24 April 2012
Research from the Grant Thornton International Business Report (IBR) shows that, according to businesses, the main drivers in the demand for cleantech products are increasingly commercial. The third annual IBR report on the global cleantech industry reveals that the adoption of cleantech is now motivated by the need to reduce costs and increase profits, supported by government intervention, and is no longer about just being ‘green’.
Despite some short-term fluctuations, key commodity prices are on the rise. With Brent Crude oil recently back above US$120 a barrel and the outlook for nuclear energy unclear following the Fukushima disaster, cleantech is starting to look like a real alternative source of energy and a means of reducing consumption of expensive resources. Accordingly, over half of those who choose cleantech options do so to reduce their costs (52%); with 45% making the choice as a way to increase profitability. CSR requirements and environmental concerns remain important, but are not the main reason for adoption.
Nathan Goode, head of energy, environment and sustainability at Grant Thornton UK, said: “It is no longer about just environmental concerns, it’s about whether alternative solutions can boost the financial performance of companies. What we’re seeing now is the potential for these technologies to compete with traditional forms of energy and the expectation that, over time, they should. At the same time, government support remains key in many sectors and jurisdictions, and fluctuations in this support are causing short term volatility for cleantech.
“This looks like a sector on the road to commercialisation but not necessarily all the way there. The mood of optimism in the sector appears, however, to be driven by fundamental trends and reflected in broader indicators such as oil prices. We’re at a stage now where the value proposition for cleantech is to save money, and consequently demand for cleantech is set to increase. We could be on the cusp of something very big indeed.
“In short, cleantech is growing up. It's a long way from being the cash generating adult that oil and gas is, but is definitely showing signs of wanting to stand on its own two feet.”
This increasing maturity is filtering through to expectations of cleantech business, creating a bullish outlook for 2012. 64% of cleantech businesses expect revenue to increase this year – up from 54% last year and the same percentage (64%) expect higher profitability this year compared tolast year (42%). Cleantech providers currently see the greatest demand from the developed economies of Europe (51%), and the US and Canada (39%).
A sector in transition
The Grant Thornton report shows a cleantech sector in transition. There are more companies involved in R&D (42%) and IT (29%) than in the previous year (31% and 22% respectively).
Nathan Goode said: “From this analysis, cleantech appears to have parallels with the biotech industry, in that R&D is being used to explore new concepts and applications for existing technologies. As a result R&D and IT are receiving greater focus as companies exploit advances in areas such as storage and smart grid technologies. In addition the sector is adopting a broader base on which to apply its learning, putting greater focus on areas such as waste and water.”
In contrast, manufacturing activity has become relatively more subdued. The number of businesses citing involvement in manufacturing of energy efficient products has decreased from 26% to 19%, although manufacturing of products for cleantech energy generation has increased marginally to 17%, up from 14% the previous year. There could be a number of reasons for this, but the Grant Thornton report stresses that the issue of capital constraint represents a big challenge for the sector and, as a result, governments.
Nathan Goode added: “The manufacturing of items such as wind turbines and waste processing plants is an incredibly capital intensive business. However, what we’re seeing is a slowing in the pace of growth as a result of constraints on raising capital. This continues to be an issue, especially in European economies where credit is constrained.
“Governments must be mindful of this issue acting as a brake on investment, as it will quickly become a barrier to achieving carbon reduction targets and the desire to supply businesses and households with alternative supplies of energy – and at a time when cleantech is really starting to compete.”
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Notes to editors
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of over 12,000 businesses per year across 40 economies. This unique survey draws upon 20 years of trend data for most European participants and nine years for many non-European economies. For more information, please visit: www.internationalbusinessreport.com.
The research is carried out primarily by telephone interview lasting approximately 15 minutes with the exception of Japan (postal), Philippines and Armenia (face to face), mainland China and India (mixture of face-to-face and telephone) where cultural differences dictate a tailored approach. Telephone interviews enable Grant Thornton International to conduct the exact number of recommended interviews and to be certain that the most appropriate individuals are interviewed in an organisation which meets the profile criteria.
Data collection is managed by Grant Thornton International's core research partner - Experian. Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire.
IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with 458 businesses globally. The majority were from the manufacturing sector (38%), followed by business and professional services (13%), retail (12%), construction and real estate (9%), technology (9%), and other (19%).
The target respondents are chief executive officers, managing directors, chairmen or other senior executives (title dependent on what is most appropriate for the individual country) from 40 economies primarily across five sectors: manufacturing (25%), services (25%), retail (15%) and construction (10%) with the remaining 25% spread across all sectors.
Locally, the sample tends to cover the sectors mentioned previously, with some countries being able to have local valid data for specific sectors or regions when the sample size is large enough.