March 30, 2016
The concept of eco-efficiency fosters synergies between business benefits and environmental goals. But how can companies seize the opportunities of a greener economy?
The recent United Nations Climate Change Conference in Paris demonstrates there is a mounting global push to decouple economic growth from environmentally destructive impacts. For the first time in history, a universal treaty now binds both industrialized Western countries and most of the developing world to reduce climate emissions, in an effort to meet the ambitious goal of zero net greenhouse gas emissions during the second half of the 21st century. The signatory nations have agreed to meet in five-year intervals to push these commitments forward.
The Paris Agreement brings new hope of redirecting world economies towards a cleaner, greener path. The impact on businesses will be profound, with both risks and opportunities for companies.
Global business leaders have already welcomed the climate deal. In the Confederation of British Industry’s response to the Paris climate agreement, Director-General Carolyn Fairbairn, for instance, called the treaty “an exciting opportunity for businesses” providing a “framework for businesses to invest with confidence.” John Danilovich, Secretary General of the International Chamber of Commerce, in a statement on the organization’s website, called on governments “to capitalize on this momentum by working constructively with the private sector in the months ahead to achieve the Paris outcomes.”
It seems as if ecology and economics can no longer be seen as belonging to opposing sides – environmentalists conserving the planet on the one hand, and businesses utilizing natural resources on the other. The winning strategy involves finding synergy between the two. But how exactly can companies go green while making more green?
Good for the planet and the bottom line
One concept that pursues environmental reforms in tandem with business benefits is called eco-efficiency. The term was first popularized over two decades ago, around the 1992 UN Earth Summit in Rio by the World Business Council for Sustainable Development (“WBCSD”). This coalition of companies wanted to provide solutions to the mounting environmental crisis and put forward eco-efficiency as the primary approach.
Simply put, eco-efficiency is a business philosophy of “less is more,” creating greater business value with a softer impact on the planet. According to the WBCSD, this can be done through technology, as well as process changes that minimize resource use and reduce emissions and waste throughout the lifespan of a product or service. Eco-efficiency is distinct from sustainability in that it focuses solely on economic and environmental aspects, not the social impacts of business.
Contrary to traditional beliefs, committing to environmental reforms does not have to come at the cost of profitability.
“In many cases, especially in material or energy intensive industries, cost-benefits and environmental viewpoints go hand in hand,” agrees Jaana Pelkonen, Leading Specialist, Carbon-neutral Industry focus area, at Sitra. “Optimizing processes to minimize resource flows coming in and the waste flows going out is good for the environment and the bottom line.”
Companies can reap significant savings by using less of what is costly – whether it is raw materials, energy, fuel or water – and producing less of risky, increasingly-regulated side products such as emissions, toxic outputs or waste. According to the New Climate Economy Report, for example, 53 of the Fortune 100 companies saved an average of over US$10 million per company in 2013 by implementing energy efficiency, renewable energy and other emission reduction initiatives.
The changing marketplace and regulatory environment nudge companies to go green with both carrots and sticks. With the Paris Agreement, almost all countries in the world have committed to stricter policies to reduce global warming, to the benefit of environmentally conscious companies. The “polluter pays” principle, the likely emergence of carbon pricing, changing tax structures and evolving policy frameworks, all lend a distinct advantage to eco-efficient products and services while punishing sloppy competitors. The financial sector is likewise warming up to the practice of including environmental risks in investment planning.
“Large, long-term investors, such as the Norwegian government pension fund, have started to critically assess the carbon risk of their portfolios,” says Pelkonen. “The companies who move proactively and change before they have to gain an advantage.”
There is evidence to suggest that being eco-efficient actually benefits companies’ financial performance in the long-term. Already, the CDP Climate Leadership Index, which tracks the performance of companies taking the strongest climate action, has outperformed the Bloomberg World Index of top companies by 9.1% over the past few years. If the trend continues, future businesses could be classified as either winners or losers based on how well they adapt to an environmentally conscious business environment. The focus of eco-efficiency is also shifting from mere resource-efficiency to looking at clean technology and smart innovation as drivers for new business.
“I would advise companies to look past incremental reductions in energy, material use, and emissions, and make ecological thinking a core part of their strategy. Develop your brand toward a more sustainable, carbon-neutral logic,” advises Pelkonen.
Smart is the new green
At Konecranes, eco-efficiency is seen as a key strategy to continuing sustainable growth.
As the biggest environmental impacts of Konecranes’ business come from raw material and components, manufacturing, and the product user phase, the company’s environmental footprint is firmly on the agenda during product development.
“One of the starting points of our product design is to make equipment as compact as possible, which not only cuts down material use, but also enables the building of smaller industrial facilities, reducing the client’s energy and heat use in the long-term,” explains Ari Kiviniitty, Director of Product Management and Development for Hoists and Components at Konecranes.
On the innovation front, Kiviniitty believes that smart solutions are the new way to go green. “For instance, automated steering systems can optimize equipment’s trajectories and minimize energy use. A smart solution can calculate and repeat actions in the most eco-efficient way every time, without human error and inconsistency.”
Though the crane and lifting industry is traditionally not the vanguard of clean technology, Konecranes’ strategy has been to bring forward-thinking, cleaner technologies to market. The world’s first hybrid reach stacker for containers, for example, launched in 2013.
“In certain customer segments, the focus on environmental awareness is stronger. Because of their close link to city infrastructure development, ports are especially looking to save energy and cut down emissions and noise pollution.”
Waste not the waste
A company wishing to find true eco-efficiency must take a broader view of their environmental impact and engage suppliers, clients and other companies in the change.
“What happens in the value chain before you and after you is just as important as your own operations. The aim should be to create ecosystems of circular economy,” stresses Pelkonen.
The circular economy concept, also strongly promoted by the EU Commission, aims at a closed-loop circulation of products and resources in the economy much like in nature, which knows no concept of waste.
Konecranes has also been looking at its operations from a circular economy perspective, and is well-positioned to move in a more eco-efficient direction, especially through its service-oriented businesses. The company’s maintenance, lifecycle care, and modernization services can extend lifespans considerably and reduce the resource intensity of existing machinery.
Meanwhile, the rental and leasing business, reuses and redistributes resources in a smart way. “Our new business models are more desirable from an environmental perspective. We can also have a key role in developing industrial Internet solutions that boost the rental and leasing business models and preventive maintenance,” says Johanna Pirinen, Konecranes Corporate Responsibility Director.
As a whole, Pirinen says that resource and water scarcity, climate change, and biodiversity loss are issues all companies have to face. For Konecranes, tackling these realities as efficiently and responsibly as possible is a prerequisite for successful business. Since 2010, the company has been a signatory of the UN Global Compact, a voluntary initiative based on CEO commitments to implement universal sustainability principles.
“One of Konecranes’ key objectives is to continue growth. To follow this road, we must accept the world’s limited resources and find even better ways to make use of what we have,” explains Pirinen. “The cutting edge of our environmental work is to continuously improve energy and resource efficiency, considering both our own operations and the whole lifecycles of Konecranes products.”
Text: Mari Suonto