President Reagan used to tell his staff a joke about twin boys with extreme personalities, one a total optimist and the other a total pessimist. You can find the long form of the joke here, but when the optimist is presented with a room filled to the ceiling with horse manure, he begins digging through it screaming with delight “Wow, there must be a pony in here!”
We recently conducted our sixth semi-annual “Green & the Economy” survey and the results have sent us scurrying to find a pony buried in all the data. We asked our more than 3,000-member GreenBiz Intelligence Panel for their views on key green economic indicators (you can join our panel here). Our most recent survey, conducted in mid-June, garnered 309 responses with 51 percent from companies with revenues of more than $1 billion (which we’ll refer to as “large companies”).
As you’ll read below, it’s possible that the pony in the pile is a new stabilization, a plateauing after significant green economic gains over the past two years. As such, there are no red flags -- but no green ones, either. As with the rest of the economy, growth in green seems to have stalled, if only temporarily.
EH&S spending is down for the first time since mid-2009. For large companies this represents the first time in two years that we’ve seen environmental, health and safety (EH&S) spending decline. If you remember back then, the Dow Jones Industrial Average (DJIA) had bottomed out at 8,146. At the same time, our survey recorded a dip, from 74 percent who said their EH&S spending would be equal to or greater than the previous year in January 2009 to 63 percent by June of that year.
Since then, spending equal to or greater than the previous year has been on a steady rise (see Figure 1), reaching 89 percent in January 2011 (44 percent and 45 percent respectively). By June, this dropped three points to 86 percent (with 40 percent equal to last year and 46 percent greater than last year). While there’s no cause to sound the alarms (the DJIA is still hovering above 12,000), it may point to stagnation in the green economy, or at least in large company activities.
Green product development dips. Companies have been steadily funding green product development since a low point in mid-2009, when 76 percent cited investment equal to or greater than the previous year (23 percent and 53 percent respectively). Since that point, continued investment has hovered above 80 percent. In our most recent survey, funding eased back to 76 percent, but this time the composition changed: 28 percent maintained investments in green product development equal to last year while 48 percent increased their spend. That last number represents a drop of 7 percentage points compared to earlier this year, when 55 percent of respondents cited increased funding for green products.
Plus ça Change. One of the key events (or, more properly, non-events) contributing to the stall in the green economy is the gridlock in Washington around environmental, energy and climate change policy. In this case, no news is bad news as large and small companies alike look to the federal government to establish long-term policy that will guide greener capital investment.
But in a dramatic drop-off, businesses have lost faith in any action in the short term. When we asked what year greenhouse gas (GHG) emissions regulations would be passed in the U.S., 46 percent replied they don’t expect any emissions regulations to be passed. Large companies were even more dismissive, with only 49 percent expecting comprehensive GHG emissions regulations. As illustrated in Figure 2, this represents a steady decrease from last year (82 percent) to six months ago (61 percent) to today (49 percent), a twelve-month swing of 33 points.