Terry Tamminen, former chief policy advisor for California Governor Arnold Schwarzenegger, sees three big sustainability trends coming down the pipe for 2009. The author of Lives Per Gallon: The True Cost of Our Oil Addiction, Tamminen is Operating Advisor to Pegasus Capital Advisors, which focuses on innovative clean-tech companies, and where he heads a team that works with states to develop and implement environmental policies. He's also the Cullman Senior Fellow with the New America Foundation, where he spends his time advising world leaders on how to design and implement climate-change solutions.
What are the biggest trends in sustainability that you see for 2009?
There are three big trends to watch out for: sustainability labels, virtual meetings, and zero waste.
What is a sustainability label?
Labels provide information about sustainability to consumers so they can make informed choices, but there's no standardization yet. Some companies, looking for a competitive edge, would do the labeling voluntarily. But retailers like Wal-Mart (NYSE: WMT) would standardize some of it, because they want to differentiate one type of product from the other.
The labels will break down into a few categories, with the first and most obvious being a carbon footprint. Secondly, retailers will always want a whole sustainability index measuring recycled content, what materials are used, how sustainable are the raw materials etc. Retailers like Wal-Mart are already devising these metrics – I've been working very closely with them on this. A third label is for food miles traveled- you're already seeing Tesco doing this. This leaves it to customers to decide whether, all things being equal, they really want to buy the pound of lamb from New Zealand when they could buy one from Idaho.
So there will be a lot of different types of labels. Some will be confusing but over time various regulatory agencies will get involved. That's where it helps to have this driven by retailers and not just companies.
Are consumers initially going to be able to -- and are they going to want to -- absorb all that information?
Absolutely not. But it's kind of like with nutritional information – that program is 20 years old now and it's only in the last few years that people have begun paying attention. If you don't have that type of information available to consumers, the opportunity to engage them is lost.
People do want to feel good about what they give their kids or what they use themselves, especially after all the horror stories coming out of China with melamine etc. Having these types of labels will also put consumers' minds at ease.
And what about virtual meetings, why are they on the rise?
Nowadays when it comes to travel, the conversation is not just about environmental impact and costs, but inconvenience, security lines, delayed flights and bad weather. All this will result in more video conferencing of meetings and even expos/conferences. The future consists of webinars instead of seminars.
How feasible is the implementation? Is the technology affordable and easy to use?
There are a lot of options available already and those products are getting better and better. There are web conferencing tools like GoToMeeting, where someone can walk you through a PowerPoint presentation just as if you were sitting in front of them. You can either see the other participants, you can press a button that's effectively raising your hand to get into the conversation – this circumvents the lack of body language that is sometimes a problem with virtual meetings.
Even the government is getting the idea - - Governor Schwarzenegger installed video terminals in many major state offices to cut down on travel by state employees.
As for usability -- my family and I were in London a while ago and my 14-year-old son video conferenced three of his friends in and gave them a tour of our hotel room. If he can do it, so can an executive.
And the third trend: zero waste. Why is 2009 the year to watch for it?
People are beginning to understand that CO2 and greenhouse gas emissions are a measurement of waste at their very core. Nobody wants to have waste in their business.
Procter & Gamble now makes Tide detergent in concentrated form to reduce the amount of packaging and filler. They found they were selling a gallon bottle of liquid detergent and two-thirds of that was water. So now they've reduced the packaging, the weight, the transportation, the size -- all of it. The driver again here is reducing your carbon footprint. If your product is being shipped with a lot of waste in it, that's adding to fuel and shipping costs, which adds to your carbon footprint.
Unless retailers can absorb the costs will people want to pay more for sustainable goods, particularly given the current economic climate?
Take the case of P&G – undoubtedly they saved money because initially they were paying for water and paying extra for shipping, but the underlying ingredients were the same. In this case, they could pass some of those savings on to the consumer if they want to be more competitive.
Secondly, if this does add some cost then you still have to look to early adopters. Tesla is selling $100,000 dollar electric sports cars to somebody. A new Whole Foods market just opened up near us -- we're in a very mixed income neighborhood here in west LA -- and it's packed. And they are not the low-price leader.
Besides, tough economic times don't last. As the economy recovers and people make more money they're going to want to feel good again about doing the right thing, and the companies that are well positioned to do that are going to make even more money.
Won't there be a large cost associated with the initial implementation of all these measures? Realistically, are companies going to be able to handle this?
I would analogize this with what many companies do with energy efficiency. First you're going to have to do an audit so that you can figure out what your company is likely to save.
These investments may have some costs up front. What smart business people realize is you get payback. Tough economic times are all the more reason why they wouldn't want to pay for excess packaging and the cost of fuel and potentially green house gas liabilities among other things.
Wal-Mart realized how much money they were spending on unnecessary packaging and the waste it created, so they put recycling centers in the back of each store. They've pushed back on suppliers to improve and reduce that packaging. The new result: they've gone from a huge liability of paying for waste hauling to a $100 million a year in net profit from these recycling centers.
What about companies who are only now thinking about going sustainable? Will they be able to afford to make changes?
Look at the Detroit car companies that recently flew to Washington in their three separate private jets with their tin cup in hand. Some companies realize that certain expenses go on -- if they can find money for personal jets they can find money for a corporate consultant who will help them through this. I don't mean to be flippant and I recognize that some companies will stall if they don't have capital up front, but planning to make changes doesn't take that much cost.
Is there a sustainability effort that needs to gain ground next year but won't?
Possibly the biggest one is green transportation. I was just at the LA auto show with Schwarzenegger to evaluate the green vehicles there. We all agree that an electric car, a car that runs on alternative fuel, or even one that gets 100 miles a gallon would be better. But it still costs so much money. For example, the premium payment for a Prius takes about five to seven years to pay back, and of course if gasoline comes down to where it is today, even longer. Because of the costs of retooling, production, and getting these things into consumers' hands, even if consumers desperately want these cars they may not have the money to buy them.