Marketing in a hot, flat and crowded world

I bring both good news and bad. As far as the bad news goes, having worked through five recessions to date, I think that the current downturn is more than a sixth in the series. Instead, it feels like the onset of a new cycle in what economists like Nikolai Kondratiev and Joseph Schumpeter saw as great waves of change that build and destroy economies.

And that's the good news, too, because our post-Second World War economic infrastructures are already proving to be ecologically unsustainable – witness the accelerating destabilisation of our climate – and likely to become much less sustainable as the planet's population soars by a further 1.5 billion people by 2025.

Launching the Observer's 'Big Idea Award' early in 2009, and spotlighting those developing and promoting market solutions to sustainability challenges, Jupiter Asset Management's head of socially responsible investment, Emma Howard Boyd, stressed that: 'The urgency of what is required to combat issues such as climate change has not diminished as a result of the current financial crisis. We need big ideas,' she said, 'and it is at times like these, when there is widespread disruption, that we see innovation and new thinking.'

But what was fascinating was the range of ideas flagged up by the awards. Here are a few examples: cradle to cradle and zero waste thinking; 'carrot-mobbing', which involves getting stores to pay for activists to help attract new consumers to retailers investing in energy efficiency; and 'transumption', where we pay for services rather than for products; 'ethical texting', in which consumers text organisations, such as the Blue Ocean Institute, from stores as they shop, to see which products are the best choice.

As a member of the advisory board of a Californian venture capital firm, I also recently saw a remarkable technology that blended a mobile phone, a bar code scanner and a Google-like interface so that consumers could check products for themselves, with instantaneous access to huge numbers of databases covering the performance of particular products, brands and companies in relation to issues like climate change, animal welfare, obesity and diabetes.

No-one has yet brought that product to market, but it's only a matter of time. And meanwhile related information is cascading into markets, with unforeseeable consequences for business. Take, for example, the recent media coverage of the carbon footprint of using search engines. Most of us probably assume that using Google or Yahoo! results in very little environmental impact, but we are now told that just two Google searches are equal in energy terms to boiling a kettle, producing around 14g of CO2.

To get a sense of the sort of information we will increasingly have at our fingertips, consider this: Nicholas Carr, author of The Big Switch: Rewiring the World, has calculated that maintaining a virtual character – known as an 'avatar' – on the Second Life website requires 1,752 kilowatts of electricity each year, and that is almost much as the average Brazilian uses for all purposes each year. Of course, most of us will begin by ignoring such facts, but I suspect we are reaching some sort of tipping point where we will see a growing range of products and services playing into the opportunity spaces opened up as a result.

GREEN ENVY

Yes, premium items like organic food products and Prius hybrids have been hit by the downturn. But that doesn't mean an end to products. Instead, we will see cheaper, better products being launched.

Take hybrid cars. The 2009 North American International Auto Show in Detroit saw the introduction of the first production plug-in hybrid car, not made by Chrysler, Ford or GM – which could only look on in green envy – but by a Chinese battery manufacturer, BYD. And that's typical of what we can expect to see, with new market entrants popping up from what seem highly unlikely corners of the global economy.

What's fascinating me at the moment is the possibility that the environmental movement may now be racing along the sort of innovation curve we have seen time and again, whether in relation to the introduction of cars, electric kettles, TVs or the internet. It often takes a major new worldview, mindset or technology anywhere between 50 and 70 years to penetrate mainstream markets. So stand back for a moment and think of where environmentalism has come from and what that tells us about where it might take us over the next decade.

The year 2009 marks the fortieth anniversary of the first publication of the 'Earthrise' images of Earth from space, with the lunar landscape in the foreground. In 1948, 21 years previously, the British cosmologist Sir Fred Hoyle had predicted that when humankind saw Earth from the outside for the first time, it would transform the way we saw and related to-our small blue planet.

True, up to a point, but the uncomfortable fact is that environmentalism waxes and wanes as an issue for politicians, CEOs and marketers alike. Typically, it has tended to track economic cycles, with the greatest pressure on business towards the end of a boom period, with criticism tending to fall away during recessions. The evidence suggests that 2009 will see a very different pattern emerging, at least in relation to climate change and issues that can be linked back to climate.

WAVES OF CHANGE

Since 1994, I and my colleagues have mapped a series of societal pressure waves that, since 1960, have driven political and market change linked to sustainable development. Up until a couple of years back, we had identified three big waves to date, together with the lulls between them, when real embedding of changes typically happens. These waves, however, have largely impacted the developed world, with emerging and developing economies tending to follow suit – if at all – quite some years later.

The wave first built from 1960, mainly in Europe and the US, and drove political and regulatory changes like the formation of the US Environmental Protection Agency and UN Environment Programme. Throughout the first downturn, from 1974 through 1987, new environmental rules spread across the developed world, with business largely on the defensive, forced into compliance.

The second downturn, peaking between 1988 and 1991, was spurred by issues like the ozone hole, and environmental performance first became a market issue, with companies competing by developing greener products. This was a period when anything containing chlorofluorocarbon, mercury, lead or similar ingredients risked immediate delisting by nervous retailers. The ensuing down-wave saw a much less visible round of convergence and consolidation around management standards such as ISO14001 environmental quality standard and the Global Reporting Initiative (GRI).

From the early 1990s, increasing globalisation meant that environmental pressures started to rattle back through supply chains. The Rio Conference on Environment and Development in 1992 was one manifestation of this increasingly globalised approach. Major companies began to be targeted by activists campaigning against the environmental degradation and inequitable development that they saw as inevitable consequences of globalisation. The peak of the third wave came as a palpable shock to organisations like the World Trade Organization (WTO) in 1999. The focus in this upwave was on globalisation and on a rapidly proliferating range of corporate and global governance issues.

The third downturn began late in 2002, following the 9/11 attacks. One symptom of this consolidation phase has been the way corporate responsibility and wider sustainability issues have increasingly become central to the agendas of organisations like the World Economic Forum and the Clinton Global Initiative – and have been addressed, to some degree, through, for example, the Sarbanes-Oxley Act in the US. And now we have the Copenhagen summit on climate change looming at the end of 2009, which will ensure that our carbon footprints will be under scrutiny as never before.

THE PEOPLE WE HAVE BEEN WAITING FOR

So what does the future hold? If intuition is anything to go by – but recall that the future is full of surprises – the early phase of the next upwave has already begun. The financial crisis will delay it, but not stop it.

It focuses on new market opportunities thrown up by the world's great social and environmental challenges, on evolving entrepreneurial solutions, and on bringing such solutions to scale, often through the use of new market mechanisms and economic instruments. That's why we are taking such an interest in the new breed of social and environmental entrepreneurs that has been springing up around the world. Even where these people fail to break through into mainstream markets, they are signalling what the new issues will be and where the great market opportunity spaces of the next decade will likely be found.

A memorable passage in Tom Friedman's recent book, Hot, Flat, and Crowded, recalls when he visited MIT and was invited to peel off from the session he was meant to attend. A bunch of students took him to see what their Vehicle Design Summit group was cooking up. This had brought together 25 college teams worldwide, including from India and China, to design and build a plug-in electric hybrid. 'Their aim', Friedman explains, 'was to demonstrate that they could build a car with a 95% reduction in embodied energy, materials, and toxicity from cradle to grave and provide the energy equivalency of 200 miles per gallon.' As a different Tom – Peters – would have said: wow!

Interestingly, the team were analysing turning points like the race to the Moon, trying to work out how to capture the same 'energy, passion, focus, and urgency'. But what really hooked me was their tagline for the project: 'We are the people we have been waiting for.' There are moments in history when a new set of challenges surface, when a new order urgently needs to be built. And Friedman concludes that this is exactly where we now find ourselves.

If the business of business is business, as a different Friedman argued, it is also to build future markets. One opportunity space attracting growing interest focuses on low-carbon cars, despite the hiccups that electric car pioneers Tesla has experienced recently. French President Nicolas Sarkozy, for example, has launched a £400 million R&D programme over four years to drive the development of low-emission vehicles. And the French energy utility EDF has announced agreements with Renault and Citroën to develop the recharging infrastructures. A make-or-break piece of the puzzle will be to develop the technologies, standards and business models – the 'soft infrastructure' – that system change demands. Compared to the French initiatives, the UK's late October 2008 announcement of £100 million for low-carbon vehicles is a good start, but hardly enough to move us into the fast lane.

So what would be some key dos and don'ts for marketing professionals in the next couple of years?

Don't

• Underestimate the challenge of going green convincingly and profitably.
• Greenwash – it's still so easy to do, through stretching marketing points, over-enthusiasm or misreading the direction of the debate.
• Imagine that 'green' performance improvements are a guarantee of market success – the product or offering has to work on its own terms. It's very much like quality. You could have made a submarine out of high-quality ferroconcrete, only to have it sink with all hands when launched.
• Forget that all forms of evolution – including product evolution – involve intense, continuing adaptation to environmental (or market) conditions. Innovate and communicate – and then keep innovating.

Do

• Test your ambitions and claims with people who know the field first.
• Be consistent: even well-founded green claims in one part of the business can be undermined by mishaps or misalignments in other parts of the business.
• Think big – just as General Electric did with its 'Ecomagination' initiative.
• Work out what your company's line is on key policy issues – looking not just for ways to defend your existing business model and reputation but new ways to build value, and encourage regulators and policy-makers to change market signals to support green solutions.
• Stick with it – Rome wasn't built in a day, nor was any well-founded green reputation.