Sustainability has become profitable. A case is point is healthy grocery chain Whole Foods, which pending the outcome of anti-trust hearings stands to become Amazon’s latest acquisition for a record $13.7 billion. Whole Foods is one of nine billion-dollar companies in the sustainability space, joined by eco-friendly innovators such as Tesla, Chipotle and Natura, as well as traditional companies that have gone green such as Nike, Toyota and GE. Together these companies generate over $100 billion in annual revenue from their green product lines, not counting other products.
As this illustrates, being green can be profitable. Here’s a look at some of the reasons why sustainability and profitability increasingly go hand in hand, along with some of the companies that are benefiting from being eco-friendly.
Profiting from Eco-friendly Branding
As public demand for eco-friendly products has increased, being green has become good for branding. Sixty-six percent of consumers around the world say they are willing to pay more for environmentally-friendly products, a number that rises to 72 percent among Millennials, a Nielsen poll found. An indicator of this trend is the growth of green packaging. The market for green packaging of food, healthcare products, personal care products and other consumer goods was valued at $161.50 billion in 2015, according to Zion Research. By 2021, it will be worth $242.50 billion.
One example of a company that has benefited from green branding is Amway. Founded in 1959, by 1962 Amway had become the first company to sell a commercial cleaning product made of biodegradable ingredients, its Liquid Organic Concentrate product line. In more recent years, Amway has promoted other eco-friendly products, such as its Nutrilite vitamin and mineral brand, grown, harvested and processed on certified organic farms. Today Amway has annual sales of $9.5 billion.
Growing from Innovative Green Disruption
Eco-friendly products can also be a boon for companies developing disruptive technological innovations. One market that has been exploding is the renewable energy market. Demand for wind and solar power surged in 2015, with half a million solar panels installed every day around the world, and two wind turbines installed every hour in China, according to the International Energy Agency. Renewables represent the fastest-growing source of electricity generation with a share increasing from 23 percent in 2015 to 28 percent in 2021.
One company poised to profit from this trend is GE. In 2005, GE launched its Ecomagination line, devoted to developing clean tech products. By 2015, GE had invested $17 billion of research and development in Ecomagination, yielding $232 billion in revenue.
Cutting Costs by Staying Sustainable
GE’s Ecomagination line has also empowered the company to profit by offering consulting services to other companies seeking to lower their operating expenses by adopting sustainable energy strategies. For example, JPMorgan Chase recently hired GE to help it cut energy use at its 4,500 Chase bank branches. GE’s technology will cut Chase’s electricity and gas usage by 15 percent while reducing water use by 20 percent.
Another company seeking to use sustainable technology to cut costs is Google. Already getting 35 percent of the energy it uses to run its data centers from clean power sources, Google has a goal of increasing that to 100 percent. One way Google is pursuing this goal is converting an Alabama coal power plant into a renewable power center. Instead of using coal, the plant will tap into clean power sources, while relying on a nearby river to cool servers, dramatically reducing the cost of air conditioning.