The growth of interest in sustainable business is one of the more positive and promising trends visible in the economic landscape today. Looking back on 2006, the clean technology sector in particular continued its emergence as a high-profile financial force and an attractive investment for venture capitalists worldwide.
Speculators pumped some $32 billion into research, development, and other business investments last year, much of it in innovative high tech projects. It was the most active spending spree since 2001. And at least $2.9 billion of that risk capital targeted advancements in the category of clean technology.
That's an impressive 78 percent increase compared to 2005 investment data. And a striking 140 percent increase compared to 2004. But I predict the smart money will be on clean tech even more aggressively in 2007.
What's it Worth
The Cleantech Venture Network, a group that organizes investors, executives, entrepreneurs, and policy makers around sustainability innovation, coined the term clean technology several years ago. The language aims to define “technologies developed by biological, computational, and physical scientists and engineers that enable more valuable use of natural resources and greatly reduce ecological impact.”
In other words, it’s a shorthand phrase that describes new products developed to solve the numerous environmental problems related to water, energy, agriculture, transportation, and a wide range of other issues.
Eliminating waste and contamination only benefits people, their societies, and the resources they rely on for production. Clean technology means pollution prevention, which means waste reduction, green design, thoughtful use of materials and, hopefully, environmental restoration and replenishment through recycling and other means.
One of the important business ideas the office furniture industry has pioneered here in West Michigan is the notion that efficiency and reduction are not radical objectives. Several companies in the region have, after all, been doing these things for decades. But there wouldn’t be much reason for excitement if the goals were simply “become more efficient” or “be less toxic.”
Sustainability means something much more. The philosophy sets a much higher goal: radically reduce or even eliminate environmental impacts altogether. It means sweeping reductions in the amount of water, oil, and other natural resources we harvest from the Earth. It means, ultimately, completely eliminating the use of toxic products by substituting substances that are either benign or fully recoverable. It means that we return production materials to the environment like we found them: in a usable and reusable condition and, in the long run, perhaps even enlarged, enhanced, and restored.
In a nutshell, the three basic objectives are to improve corporate performance, reduce costs, and enhance, rather than steadily degrade, the natural environment.
Achieving these laudable goals requires a fundamental shift in the way humans do business, and that requires a wide range of modern products, services, and processes designed specifically to promote sustainability.
The Cleantech Venture Network predicts that entrepreneurial investment in clean technologies will surpass $10 billion per year in North America sometime between 2006 and 2009. Globally, venture investments in that period are forecast to break $17 billion annually.
That compares with $6.4 billion in venture investments from 2003 to 2006, and $3.2 billion in the previous three-year period. Business is brisk, and pace is quickening.
Some are worried that clean technology, like the Internet bubble, may be attracting excessive investment. Granted, some narrow individual segments of the emerging marketplace may have a cloudy future. But sustainability as a whole is not just another executive fad. In fact, a growing number of visionary business leaders are convinced that the future of the clean tech sector is strong, and getting stronger. That's why investment is rising sharply upward.
Shaping the Marketplace
Under the leadership of President George Bush, the White House seems unprepared to encourage either basic research or startup technologies in the increasingly competitive marketplace for new ideas and products to achieve sustainability. That means it's up to states, regions, and cities to lead.
Michigan, frankly, started behind the curve and still strives to catch up. We've overhauled and ramped up the state's economic development strategy in recent years. But, even as the venture capitalists write bigger and bigger checks for it, a conservative Republican Legislature and an inexperienced Democratic governor sometimes seemed slow to seize on the topic of sustainable business in recent years. For a little while it looked as though lawmakers might jettison a promising alternative-energy funding idea altogether. Many thought, and a few still believe, the program is too marginal to justify the additional expense.
That was just three years ago. But conditions are improving – slowly.
The state's 21st Century Jobs Fund will invest $2 billion in the next ten years to spark economic diversification and job creation in a few strategically-chosen industries: life sciences; advanced automotive and manufacturing; alternative energy; and homeland security. Sixty-seven companies and research projects received some $100 million in funding in 2006. Governor Jennifer Granholm announced in her 2007 State of the State Address an additional $100 million to spur energy innovation during the next three years. This is all good news.
And what’s happening locally? What we need is for local venture capitalists to recognize the strategic opportunity presented by clean technology and invest accordingly. The Grand Angels, for example, is a group of financial heavy hitters that funds promising new startups in West Michigan. But do alternative energy, clean technology, and other sustainable business ventures register on their investment agenda?
West Michigan continues to pour lots of money and attention into the life sciences. But the lion’s share of the state's 21st-Century Jobs funding is going to Washtenaw County, home of Ann Arbor. I didn’t do all the math, but the ratio in dollars has to be something like twenty to one, maybe worse. I don’t regret our area’s preoccupation with life sciences but, frankly, sometimes it seems that the more we do, the further behind we fall.
Clean technology, by contrast, is a fast-growing segment in which we have the leadership, investment capital, and business savvy to compete and win. So, will we? Or will we wait it out, in the confidence that business as usual will sustain us in the future as it has in the past?
Tom Leonard, the former executive director of the West Michigan Environmental Action Council, is a writer and independent consultant living in Grand Rapids.
Photos:
Falcon Waterfree Urinals, which can save thousands of gallons each year, are installed at the Taj Majal, India (yes, that Taj Majal). The porcelain potties are one example of clean tech innovation.
Falcon Waterfree Urinals, which can also reduce maintenance costs and improve bathroom cleanliness, are installed at Forest Hills Fine Art Center - Grand Rapids
The historic facade of Chase Bank in East Grand Rapids. Area banks and investors could find significant business opportunities in the clean technology industry. (photograph by Brian Kelly)
The U.S. and Canadian headquarters of Falcon Waterfree Technologies is located in Grand Rapids, Michigan.
Urinal photographs courtesy of Falcon Waterfree Technologies