Why Sustainability Still Matters to Success of Cleantech Markets
Last month I participated in a panel discussion in San Francisco on cleantech marketing and communications. At the heart of that discussion was an unspoken question: ‚ÄúDoes ‚Äėsustainability‚Äô still matter to the future of cleantech?‚ÄĚ ‚Äď that is, have economic and market forces caused the business value case for new technologies (the ‚Äútech‚ÄĚ) to trump the social and environmental value case (the ‚Äúclean‚ÄĚ)?
It‚Äôs not an unreasonable question. The global recession of 2008 ‚Äď 09 has had a dramatic effect on the willingness of markets to make investments in social or environmental priorities that fail to generate immediate return.
One of my co-panelists made a very strong argument that cleantech companies need to focus on the business case ‚ÄĒ that platitudes about sustainability may resonate with some early adopters, but are a pretty thin gruel on which to build a business or an industry. And, of course, he was right.
I tried to make a somewhat different point ‚ÄĒ that splitting the ‚Äúclean‚ÄĚ from the ‚Äútech‚ÄĚ creates a false dichotomy of value between what is often derided as the ‚Äúfeel good‚ÄĚ or social responsibility benefits and the ‚Äúhardcore‚ÄĚ money-making benefits of a new technology or process.
In fact more than any other technology category, communications plays a central role in the cleantech conversation by assuring that both the ‚Äúclean‚ÄĚ (sustainability leadership) and the ‚Äútech‚ÄĚ (business value) stories are told consistently and to the right audiences at the right times.
This ‚Äústrategic storytelling‚ÄĚ works in ways akin to the way a carburetor mixes air and fuel and air to make a motor run. (Or used to. No one has a carburetor anymore.) Too much of one or the other can fail to unlock the full competitive advantage of a cleantech company‚Äôs value proposition.
To be clear, there‚Äôs no question that the long-term viability of cleantech and sustainability best practices depends on making a strong value case for customers and investors.
But ‚Äúvalue‚ÄĚ in cleantech is not simply of the ‚Äúbetter mousetrap‚ÄĚ variety. In cases where the solution involves extra cost, time, investment or uncertainty over the ‚Äúoldtech‚ÄĚ approach, the critical success factor for companies in cleantech is related to finding new ways to monetize the value of the ‚Äúclean.‚ÄĚ
In this way, cleantech is unlike the generation of technology with which people most often compare it ‚Äď the software/IT/internet revolution of the mid-1990s.
Persuading a business to adopt a sales force automation tool from Siebel Systems in the 90s was a relatively pure case of promised business and productivity gains ‚Äď a competitive advantage play.
Today, Siebel Systems founder Tom Siebel is engaged in an exciting new enterprise called C3 whose mission is to help organizations ‚Äúmaximize profitability and cash flow by optimizing their enterprise energy strategy and carbon footprint.‚ÄĚ A big part of the value proposition of that business is essentially a bet on the long-term growth of carbon trading markets and regulatory incentives for a more sustainable energy future.
C3 will undoubtedly deliver on the ‚Äútech‚ÄĚ side of its value proposition. But for all this to work, the ‚Äúclean‚ÄĚ side of the value proposition has to come to life. An essential ingredient in the success of C3 is the idea that software can help companies navigate carbon trading markets and government incentives around efficiency or pollution reduction.
That value derives in turn from expectations that it will be profitable to create low-carbon alternatives to traditional processes and that some meaningful fraction of potential customers in power generation, industrial applications or the transportation sector will care.
This is the embedded value of sustainability communications . . . not in the sense of corporate social responsibility but in the sense of navigating and profiting from the market in its totality (doing things the market as a whole has decided are valuable and important in the long run).
In other words, there is real dollar value in the ‚Äúclean‚ÄĚ of cleantech. Indeed, that‚Äôs why it has organized itself as a sector separate from traditional ways of doing power generation, transportation, automotive applications, building materials and so on.
Think about a ‚Äúcleantech‚ÄĚ innovation from a generation ago: the catalytic converter. It is a brilliant piece of technology, pioneered in the 1950s, but essentially a novelty item until the early 1970s when a variety of factors combined to make it an idea whose time had come.
Those factors did not have to do with better articulation of the ‚Äútech‚ÄĚ value proposition which has remained essentially he same since the 50s. It had to do with the ‚Äúclean‚ÄĚ part ‚Äď namely, the development of market standards that made it an essential ingredient in the future of car manufacturing, including the establishment of the EPA in the U.S.; emissions standards for cars and trucks; the development of unleaded gasoline; and, in general, the mainstreaming of the environmental consciousness of the industrialized world.
It is worth noting that the principal customers of the catalytic converter (automotive OEMs) worked furiously at the time to ensure that they would never have to use them. The competitive advantage of the ‚Äútech‚ÄĚ only appeared to them in the broader context of the ‚Äúclean‚ÄĚ ‚Äď when it became a foregone, socially-mandated conclusion.
Did the pioneers of catalytic converter technology make money? They did. Did they sell on the basis of ‚Äúsustainability‚ÄĚ? Not in the social responsibility sense. But did the broader conversation about air quality transform the catalytic converter market from a sideshow to multi-billion dollar business? Yes it did. Today we would call that the ‚Äúsustainability‚ÄĚ conversation.
That same kind of strategic storytelling is happening today when it comes to the future of energy, water, agriculture, climate change, renewable resources and many other areas. It is absolutely in the interests of the cleantech sector that these conversations continue and become more prominent.
There‚Äôs no question the winners in cleantech will be all about making money and lots of it. But one way to get there is still to develop as much social and market appreciation for the ‚Äúclean‚ÄĚ as for the ‚Äútech.‚ÄĚ
Greg Sendi is EVP of Corporate Communications and Director/geoImpact Sustainability Practice at GolinHarris in Chicago.
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