Green Tech-er

If you want to cut carbon, cut costs.

World leaders are ready to convene for two weeks in Copenhagen hoping to agree on goals to halt global warming while marketers hawk green in everything from sports cars to dish soap. It’s tempting to think that the combination of vigorous government intervention and catchy ad copy are leading the way in saving the world. In practice, however, almost all of the real work involved in cutting greenhouse gas emissions, reducing waste, and limiting water, soil, or forest damage is already being done by supply-chain people who source, manufacture and deliver everything we consume.

Consider that 29% of U.S. greenhouse gas emissions come from industry, 28% from transportation and 7% from agriculture. Households account for only 17%. At the risk of oversimplifying things, the 20 million or so people who produce and ship what we buy at the supermarket or the hardware store spew almost four times as much carbon dioxide into the air as all 300 million of us do together while at home.

Of course every little bit helps, so turning off the lights as you leave the room or printing on both sides of the page is nice. But in the grand scheme of things it’s more symbolism than anything else. To fix the world you need to fix supply chains. Take KLA Tencor, who makes semiconductor equipment to feed our need for electronics. The company runs a bunch of distribution centers around the world and ships parts to factories that use their equipment. By eliminating inefficient routes and minimizing air freight, the company cut their carbon emissions by 8% in one year, the equivalent of taking 1,000 cars off the road. Along the way of course, they also saved money – 20% of total logistics costs.

The push to save money is driving MillerCoors to reduce the weight of its cans and boxes and Home Depot to look for ways to reuse wooden pallets or find pallets made of some other recycled material. Big energy users like Dow Chemical and Owens Illinois streamline production of essential stuff like plastic and glass primarily to keep fuel bills from eating up profits. Sports apparel giant Nike and food conglomerate General Mills use post-consumer recycled packaging because it costs less.

In each of these cases, corporate commitment to sustainability and social responsibility is clearly called out at the senior-most levels, but when it comes to doing the actual work, it’s all getting pushed down to the supply chain. Supply-chain people trained in the gospel of lean production have always tried to eliminate waste, scrap and empty miles, so forgive their quizzical expressions when you challenge them to cut carbon emissions – they’ve already been at it for decades.

Expectations of a Copenhagen-inspired regulatory overhaul solving the problem look pretty far fetched with mega-polluter China saying right up front that it won’t flatten carbon emissions before 2050. Meanwhile, back in the United States, President Obama’s intent to work toward some kind of carbon tax or cap-and-trade system faces predictable political fire and is unlikely to force real change any time soon.

Brand owners of course also have a stake now that consumers seem ready to move en masse toward greener products. Here again, the real work devolves to supply chain. If Wal-Mart’s Sustainability Index forces suppliers to understand and report their energy, waste and ecological impacts, it will be the folks dispatching the trucks, running the factories and purchasing the raw materials who get some extra homework.

Consider the case of one very famous, but very shy, children’s brand. The company in question is keen to roll out a far-reaching green campaign in 2010 and is ready with some catchy messaging. The hard work is chasing facts all the way up the supply chain to raw-material suppliers in distant countries and solving production engineering problems at the factory. These functions suddenly include a third dimension beyond the traditional axes of cost and quality – that dimension is sustainability. As sustainability moves past awareness and becomes an embedded part of business, the supply chain owns the job.

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People at green-technology companies will likely keep an eye on next month’s global climate change negotiations in Copenhagen but they aren’t betting their businesses on the outcome.

Research and events company Cleantech Group on Thursday released an analysis called “Why Cop15 Doesn’t Matter,” referring to the 15th conference of international climate change talks scheduled to start December 7 in Copenhagen.

With numerous political and economic issues complicating the picture, it would be surprising if a major breakthrough pact emerged next month. But whether there is a binding agreement won’t have an immediate impact on the adoption of green technologies, according to research analyst Stephen Marcus, who was the principal author.

Instead, any progress in ongoing global negotiations is a more of a “milestone” toward a day when heavy polluters will need to account for the amount of greenhouse gases they emit.

“The private sector is not letting the (United Nations) bureaucracy get in the way of getting things done,” said Cleantech group managing director Dallas Kachan during a conference call with reporters on Thursday. “The funds are already flowing.”

The Cleantech Group estimates that between $5 billion and $6 billion in venture capital will go to green technologies, a category which received more money than software last quarter.

More significant is the amount of money and political commitment made by national governments around the world. Over the next few years, the United States will spend tens of billions of stimulus dollars to develop clean-energy industries, such as solar, wind, and plug-in vehicles. China, too, has made economic development around clean energy a national priority.

Government programs designed to promote clean-energy technologies, along with growing private-sector financial interest in green tech, will be the primary driver for investment in the short term, according to the Cleantech Group.

Writing on the wall

The U.S. Congress is now considering an energy and climate bill that calls for the creation of a cap-and-trade system to regulate greenhouse gases. Large polluters would be given a certain number of pollution permits and be able to buy and sell them to stay under a government-set cap on emissions.

On Thursday, the U.S. Senate’s environment committee passed an energy and climate bill despite a boycott from Republican members. The bill faces an uncertain future as it still needs to pass other Senate committees and be reconciled with an existing House version before being passed into law.

Although one of the most discussed portions of the bill is cap-and-trade legislation, many green-technology investors and entrepreneurs say that other measures in the bill would have a more direct influence on their business plans.

For example, the bill calls for stepped-up efficiency standards and a mandate that utilities use a certain percentage of wind, solar, or geothermal energy in their power generation. By contrast, limits on carbon emissions and trading carbon permits would be phased in over several years with a percentage of the permits given away for free.

Still, there are a number of corporations lobbying for a climate bill because it sends a signal that there will be a cost attached to carbon emissions.

On Wednesday, a varied group of businesses, including large utilities, formed a new group to lobby Congress to quickly pass a climate bill now moving through the Senate. Called American Businesses for Clean Energy, the group was created to garner more public corporate support for a climate and energy bill that would limit greenhouse gases.

The initial companies are pushing for passage of a climate bill in the U.S. because they expect it to spur innovation.

“Many within the business community are urging Congress to adopt meaningful energy and climate legislation, so we can move forward with investments in technologies and infrastructure that will be needed to meet future energy demand, grow our economy, and protect our environment,” Tom King, the president of utility National Grid, said in a statement.

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