I had an interesting discussion with a client recently about how to think about the environment as a business opportunity. Is it a market like any other…one you can “size” by revenues, or profile the competitors? Or is it an idea, a theme shaping business?
In the end, I felt that trying to “size” the environment as a market could lead to some wild, quasi-meaningless numbers. Of course you can put numbers on some things: the eco-products customer segment, often referred to as the Lifestyles of Health and Sustainability (LOHAS) market is roughly $225B. But is that helpful?
Let’s come back to that. Take another ‘market’/business changing theme: information technology. I can size the market for Internet or software companies. But does that give a sense of the role of info-tech in our economy? After all, FedEx is arguably one of the most successful implementations of info-tech thinking ever. Everyone uses info-tech in some way.
I think “environment” is quickly becoming something thematic: a way of thinking about how business is conducted at a fundamental level…not a particular market called “eco-products” or “greening the supply chain,” but all products and all supply chains. I was kicking this around with Will Sarni from Domani and we discussed Wal-Mart’s recent pressure on suppliers to go green. Wal-Mart is roughly 2% of the U.S. GDP (yes, you read that right). So let’s say the revenues of their suppliers (which include GE, P&G, and 59,998 other companies) are 25% of the global economy. That would mean that out of the $40 trillion global economy, the size of the “market” being affected by greening the supply chain is $10 trillion. As I said that, Will said, “or $40 trillion” — meaning, these issues are affecting the entire market. Thus, the not-so-meaningful numbers.
In another example, take energy. The companies most directly dependent on fossil fuels — energy, auto, chemicals — make up trillions in revenues (most of the top of the Global Fortune 500). If, within a generation, all coal use needs to be clean coal to exist at all, and all gas needs to be clean-burning or natural, and all cars need to be zero emission, then the entire product portfolio of these giant companies is facing environmentally-driven change and is part of the “market” for eco-products. Thus, the current estimate of eco-products serving the LOHAS customer segment is not useful, no matter how many billions.
In the near future, there is no “eco-product,” there’s just product.
It’s a paradigm shift like we’ve never seen. It sounds like hyperbole, but it’s seeming more and more real every day.
Andrew
One Response
Andrew, you’re dead on. We’re talking about a shift in products and services that’s never been contemplated before. Like the internet changed the world (it’s hard to go back now), the green wave is going to drastically change the world as we know it. Everything about it.