the prediction can't be scientific, then fantasy will do. I worked on Superfund sites, Exxon Valdez samples, and here comes some kind of green revolution promising the american dream of sustainable dollars. I don't buy it. Or maybe it's just that I won't live long enough to see real change, just more excited media.

[Patrik M]

Joel,
I think you make excellent points. I would say that investor experience from the dot-com bubble is another important aspect that will hinder the renewable energy and cleantech sectors to become bubbles. I develop that on my blog.

[Jim Ronay]

Care is needed when getting excited about "new" trends. Typically five stages occur at 20 yr intervals of a new product or capability. Development, introduction, growth, maturity, decline. Computers seem to be in the beginning of the maturity stage. The Internet in late stage 2. I suspect "green" is in early stage 2.

[Tom White]

I'm impressed to see that urban economic developers are starting to see more green opportunities in job training, workforce development and local food security.

There's also a new conjunction between environmental justice and social equity movements in the urban areas, with entrepreneurs like Van Jones in Oakland and Majora Carter in the South Bronx and the Apollo Alliance starting to "green the ghetto" with some serious social enterprises.

I've posted some interviews with these social entrepreneurs on the SEReporter website and SEblog.

[John Neville]

Joel - nice list of reasons - except one: moving beyond sustainability. Perhaps moving beyond regulatory compliance would be more fitting. What businesses are doing without exception, I think, are moving towards becoming less unsustainable. That seems to be the real focus today - reducing unsustainability. To become more sustainable, we need to stop growing the economy, our population and our levels of consumption. I don't see any evidence of that happening anywhere. When a business adds a new line of sustainable products, that action is unsustainable in this finite world. So - while encouraging more sustainable businesses, as you do - and as we do at Sustainable Arizona - we also need to be realistic about what we are doing. We are becoming less unsustainable.

[Fred]

Great post and even better counter points.