Daily Archives: December 18, 2007

Sustainability and Business Strategy in Emerging Markets

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SustainAbility, the organization, along with the International Finance Corporation (IFC), has come out with a “case study + sustainability strategy building steps” report called Market Movers: Lessons from a Frontier of Innovation, where they analyzed in detail 4 companies in the emerging markets of China, India, Brazil and Sri Lanka and how their sustainability focus has influenced their business success.

The report goes on to draw some lessons from their experiences and to make recommendations as to how other emerging-market businesses might create value from sustainability. The report identifies a number of ‘ingredients of success’ – factors that contributed to the strong results in all four case studies and helped them overcome some of the constraints that many emerging-economy companies face. The five ingredients are:

Leadership: the role of the chief executive or chairman in pushing through a strategy based on sustainability.

Integration: the embedding of sustainability elements in corporate strategies from the very beginning.

Innovation: using sustainability as a source of innovation.

Differentiation: having the courage to be different.

Quality of relationships: business benefits from strong relationships with stakeholders – suppliers, customers, employees.

The reports using a nice little matrix which provides sustainability parameters like environmental performance, social and governance performance and the business benefits of these startegies. As the case studies show, each company has used a different mix of sustainability parameters for generating business value.

A very interesting read. However, it is important to remember the following advice from the authors.

While we recognise that any measure of the value added either to their bottom line or to society by businesses’ sustainability strategies is necessarily imprecise, it is none the less real for that. In all our cases there is a close correlation between sustainability and business success, even if there is no irrefutable evidence of causation between the two. The entrepreneurs who built up these companies invariably attest to it.

Profiting From China’s Green-Tech Movement

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Money Morning investigates the green tech opportunities flowing from the problems in China.

Money isn’t the only thing flowing through China right now. Pollution has filled the streets, contaminated the rivers and clouded the skies.

Half of China’s population – 600 people to 700 million people – drinks water contaminated by human and animal waste. In fact, 1 billion tons of untreated sewage is dumped into the Yangtze River each year. And, according to a recent study conducted by the World Bank, air pollution causes more than 400,000 premature deaths every year.

With the health of its population fading and global opposition to carbon emissions rising, China has no choice but to address its pollution epidemic. And thanks to a blistering economy and a stockpile of cash reserves, throngs of investors are eager to help Beijing wash away its troubles.
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According to a Cleantech Network report and industry insiders attending the clean energy forum in Beijing, water treatment and energy efficiency projects boast the greatest investment potential.
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Both Guo and Liu agree that the greatest obstacle to solving the nation’s water crisis is economics.

“Artificially low water prices, as well as lack of preferential policies from the central government, mean that it doesn’t make economic sense for companies to adopt costly technologies to improve water usage efficiency and re-utilize wasted water at the moment,” Guo told InterFax.
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The second biggest environmental concern for China is the nation’s suffocating air pollution. So far, China has relied heavily on coal-fired power plants to power its rapid industrial expansion.

Between 2003 and 2006, worldwide coal consumption increased as much as it did in the 23 years prior. China was responsible for 90% of that increase. China used 2.5 billion tons of coal in 2006, more than the next three highest-consuming nations combined. The country is home to more than 2,000 coal-fired power plants, and a new one goes into operation every week.
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The nation’s climate-change program has set a target of reducing greenhouse gas emissions by 950 million tons over the next two years. Last week, at the U.N. climate conference in Bali, Xie Zhenhua, vice chairman of the National Development and Reform Commission, said China’s investment in renewable energy would reach $20 billion this year.

“China is already the world’s factory,” Yang Ailun, climate change program manager at Greenpeace China, told Bloomberg News. “It could be and should be the manufacturing hub of clean technology for the world as well.”
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China-based manufacturers of alternative energy technologies are already taking off in a big way. Companies specializing in alternative energy have seen their stock prices soar. Suntech Power Holdings Co. (STP) has seen its stock price skyrocket by 137% this year. Solarfun Power Holdings Co. (SOLF) has jumped 125%.

Vcs are already there. Large companies like GE are building desalination plants. Suntech’s technology was developed in Australia. More entrepreneurs are looking to China for growth in this area. For individual investors, ETFs can be a possibility. However, figuring out the right value at this time is tough. And there is always the need for people who can understand China and the green tech sector!

TATA’s green strategy

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With all the big automobile majors and even new upstarts like Tesla Motors in the green race it is not far away when the forward thinking Indian conglomerate, the house of TATA, is going into building eco-friendly cars.

Money Morning has more:

The new vehicle line would showcase cars capable of running on electric, hydrogen and other alternative and organic fuels.

Most of Tata’s efforts have been focused around the company’s Indica, a compact hatchback, popular in India and Europe. According to the Times of India, the company wants to produce five electric variants of the Indica using lithium ion batteries that will run up to 200 km on a single charge. It is also interested in building an Indica hybrid, which would combine electricity and petroleum-based fuel to average 20 km per liter.
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Now, Tata is gearing up to roll out India’s first hydrogen-fueled vehicle in a partnership with the Indian Space Research Organization (ISRO). According to a recent report from DNA Money, the vehicle in question will be a mini- or microbus scheduled to debut in 2009. ISRO will provide its recently tested cryogenic engine technology.

“We have been successful in adapting the system for a bus or car engine and are fine-tuning it. The vehicle will be ready in two years. It will emit only water vapor and will not pollute the environment,” ISRO chairman G Maharani Nair told DNA. A car is rumored to be next in line.