Is sustainability becoming a baseline?

Peter Garforth wonders if green is the new green.

By Peter Garforth

A comment from an interview with an auto industry leader at the North American Auto Show recently caught my attention. When asked about the “green cars,” the response was that they were no longer a category and that sustainable technology was simply becoming embedded in all cars. The new fleet average targets of 54 mpg by 2025 in the United States, and by 2020, 50 mpg in China and 60 mpg in the European Union, no longer look like fantasies.

The auto industry is discovering that systematically pushing “green” features into lower-priced vehicles makes them attractive to consumers, while margins are retained as costs drop rapidly with volume or growth in market share. In effect, the market baseline shifts. What was green yesterday is normal today.

The speed of adoption is accelerating as major markets are setting the same expectations and increasing the competitive pressure. Along with modern design and manufacturing that allow faster model changes, global competition and innovation could well see this industry hitting targets ahead of schedule. When Cadillac announces an electric luxury sedan and Jeep announce a 30-mpg Grand Cherokee for 2013, you know the baseline is changing.

This industry also coexists with rail and air on completely different terms than in the past. The Airbus A380 and the Boeing 787 are more fuel efficient per passenger than a Prius. A modern train gets at least 10 times the fuel efficiency of that same Prius, at far higher speeds and comfort. Are these competitors or colleagues?

Positive feedback is happening in the transportation industry, which, worldwide, accounts for about 30% of all energy used. Energy efficiency challenges, global and intermodal competition, and rapid innovation are redefining the sector’s relationship to energy. There’s still a long way to go, but arguably a sustainability tipping point has been reached.

Are we seeing this in other sectors? In January’s column, the accelerating scale of the global deployment of renewable electricity generation was explored. Since then, new potential game changers are playing out.

Peter Garforth heads a specialist consultancy based in Toledo, Ohio and Brussels, Belgium.Peter Garforth heads a specialist consultancy based in Toledo, Ohio and Brussels, Belgium. He advises major companies, cities, communities, property developers and policy makers on developing competitive approaches that reduce the economic and environmental impact of energy use. Peter has long been interested in energy productivity as a profitable business opportunity and has a considerable track record establishing successful businesses and programs in the US, Canada, Western and Eastern Europe, Indonesia, India, Brazil and China. Peter is a published author, has been a traveling professor at the University of Indiana at Purdue, and is well connected in the energy productivity business sector and regulatory community around the world. He can be reached at peter@garforthint.com.

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Germany, faced with the self-imposed challenge of having 35% of all its electricity renewable by 2020, finally admitted its grid would be inadequate if it stuck to its original extensions and upgrades timetable. A reaction could have been to delay the target, especially given Europe’s current economic challenges. At the end of 2012, the harder political choice was made to hold the target and shrink the implementation to four years.

China is increasingly accepting that growth and pollution cannot go hand in hand, and has upped its 2013 renewable target to 49 GW, in order to at least start flattening the fossil fuel growth curve. More interestingly, this January, it announced a wide ranging cooperation with Germany on energy policy, industrial teaming, and city-scale renewable systems.

In the United States, a last-minute tax deal ensured most planned wind projects would go ahead maintaining the current growth rate. It is easy to see how decisions like these could catalyze another global round of innovation and scale-up on the clean electricity front. There is probably a way to go, but the signs are in place for the electricity market to soon subsume green into it baseline.

What about other industry, especially those with high energy consumption or risks? As discussed so many times in this column, individual corporations come close to embedding energy and emissions efficiency into their day-to-day operations with reduced costs, enhanced innovation, and competitive advantage. Inside their corporate boundaries, they have shifted their energy baselines, but remain outliers relative to most of their peers.

For the past few decades, industrial energy efficiency improvements have globally outpaced those of transportation, utilities, and buildings. There are signs this may be changing as the transportation and electricity sectors accept, and probably deliver, breakthrough efficiency and emissions targets. Improved energy understanding is even beginning to shift the energy habits of users and owners.

It is time for entire industry sectors to revisit the sustainability question, not only inside their corporate boundaries, but also with their customers, supply and delivery chains, and competitors. It is time to explore what it will take to shift green energy and other aspects of sustainability from being an optional extra to an embedded part of the baseline design, manufacturing, and delivery of products.

Failing to do this in a coherent and systematic way could result in unrecoverable loss of competitiveness for companies, or even entire industry sectors. The reverse is true. As the auto, transit, and electricity sectors are demonstrating, embracing energy sustainability as a given is redefining the value and competiveness of their offerings.

The United States is already employing more than 3 million people in the green economy, and that is expected to rise rapidly. Germany sees the green technology sector to be 15% of GDP employing more than 4 million people by 2020. The shift to new norms is well underway.

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