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.