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Businesses Double Down on Sustainability as Consumers Focus on Costs

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While most businesses have intensified their sustainability efforts, many residential consumers’ actions have stalled as cost and complexity have slowed commitment to clean-energy solutions, according to Deloitte’s “Resources 2019 Study — Balancing climate, cost, and choice,” released today.

Although the annual survey shows widespread agreement on the need to address climate change and reduce their carbon footprints, businesses seem much more willing to take action than residential consumers. The survey found that businesses increasingly view sustainability as an opportunity to create value, while residential consumers tend to have a more nuanced view that factors in the cost and convenience of sustainability improvements.

“Consumer complacency may be settling in as costs outweigh climate as a motivator in adopting new technologies and cleaner energy sources,” said Marlene Motyka, Deloitte U.S. and global renewable energy leader and principal, Deloitte Transactions and Business Analytics LLP. “On the other hand, most businesses don’t perceive a choice between climate and cost. They see green energy choices as a win-win: doing the ‘right thing’ is good for the environment and the bottom line.”

According to the study, about two-thirds of business respondents say their customers are demanding they procure a certain percentage of their electricity from renewable resources, and nearly half of the businesses surveyed are seeking to do so. On the other hand, despite their own hesitations about investing in sustainability, most residential consumers surveyed expect action from the business sector and the government. Households also tend to believe it is the government’s responsibility to set the vision and path for U.S. energy strategy, indicating that government policies could help overcome consumer reluctance to adopt sustainable technologies.

Among the key findings:

Of the 84% of business respondents aware of recent global climate change reports, nearly two-thirds reviewed or changed their energy management strategies in response, with 83% increasing their commitment.

While energy management remains a top priority, with 9 in 10 reporting goals to reduce electricity consumption, most businesses surveyed are also expanding resource management goals in other areas — with water gaining the most ground with an increase from 59% in 2016 to 75% this year.

Among residential consumers polled, 67% are very concerned about climate change and their personal carbon footprints, but there was a slight retrenchment in how they felt about the importance of renewable sources of electricity — down to 48% from 53% in 2018.

Keeping total energy bills affordable rose five points to 63% in 2019, continuing to be the most important energy issue for residential consumers surveyed, while using clean energy sources fell slightly from 2018 to 50%.

Residential consumer behavior on climate in holding pattern: complacency or confusion?
When it comes to translating attitudes into action, the cost of electricity and the perceived cost/time investment required for changing behaviors or adopting new technologies, can be significant barriers to change. Moreover, messaging about new technologies, alternate providers, and other options do not appear to be coming through clearly. Whether it’s installing solar panels, enrolling in green energy programs, or purchasing battery storage or electric vehicles, many residential consumers consider those options too expensive or too complicated.

Slowing down on solar
Interest by surveyed residential consumers in installing rooftop solar fell from higher levels seen in 2016–17. Forty-four percent of those polled cite expense as the top barrier to solar installation, followed by uncertainty that panels would work as promised (21%). On the other hand, 39% of respondents would be extremely or very interested in purchasing a share in a community solar project, with interest highest among millennials (49%).

The millennial factor — the countertrend consumer
Surveyed millennials stand out as concerned about climate change and the only generation who consistently rate clean energy and exploring new technology options higher than other age cohorts. According to the study, 53% of millennials rate renewables’ role in their electricity supply as extremely or very important, as opposed to 40% in the mature age category (68+). In terms of technology adoption, 18% of respondents use software apps to track energy usage, with 29% of them using it daily. They’re also more likely to use home automation than older cohorts.

Home automation gaining momentum despite cyber concerns
Although home automation is at an early stage of deployment (only 2 in 10 of respondents), there are signs adoption is accelerating, with a doubling since 2016 of home device connectivity with smartphones. Fully 61% of active users surveyed are increasingly concerned about privacy and security, while 46% of all residential consumers say that these concerns might prevent them from purchasing smart home technology, and 39% of households link cyber risk with concerns about power outages.

Business see green begetting more green
While desire to cut costs was the top driver of those surveyed for resource management programs, “just ‘the right thing to do’” rose 11 points in 2019 to second place, at 39%. In fact, companies who view energy procurement as an opportunity to reduce risk, improve resilience and create new value, rather than as a cost — rose to 88% from 81% in prior years.

More businesses are also tying resource management goals to employee compensation, with 48% polled already incorporating energy objectives into goals, the highest level ever. Of those not working to procure more renewable energy, 65% said they could be motivated to do so by combining renewable energy with battery storage to provide backup generation and/or to improve the economics of the overall system.

Businesses increasingly look to onsite/self generation
By 2021, surveyed companies generating electricity on-site expect to source less power from electricity providers, falling from 40% of power consumed in 2018 to 35% of power consumed in 2021. They expect to replace this electric power with increased supplies from on-site renewable generation, off-site renewables and on-site co-generation. The top three reasons cited for installing onsite generation were diversification of energy supply, cost savings (up sharply) and price certainty.

Interest in electric vehicles (EVs) accelerating
Residential respondents are showing significant interest and intent in EVs, with 26% of respondents saying they are extremely or very interested in purchasing an EV, and 11% planning to replace their current vehicle with an EV. Concerns hindering growth are cost (44%), recharging convenience (29%) and range (26%), but if gasoline prices were higher, interest in purchasing an EV would likely rise for about 44% of residential consumers — and 55% of millennials.

On the business side, the survey shows that while business intentions to purchase EVs for their fleets remain unchanged, more are making the charging stations they provide to employees available for public use. More than half (54%) of respondents said their companies provide EV charging stations for employees, and of these companies, the percentage who make them available to the public ticked up to 6 points in 2018.

“For incumbent electricity providers and new entrants, inertia among residential consumers may, paradoxically, provide a competitive advantage,” said Stanley Porter, vice chairman, U.S. energy, resources and industrials leader, Deloitte Consulting LLP. “Generational preferences for greener energy, more choice, and more appetite for technology could open up markets. By understanding and segmenting the customer base and targeting them with clear and compelling messages through the appropriate channels, providers could break through consumer complacency and expand adoption of new services.”

Since 2010, Deloitte’s annual Resources study has been focused on the thinking of U.S. business and household decision-makers on energy usage, climate change, environmental responsibility, energy management and clean technologies. Based on surveys of 600 businesses across multiple sectors, and 1,500 residential consumers, the nationwide study was designed to provide insights that can help energy companies and businesses make energy-related investment and business decisions.

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‘Industry 4.0’ tech for post-COVID world, is driving inequality

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Developing countries must embrace ground-breaking technologies that have been a critical tool in tackling the COVID-19 pandemic, or else face even greater inequalities than before, UN economic development  experts at UNCTAD said on Thursday.

“Very few countries create the technologies that drive this revolution – most of them are created in China and the US – but all countries will be affected by it”, said UNCTAD’s Shamika Sirimanne, head of Division on Technology and Logistics. “Almost none of the developing countries we studied is prepared for the consequences.”

The appeal, which is highlighted in a new UNCTAD report, relates to all things digital and connective, so-called “Industry 4.0” or “frontier technologies”, that include artificial intelligence, big data, blockchain, 5G, 3D printing, robotics, drones, nanotechnology and solar energy.

Gene editing, another fast-evolving sector, has demonstrated its worth in the last year, with the accelerated development of new coronavirus vaccines.

Drone aid

In developing countries, digital tools can be used to monitor ground water contamination, deliver medical supplies to remote communities via drones, or track diseases using big data, said UNCTAD’s Sirimanne.

But “most of these examples remain at pilot level, without ever being scaled-up to reach those most in need: the poor. To be successful, technology deployment must fulfil the five As: availability, affordability, awareness, accessibility, and the ability for effective use.”

Income gap widening

With an estimated market value of $350 billion today, the array of emerging digital solutions for life after COVID is likely to be worth over $3 trillion by 2025 – hence the need for developing countries to invest in training and infrastructure to be part of it, Sirimanne maintained.

“Most Industry 4.0 technologies that are being deployed in developed countries save labour in routine tasks affecting mid-level skill jobs. They reward digital skills and capital”, she said, pointing to the significant increase in the market value of the world’s leading digital platforms during the pandemic.

Innovation dividends

“The largest gains have been made by Amazon, Apple and Tencent,” Sirimanne continued. “This is not surprising given that a very small number of very large firms provided most of the digital solutions that we have used to cope with various lockdowns and travel restrictions.”

Expressing optimism about the potential for developing countries to be carried along with the new wave of digitalisation rather than be swamped by it, the UNCTAD economist downplayed concerns that increasing workforce automation risked putting people in poorer countries out of a job.

This is because “not all tasks in a job are automated, and, most importantly, that new products, tasks, professions, and economic activities are created throughout the economy”, Sirimanne said.

‘Job polarization’

“The low wages …for skills in developing countries plus the demographic trends will not create economic incentives to replace labour in manufacturing – not yet.”

According to UNCTAD, over the past two decades, the expansion in high and low-wage jobs – a phenomenon known as “job polarization” – has led to only a single-digit reduction in medium-skilled jobs in developed and developing countries (of four and six per cent respectively).

“So, it is expected that low and lower-middle income developing countries will be less exposed to potential negative effects of AI and robots on job polarization”, Sirimanne explained.

Nonetheless, the UN trade and development body cautioned that there appeared to be little sign of galloping inequality slowing down in the new digital age, pointing to data indicating that the income gap between developed and developing countries is $40,749 in real terms today, up from $17,000 in 1970.

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Greater Innovation Critical to Driving Sustained Economic Recovery in East Asia

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Innovation is critical to productivity growth and economic progress in developing East Asia in a rapidly changing world, according to a new World Bank report launched today.

Countries in developing East Asia have an impressive record of sustained growth and poverty reduction.  But slowing productivity growth, uncertainties in global trade, and technological advances are increasing the need to transition to new and better modes of production to sustain economic performance.

To support policy makers in meeting this challenge, The Innovation Imperative for Developing East Asia examines the state of innovation in the region, analyzes the key constraints firms face in innovating, and lays out an agenda for action to spur innovation-led growth.

A large body of evidence links innovation to higher productivity,” said Victoria Kwakwa, World Bank Vice President for East Asia and Pacific. “The COVID-19 pandemic, climate change, along with the fast-evolving global environment, have raised urgency for governments in the region to promote greater innovation through better policies.

While developing East Asia is home to several high-profile innovators, data presented in the report show that most countries in the region (except China) innovate less than would be expected given their per capita income levels. Most firms operate far from the technological frontier. And the region is falling behind the advanced economies in the breadth and intensity of new technology use.

“Aside from some noteworthy examples, the vast majority of firms in developing East Asia are currently not innovating,” said Xavier Cirera, a lead author of the report. “A broad-based model of innovation is thus needed – that supports a large mass of firms in adopting new technologies, while also enabling more-sophisticated firms to undertake projects at the cutting edge.”

The report identifies several factors that impede innovation in the region, including inadequate information on new technologies, uncertainty about returns to innovation projects, weak firm capabilities, insufficient staff skills, and limited financing options. Moreover, countries’ innovation policies and institutions are often not aligned with firms’ capabilities and needs.

To spur innovation, the report argues that countries need to reorient policy to promote diffusion of existing technologies, not just invention; support innovation in the services sectors, not just manufacturing; and strengthen firms’ innovation capabilities. Taking this broader view of innovation policy will be critical to enabling productivity gains among a broader swath of firms in the region.

“It is important for governments in the region to support innovation in services, given their rising importance in these economies – not only for better service quality but increasingly as key inputs for manufacturing,” said Andrew Mason, also a lead author of the report.

Countries also need to strengthen key complementary factors for innovation, including workers’ skills and instruments to finance innovation projects. Building stronger links between national research institutions and firms will also be critical to fostering innovation-led growth in the region.

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Sea transport is primary route for counterfeiters

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More than half of the total value of counterfeit goods seized around the world are shipped by sea, according to a new OECD-EUIPO report.

Misuse of Containerized Maritime Shipping In the Global Trade of Counterfeits says that seaborne transport accounts for more than 80% of the volume of merchandise traded between countries, and more than 70% of the total value of trade.

Containerships carried 56% of the total value of seized counterfeits in 2016. The People’s Republic of China was the largest provenance economy for container shipments, making up 79% of the total value of maritime containers containing fakes and seized worldwide. India, Malaysia, Mexico, Singapore, Thailand, Turkey and the United Arab Emirates are also among the top provenance economies for counterfeit and pirated goods traded worldwide.

Between 2014 and 2016, 82% of the seized value of counterfeit perfumes and cosmetics by customs authorities worldwide, 81% of the value of fake footwear and 73% of the value of customs seizures of fake foodstuff and toys and games concerned sea shipments. Additional analysis showed that over half of containers transported in 2016 by ships from economies known to be major sources of counterfeits entered the European Union through Germany, the Netherlands and the United Kingdom. There are also some EU countries, such as Bulgaria, Croatia, Greece and Romania, with relatively low volumes of containers trade in general, but with a high level of imports from counterfeiting-intense economies.

To combat illicit trade, a number of risk-assessment and targeting methods have been adapted for containerised shipping, in particular to enforce against illicit trade in narcotics and hazardous and prohibited goods. But the analysis reveals that the illicit trade in counterfeits has not been a high priority for enforcement, as shipments of counterfeits are commonly perceived as “commercial trade infractions” rather than criminal activity. Consequently, existing enforcement efforts may not be adequately tailored to respond to this risk, according to the report.  Tailored and flexible governance solutions are required to strengthen risk-assessment and targeting methods against counterfeits.

As well as infringing trademarks and copyright, counterfeit and pirated goods entail health and safety risks, product malfunctions and loss of income for companies and governments. Earlier OECD-EUIPO work has shown that imports of counterfeit and pirated goods amounted to up to USD 509 billion in 2016, or around 3.3% of global trade.

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