spending by large firms in the UK on energy, environment and sustainability initiatives is set to increase by 12% in 2012
Spending by large UK firms on energy, environment and sustainability initiatives will grow at an average of 16% a year between 2012 and 2015, according to a new market forecast from independent analyst firm Verdantix. The growth in sustainable business spending in 2012 will be 12% which is twenty times faster than the forecasted growth of the UK economy at 0.6%. The study finds that spending by 421 firms in the UK with revenues greater than £750m will grow from £4.3 billion in 2012 to £6.8 billion in 2015. With current GDP assumptions, annual growth rates will accelerate from 15% in 2013 to 17% in both 2014 and 2015.
“Despite the sluggish economy, spending by large firms in the UK on energy, environment and sustainability initiatives is set to increase by 12% in 2012. By contrast the UK economy is only expected to grow by a paltry 0.6% in 2012” commented Susan Clarke, Verdantix Analyst and author of the report. “The UK’s sustainable business market is continuing to grow at a healthy rate because firms have aligned sustainability strategies with operational efficiency. Energy cost savings and more efficient use of natural resources now underpin sustainability investments – not philanthropic commitments to fight climate change.”
The Verdantix study, UK Sustainable Business Spending 2010-15, finds that three value chains account for three-quarters of the entire UK market. In 2012, retail and consumer brands will account for 34% of total spend representing £1.5 billion. The emissions intensive sectors – oil and gas, transport and utilities -- will spend £1.1 billion on sustainable business initiatives representing 25% of the 2012 market. Technology, telecoms and high-tech engineering firms will represent a further 18% of the market in 2012, reaching £792 million. Over the 2010 to 2015 period, compound annual growth rates will vary between 17% for sectors at the top end like automotive, telecoms and utilities, and 9% at the bottom end in the chemicals and pharmaceuticals sectors.
Industry growth rates diverge over the 2010-15 period because each industry is impacted differently by four market drivers. 1) The relative maturity of organizational structures designed to deliver sustainability strategies, for instance, the presence of a Chief Sustainability Officer. 2) The scope to generate revenues in markets for on-site renewable energy, energy efficiency, green building materials, environmental product stewardship and sustainable waste management. 3) The impact on business operations of policies for energy efficiency, renewable energy and carbon management. 4) The potential to differentiate on sustainability, which is significant in sectors like grocery retail, data centre services and consumer products but not in industrial sectors.
In the context of the 16% compound annual growth rate, some initiatives will experience significant growth and others will barely keep pace with inflation. Fast growing areas of spend between 2010 and 2015 are smart meters (23%), electric vehicles (22%), on-site renewable energy (22%), product stewardship (21%) and sustainable solution marketing (21%). Initiatives which will experience slower growth rates are: spending on social responsibility (5%), employee engagement (5%), environment, health and safety (6%), regulatory affairs and lobbying (6%). Taken as a whole, strategic energy management will be the largest area of spend in sustainable business budgets (see Table 1).
“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 roll-outs will be delayed or cancelled” commented 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. Over the next 3 years strategic energy management will be the hottest market as firms seek to cut energy expenses by between 5% and 20% with access to new integrated energy services propositions.”
The Verdantix report, UK Sustainable Business Spending 2010-15, launched today and is available to Verdantix clients at www.verdantix.com.
Note To Editors
The Verdantix market sizing and forecasting study analyses spending by 421 firms with UK revenues greater than 1$bn and cross-industry research into over 1,000 sustainable business initiatives. The model applies forecast drivers including UK and Global GDP, energy and carbon prices to predict future spending across 29 energy, environment and sustainability initiatives. The model excludes investment flows, corporate transactions, utility-scale renewable energy investments and the financial trading of environmental assets.
Verdantix is the fastest-growing, independent, analyst firm focused on energy, environment and sustainability. Through our global primary research and deep domain expertise we provide our clients with strategic advice, revenue generating services, best practice frameworks, industry connections and competitive advantage. For more information visit: www.verdantix.com.
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