What crucial trends are driving the industry?
The crucial trends are in carbon, energy, global indicators and consumer issues.
The overall trend in the sustainability industry is the rise of a low carbon, twenty-first century economy (green economy) replacing the twentieth century economic models.
It is imperative for businesses to decrease carbon footprints by reducing Green House Gases (GHG) emissions. Specific trends are:
– Intense network: at the onset of the COP 21, we see a global momentum to redefine our climate regime after 2020. Industries, governments and society must seek common goals in green technologies and innovations thru Low Carbon Technology Initiatives. Renewable energies, biofuels, materials, forestry and agriculture sectors are key players.
– Cap and Trade systems: represent a path for high carbon sectors to offset emissions.
– Clean energy, demand: innovative concepts of energy services and home retrofit models are in place, mainly with solar panels. In this system, consumers do not buy pieces of equipment, rather, they pay for a clean energy solution.
– Clean energy, offer: we observe the mix of energy sources with low impact on nature. One example is the combination of hydropower and wind generators in the same place. At daylight time, hydropower generators use the water flow from a local reservoir while wind generators produce and store excess energy to move the same water flow back into the reservoir.
– Shale oil extraction: hydraulic fracturing is very popular in the U.S., and rapidly expanding in many countries. Low energy costs have brought a resurgence of American manufacturers, hence, economic growth.
– Stranded assets: extremely relevant to the oil industry is the future diminishing value of their fossil fuel assets imposed by lower production levels in a low carbon economy.
-SDGs: recently launched, the Sustainable Development Goals represent a global effort to end poverty, fight inequality, injustice, and tackle climate change by 2030. All businesses claiming to be sustainable must observe the SDGs.
– Sharing Economy: it is impressive to watch the rise and growth of collective web based businesses in the categories of recirculation of goods, increased utilization of durable assets, exchange of services, and sharing of productive assets.
What market segments will experience the most growth and why?
The green economy brings huge opportunities for all economic sectors.
The financial markets are key, mobilizing more than US$ 100 billion from public and private sources to fund climate change related projects, by the end of 2015. In the following years, major financial issues are forecast to mobilize about US$ 1 trillion in investments, portfolios, project finance, green bonds and other commitments funding the green economy.
The car industry and transportation markets will face a huge growth in electric vehicles, due to fulfill 25 to 30% of car markets, related to city based transportation. Cars, additionally, will have more durable and lighter materials to achieve lower fuel consumption.
Public transportation vehicles and bikes will face a huge growth in more than 400 of the large cities in the world, commited to adopt pro bike facilities and electric cars filling stations. At the same token, hundreds of public trasportation authorities will ban fossil fuels in city buses.
The aviation industry is commited to stabilize fossil fuel emmissions by 2050, at 2005 levels. Such an effort represent a dramatic engineering concern for all aircraft builders, regarding lighter materials and turbo fans running on clean fuels.
Railways will increase lines, distances and services coverage. At least 240 railways operators worldwide are commited to 50% of fossil fuels reductions by 2050.
Renewable energies and energy efficiency businesses are key to the green economy. The combination of free nature power generation sources with local solutions are mandatory for nature conservancy and safe energy generation. Decreasing energy consumption patterns are in place. Phasing out incandescent lamps is a present commitment of more than 55 countries.
The construction industry will face increasing trends for building efficiency and city heating networks at local and national scales.
The sharing economy will provide huge benefits to citizens everywhere, with strong web based services and networks.
Finally, in agriculture we observe a high growth of organic food production and the improvement of nature conservancy in farmland, receiving compensation for their environmental services.
What are the key challenges?
I see four major challenges related to: traditional business, finance, oil industry and consumption patterns.
Sustainable innovations are disruptive to “business as usual“ models. Corporations and commercial banks are tied to quarterly results, pushing them to short term, rather than long term strategies, required by green economy projects.
Financing the green economy is a major challenge for most nations under severe fiscal spending restrictions. To address this situation, financial markets must act in coordination with industries and governments to ensure an unprecedented volume of financial instruments to foster the new economy. Examples and figures are: decabornizing porfolios, with goals about US$ 100 billion; measuring and communicating the carbon footprint of US$ 500 billion in investments; placement of US$ 35 billion in Green Bonds; development banks increase their climate activities to US$ 100 billion; insurance companies increase climate-smart investments tenfold by 2020; and the rise of carbon stocks trading to foster a necessary system of carbon pricing worldwide.
In the oil industry, subsidies represent an average of 5% GDP worldwide. Governments spend four times more in fossil fuel subsidies than for renewable energy projects. The measures that must be taken by governments, businesses and societies are: the removal of subsidies to production and consumption of fossil fuels; action to oblige investor to factor in and accept the carbon risk attached to their investments; work with fiscal authorities to introduce differential taxation for “clean” projects; support the coallition of 40 megacities in the word to accelerate climate action; and launch a global campaign to strand fossil fuels assets in the near future.
Finally, consumers wordwide must lower their carbon footprint and adopt the Sharing economy. This is a contrary move to new middle & upper class aspirations, with hundreds of millions of new consumers in China and everywhere. We foresee dramatic impacts with a rising world population of 12 billion inhabitants in the next 50 years. Nevertheless, sustainable policies and practices are not an option, they are mandatory for our survival.
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