Will a Recession Be a Giant Green-Killer?

Will a Recession Be a Giant Green-Killer?

Each
day brings new numbers that reveal the possibility of a slowing
economy. Nobody really knows if there is actual deterioration going on
out there -- or if a macro slide is in the offing. But the word on the
street is that recession is coming, that recession is inevitable. It's
especially confusing to executives and entrepreneurs because business
seems to be holding up pretty well in the face of this crumbling and
off-putting market psychology.

So, while we're waiting to find out if a downturn will drown us, I thought I'd take stock.

Without revealing my age (I'm still a vigorous and engaged CEO), I
realized that this could be the fifth or sixth recession I've
experienced in my working lifetime; it depends on whether we want to
put an asterisk next to the Internet implosion of 2000, which was worse
than a recession in my view because it wiped half an industry off the
economic map.

In trying to make sense of these downturns, I remembered that
several of the really nasty ones were caused by energy crises, shocks
or imbalances 30 or so years ago. Those dislocations were triggered by
external events -- an OPEC boycott, the Iranian hostage crisis and
Japan's over-reliance on imported oil, for example. If we have a
recession in 2008 or 2009, similar energy upheavals (trouble in the
Middle East or China's insatiable appetite for imported fuel) will be
blamed for the damage -- along with the mortgage and housing tumult.
Isn't that sad?

After three decades, we still haven't truly addressed our failed
energy policies or reversed our wrong-headed fuel and power consumption
patterns in the United States and the world. And we're still paying the
price as a nation -- in communities, companies and households all
across the country.

It boggles the mind that there still are echoes of the late
1970's when it comes to energy issues -- even after a series of
petro-related recessions, consensus about climate change, and a new
awareness of the dangers posed by the Middle East. And there lurks an
even worse thought: if another recession is imminent, will corporate
cost-cutters move in and trim away all the good green initiatives that
have recently taken root in companies?

Although this seems likely in the face of economic uncertainty --
some projects look less attractive on the balance sheet than others --
it would be a mistake if they do. There are many positives when
companies green their operations -- whether it's complying with, or
getting out in front of, regulatory measures, boosting their brands, or
meeting CSR goals.

We're also finally making environmental progress in businesses of
all sizes -- from manufacturing less-toxic and more environmentally
friendly products to better managing supply chains. But the advances
are most pronounced in energy efficiency.

The good news here is that there seems to be a growing appreciation
for this approach in many quarters. Energy efficiency is seen as one of
the least expensive, most effective and immediately adoptable action
items for dealing with the environmental issues we face. If you're
generating less energy, you have fewer power plants, fewer pollutants
and fewer problems. Energy efficiency also costs an average of 2-3
cents per kWh, less than half the cost of new power generation; in the
end, it saves consumers and companies money.

In a report released last year, research frim McKinsey found that
by using existing efficiency technologies we have the potential to cut worldwide energy demand by 64 million barrels of oil per day,
or almost 150 percent of the United States' total energy consumption
today. This would reduce global energy demand growth by half in 2020.
Seizing this opportunity would also contribute up to half the emission
abatement required to cap long-term concentrations of greenhouse gas in
the atmosphere at 450 to 550 parts per million -- a range that would
help combat global warming.

Our company has been very successful in developing and marketing
energy-efficiency software that manages and measures the power
consumption of PC networks. Three simple reasons help illustrate why
energy efficiency is an easy way to achieve results:

  • First,
    purchasing our green software solution doesn't require a huge capital
    expenditure -- we're not asking companies to replace their old
    gas-guzzling fleets or build expensive new plants or facilities that
    are eco-friendly.
  • Second, our software isn't time-intensive to
    install or maintain, so recession-leery and cost-conscious companies
    don't have to expend extra resources to monitor the solution.
  • Third,
    and most importantly, the solution we're advancing generates almost
    immediate savings and returns. In the private sector, our software
    helps companies save 45-50 percent of the total energy cost generated
    by their PC networks; one recent customer has booked savings of nearly
    $3 million for the first year of usage. Those are the kind of numbers
    that make immediate sense in the ledgers, so why cut funding for
    something that will save significant money so quickly?

As
we wait for the economists to sift through the data in an effort to
determine whether a recession is on the way -- or already upon us --
I'm both discouraged and encouraged.

I'm discouraged because it seems we haven't learned from our
repeated experiences with energy-related downturns over the past
generation. But I'm encouraged because energy efficiency finally seems
to have taken hold as a solid and workable solution to many of our
energy problems today. And if a recession strikes, I'm convinced the
resulting economic stress and strain won't eradicate this new,
important and growing awareness, which holds so much promise for our
nation and world.

Kevin Klustner has more than 20 years of experience in the
technology industry and is currently the CEO of Seattle-based Verdiem
Corporation, which develops and distributes energy-efficiency software
to public- and private-sector entities.