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2021-04-30

Environmental Problems Through the Lens of Business


One of the key insights I gained from Bill Gates's "How to Avoid a Climate Disaster" is that the next economic leader in the world is an innovator in the global environmental management field.

But, is it truly possible to balance technological innovations and business outcomes (i.e., profit)? If so, what kind of technologically and economically solvable problems we have today?

To answer the questions, I dove into the topic through Renewable Energy and Green Building Entrepreneurship and Global Environmental Management on Coursera and studied some of the real-world examples. These courses told me why environmental problems matter for all of us, how we can readily make a change, and how the effort leads to business opportunities.

What's a green building?

Green building is a holistic design of an entire building that achieves a high efficiency of (net positive) energy use, zero "red-listed" chemical use, and better city planning and social equity. For example, reusing materials, use of natural lights and energy-conscious HVAC systems make up a green building.

It is important to note that sustainable development requires us to consider mutually dependent different factors:

  1. Environmental sustainability
  2. Social sustainability
  3. Economical sustainability

To give an example, a newly constructed green building must coexist with existing local communities, and the project must be affordable and/or beneficial enough to make a long-term positive impact. Otherwise, even if the climate crisis is somehow mitigated at that moment, new problems immediately arise as a trade-off. That's why city planning and social equity matter for the green buildings

The need for green buildings is tightly connected to the trend of global urbanization. As the global population is concentrating on urban areas, energy-dependent human activities such as housing, transportation, and dining become more active, and hence climate change proceeds. Therefore, a climate disaster forces us to redesign urban areas, and green buildings could be a deeply satisfying solution.

Environmental problem as a business opportunity

Here is a list of facts associated with a wide variety of environmental problems green building could mitigate:

  • 2.5 billion people lack access to clean drinking water.
  • Roughly 1.2 billion people lack access to electricity.
  • 2.7 billion people use biomass for cooking, and 3.5 million deaths per year are caused by indoor air pollution.
  • We lose 68% of all wild animals by 2020, relative to 1970; we've already lost 58% of them when the course material was created.
  • Humans have created over 100k chemicals, and 3 million possible combinations exist among them. What are the origins of this product? How can we ensure if the product is "safe"?
  • 20% of the world's coral reefs are now dead; only 45% are healthy.
  • 24% of diseases are linked to environmental factors, and it's 34% for children.

In fact, all of them can be translated into business opportunities, but it's not trivial for those who don't directly face the problems in their daily life for the following reasons.

Misperception #1: It's not relevant to the developed countries

Well, why do people in the developed countries need to care about the problems?

Unfortunately, telling an urgency of the problems won't be enough to motivate those who have no visible issues in the developed countries. Instead, showing the financial and business impact of dealing with the global problems and incentivizing the contributions are necessary.

According to the course, a significant amount of investment already goes to energy generation technologies these days. One reason for this global trend is the younger generation's strong interest in the climate crisis, especially millennials and z-generation in the developed countries. It should be noticed that they will dominate the global economy in the coming years, and they are the people who make the next market demand; being considerate of their immediate concerns naturally makes business profitable in the long run. This point tells us how important understanding demographic trend is, which is a relatively predictable factor among the complex problems.

During the Web 2.0 era, people started IT business because huge investments have been made in the market, and today, they're aggressively leveraging AI technologies as the market trend shifts—Nothing differs from the situation, and the investors' interest clearly represents a chance of making a profit.

Misperception #2: It's costly

Sure, now I understand the value of contributing to green building and surrounding technologies. But I know such advanced technologies are expensive.

A key message from the course is how affordable today's green building is. In particular, thanks to the aggressive investments and accelerated innovations, energy storages (i.e., batteries) are dramatically getting cheaper these days, while increasing its capacity. It means that we have become able to economically rethink energy supply (e.g., by using solar power).

One survey result introduced in the course revealed that people consider green building requires to pay 15% of extra cost compared to conventional buildings. However, in a mature market, a green building requires only 0-4% of extra cost in practice.

Moreover, 75% of the total cost over the entire life of a green building is operational costs. That is, although predicting seasonality (e.g., daylight hours and wind power for energy generation) and managing the budget might be challenging, the advanced green building techniques allow us to save a lot of money in the long run once they succeed.

Speaking of long-term benefits, adapting to renewable energy also enables companies to build an attractive brand for the millennials and z-generation, and they could retain more talents.

Misperception #3: It's not employee's responsibility

It'd be great if my employer made our office green building, but I, one of hundreds and thousands of employees, can do nothing.

As the course title suggests, the lecture ultimately emphasizes the power of connecting renewable energy and entrepreneurship for all business people ranging from an employee to an executive. See The Importance of Entrepreneurial Thinking for the Green Building Industry, for example.

Of course, starting my own business gives me a huge chance to make wealth, literally change the world, and redefine how I work. There are tons of methodologies and successful/failure stories the books and MBA courses tell, and anyone can change the world as a result of an unpredictable, uncertain journey.

Meanwhile, the course also shows the possibility of intrepreneurship, which means entrepreneurship within an organization. Unlike making a brand-new company, we could leverage the current job to create something new at a minimum risk. What can I create that doesn't exist today? What are customers going to ask 3-5 years later? Such intrepreneurial thinking allows us to come up with an innovative idea in many different domains, including but are not limited to renewable energy and green building.

Opportunities beyond renewable energy

The Global Environmental Management course is conducted by Technical University of Denmark, and the lecturers share several problems their capital, Copenhagen, faces. Although their relationship to business models is unclear, the list of real-world problems & solutions developed in the world's greenest city is highly inspiring for us to seek new areas of innovation.

  • How to determine "policy" to force a change.
  • Quantitative risk assessment to ensure water quality.
  • How to layout the city and accept/avoid flood under the increasing precipitation.
  • Waste management strategy against ongoing population growth.
    • Recycling is not free, and net benefit may not be positive; recycling cardboard causes the same CO2 emissions as non-recycling disposal, for example.
  • Importance of local stakeholders to deeply understand a problem, develop the right solution, and deploy in the right way.
  • The power of a demand-based approach that enables local people to choose their resource management system by themselves, rather than forcing a particular method by the government.
  • Effective and efficient way of processing ground/sea/wastewater, which is tightly integrated with urban city planning.
  • Difficulty in the management aspect of dealing with air pollution; technically, mitigating pollution is not difficult, but a real challenge is how to implement the relevant policy/regulation on a massive scale.
  • Water is one of the most "at-risk" natural resources on the earth. Understanding our water footprint (e.g., how much water making X tons of rice requires), predicting and optimizing the water usage is important to build the best water resource management strategy.

Climate change is real, and it is an ongoing issue. We need to consider not only how to stop it but also how to adapt our life and way of thinking to the change.

  Author: Takuya Kitazawa

Takuya Kitazawa is working on machine learning, data science, and product development at Treasure Data.

Opinions are my own.

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