Sustainability Is Just a trend

Renewable-energy and green-business initiatives deliver little real value and will fade soon. Pro or con?

Pro: No Credible Evidence

You usually only know something’s a fad in retrospect, after a number of unsustainable businesses fail in the marketplace. But when it comes to the renewable energy industry, it’s hard to tell whether certain companies or technologies are fads or innovators, because the government is plying them with subsidies that shield them from market competition.

Venture capitalists try to avoid fads, but they also know that taking some risks with emerging technologies can pay off. They’re doing it, however, with private money and have no incentive to allocate capital on a whim. When government tries to play venture capitalist, it does so with taxpayer money and has less incentive or ability to get it right.

The government’s track record at picking winners in energy markets has been dismal. Take the failed taxpayer-funded experiment with “synthetic fuels” in the 1970s. More recent were government efforts to jump-start the hydrogen fuel-cell automobile and the quest to find a cleaner-burning coal. All petered out due to each project’s economic infeasibility—but only after spending billions of taxpayer dollars.

Until the energy market is left to innovate in all sectors—renewable and nonrenewable—without government trying to steer the flow of capital, it’s hard to know whether renewable energy sources can be a real long-term solution. We should trust the markets to determine the best way to reach that goal, not government planners.

Con: Many Benefits Now and Later

For businesses—the mighty corporations—sustainability has meant a lot of different things over the past five decades. From a strictly regulation-driven compliance “issue,” sustainability has traveled as a concept through years of debatable dialogue on climate change, the set lifetimes of our energy resources, and myriad definitions.

In fact, a recent report by Accenture noted that of 766 chief executives interviewed, 93 percent believed that sustainability will be “important” or “very important” in the future success of their companies.

Today, thousands of companies are releasing sustainability reports as an exercise in introspection and future improvement. The next frontier, as many indicated—including Lord Michael Hastings, KPMG’s corporate citizenship director, and Maggie Kohn, Merck’s CSR (corporate social responsibility) director—at the 2011 Net Impact Conference.

And here’s why: Sustainability offers organizations a wide enough platform to shift from a linear obligation restricted to shareholders to a multiple stakeholder model. Further, looking at business growth through the sustainability lens allows for consistent customer loyalty, a viable social license to operate, and a vibrant environment, all of which lead to competitive edge.

This is not lost on corporations.

As Sally Jewell, a former commercial banker and the current CEO of the conservation-minded outdoor equipment maker REI, said, “There is no mission without margin and no margin without a mission.”

If being financially successful isn’t a trend, figuring how to be so while replenishing your resources and maintaining your very raison d’être certainly cannot be, either.

Opinions and conclusions expressed in the Debate Room do not necessarily reflect the views of Bloomberg Businessweek, Businessweek.com, or Bloomberg LP.

Reader Comments

Stephen Nemeth

The challenge here is what is meant by sustainability. Singh seems to be talking about it in the broader sense of social, economic, and environmental responsibility, which is a "trend" in as much as successful companies tend to be the ones that are better managed and better manage their resources. However, Silvinski seems to be discussing it within the narrow confines of regulation, in particular renewable energy, which is not so much sustainability as it is, well, just renewable energy, one part of the overall sustainability area.

Further, he neglects social aspects even of renewable energy (public health concerns, etc.) in favor of a tired trope about government picking winners through its intervention. The concept of a free market with no intervention has never and will never exist (even that Saint of Capitalism, Adam Smith noted as much--even suggesting (gasp!) that government intervention could be a force for good).

Witness how the government "picked winners" during the bailouts of the financial and automotive sectors. To suggest that the real problem is that government is dictating the flow of capital into these sectors simply ignores the role of government in these sectors as a major force for innovation (see the military's successful innovations in renewable energy) as well as its role to protect the citizenry from the harmful effects of rogue players (Massey energy, anyone?). With billions in capital being thrown into the energy arena since the 70s, with real effects on both public health and in reduced energy costs (see: profits), to suggest this is a trend may be quite a shock to the leaders at Duke energy, states like Texas, and others whose business models now rely on reduced energy consumption and innovations in the renewable energy field.

jimbo

Renewable-energy and green-business initiatives deliver little real value and will fade soon.

Perhaps we should consider them as mutual exclusives and diametrically opposed. Then we would not expect a lot out of them.

Ideapete

Sadly, sustainability is currently following a numbers game and will not follow its name's meaning and should listen to W. Edwards Deming, probably the greatest American-born expert on quality: When people and organizations focus primarily on quality, quality tends to increase and costs fall over time. However, when people and organizations focus primarily on costs, costs tend to rise and quality declines over time.

Today’s focus of the US energy industry future is solely on cost and that includes renewables - sustainability (sic). The average efficiency rating in the utility industry is less than 25% and green technology is much lower and until that curve ramps up drastically we are throwing magic bullets at an empty hole.

Follow Deming's path, and it would truly earn its name sustainability

Merkel-pressium

A German village called Wildpoldsried is now producing 320% of solar energy, which the residents sell to the main grid and earn millions of euros. This kind of hot news is intentionally ignored by the most of big news sources like BW, Forbes, etc., due to pitiful political reasons.

Kaj Embren

As Aman Singh wrote, from a strictly regulation-driven compliance “issue,” sustainability has traveled as a concept through years of debatable dialogue on climate change, the set lifetimes of our energy resources, and myriad definitions. Maybe it is not right to called it a concept. It is more of a basic rule and a living play field for politicians, business, and all stakeholders in the societies. As we are in a turbulent time and many of our basic fundaments of democracy, economy, environment, and other welfare states ingredients are topics in the discussion. And most of us would like to find the most relevant way out of the crises and do it in a long term sustainable way. Let me take one of many example of what sustainability could be for Libya. They are in the beginning of a new era to build their society. They should take the time to develop their strategy based on a long term sustainable society. Read how in my blog - Revolution, recession and sustainability at http://bit.ly/w5dZTN


Jerry Wilkinson

And here I thought the answer was clear. Sustainable energy makes sense on so many levels. If for no other reason than it is renewable and will not at some point run out. Relying on a finite source that will and is running out also means an alternative must be found, and now seems like a good time for that. The added issues of pollution and global warming are equally strong reasons to seek out, develop, and embrace sustainable/renewable energy sources.

Perhaps I am missing something, but I do not understand, other than profit and control, why anyone would dismiss alternative energy as fringe or unachievable. It is a very necessary and desirable goal.

Green businesses, again, think renewable. If a symbiotic cycle can be established, clearly that is better than a linear arrangement whereby the by-products end up in a landfill, at some point we run out of land, not to mention the multiple forms of destruction and waste that occur along the way.

Just my simply put thoughts...

James A. Burt

The sun will last billions of years after all carbon fuels are exhausted.

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