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Market News

 January 31, 2012
Green corporate spending to soar by recession-busting 16 per cent a year

 The UK's burgeoning green businesses will continue to defy the sluggish economic backdrop, according to a major new report that predicts spending by large UK firms on energy, environment and sustainability initiatives will grow by an average of 16 per cent a year between now and 2015.

The report from research firm Verdantix predicts spending on sustainability among the 420 UK firms with revenues of more than £750m will rise 12 per cent this year to £4.3bn, before climbing 15 per cent in 2013 and 17 per cent in 2014 and 2015, culminating in a market worth £6.8bn.

Susan Clarke, Verdantix Analyst and author of the report, said the projected growth was in stark contrast to the 0.6 per cent growth that is expected this year across the entire economy.

She added that demand for green goods and services was being driven by a solid business rationale focused on the cost savings and commercial benefits that result from green investments.

"The UK's sustainable business market is continuing to grow at a healthy rate because firms have aligned sustainability strategies with operational efficiency," she said in a statement. "Energy cost savings and more efficient use of natural resources now underpin sustainability investments -- not philanthropic commitments to fight climate change."

Speaking to BusinessGreen, Verdantix chief executive David Metcalfe said the report was based on a detailed assessment of large companies' publicly stated sustainability goals, and green projects and trials, as well as in-depth interviews with leading sustainability executives.

"It is a mixed picture with some green sectors doing better than others," he said. "But the positive news is that all sectors are growing, there is not one area we have looked at that is shrinking... We are seeing more and more firms see sustainability as a strategic priority and appointing senior executives with access to real budgets to drive forward their green programmes."

The report found that sustainable business spending is dominated by the retail, high tech and emissions intensive energy and heavy industrial sectors, which combined account for over three-quarters of the entire market.

It also revealed considerable variations in the spending growth rate for different green technologies and services. For example, smart meters, electric cars, onsite renewable energy and product stewardship initiatives are all expected to enjoy compound annual growth rates of 22-23 per cent over the next four years, while social responsibility, employee engagement, and lobbying activity will see slower growth rates of around five per cent.

Metcalfe said that despite a number of high profile government u-turns spending was continuing to be driven by positive green policies, as well as the awareness in sectors such as retail that firms will face brand damage without a reputable sustainability strategy.

"The policy environment is still broadly supportive through measures such as the Carbon Reduction Commitment and Air Passenger Duty, not to mention compound annual growth rates for electricity prices that most people expect to rise," he said.

However, the report also acknowledged that sustainable business spending would be in a healthier position, were it not for weaknesses in the wider economy.

"If the UK economy falls back into recession in 2012, spending on capital intensive initiatives like waste-to-energy plants, electric van fleets or smart meter rollouts will be delayed or cancelled," said Rodolphe d'Arjuzon, Verdantix Global Head of Research. "Compared to our original forecast in 2009, growth in spending by large UK firms on energy, environment and sustainability has already slipped back by 18 months. The picture is likely much worse in the public sector."