Revenues from company-defined portfolios of sustainable products and services grew by 91 percent between 2010 and 2013, according to a new report by The Conference Board, a public interest research association.
For S&P Global 100 companies that break out revenue for sustainable products or services separately, that revenue stream grew at six times the rate of overall company results.
Driving Revenue Growth Through Sustainable Products and Services concludes that leading corporations are realizing a substantial and positive impact on revenue from their sustainability products and services. Corporate sustainability programs are evolving from adhering to the best environmental, social and governance standards to becoming a critical element of a company's growth strategy.
The twelve companies profiled include Allianz, BASF, Caterpillar, Dow Chemical, DuPont, GE, IBM, Johnson & Johnson, Kimberly-Clark, Philips, Siemens and Toshiba.
Sustainable products represent a growing share of revenues from companies in the sample, and on average account for 21 percent of total revenues in 2013 compared to 18 percent in 2010, the report says.
Commercial and investment banks also are playing an increasingly significant role in financing the development of large-scale sustainable products and solutions, primarily through asset finance, tax equity and green bonds.
Total investments in clean energy, for example, increased 142 percent from 2006, reaching $310 billion in 2014. Renewable energy asset finance accounts for the greatest share of total clean energy investments, totaling $184 billion in 2014 — a 16 percent increase from 2013.
A few companies have published measurable sustainable product revenue goals, helping spur growth of these portfolios by incorporating sustainable products into strategic planning and target-setting. All but one of these goals are set to be realized by 2015, according to the report, and the majority of them have already been achieved. Inclusion in portfolios of sustainable products and services is in most cases determined by a product's performance across a set of environmental criteria. In many cases, these portfolios focus on climate change mitigation, energy usage and efficiency, and resource and materials usage.
The profiled companies say a driving force for sustainable products is customer demand for solutions that address global sustainability challenges, such as climate change and resource scarcity. But launching these initiatives requires overcoming a number of significant challenges, such as a lack of existing global standards; trade-offs between cost, environmental design, and pressure to price sustainable products competitively; and challenges embedding these initiatives into existing company processes.
Successful launches of sustainable product initiatives requires broad stakeholder engagement. This includes getting CEO buy-in, tapping into motivated and passionate employees, understanding the specific needs of customers and society, and clearly communicating the business benefits of the company's sustainable products.
Some investments involve revisiting basic, but critical materials to find more sustainable alternatives. In June, for example, LEGO Group announced an investment of 1 billion Danish Kroner (~US$152 million) in the research, development and implementation of sustainable raw materials to manufacture LEGO® toys and packaging materials.