“Recycling Management”

“Market-friendly environmental management,” in which companies do business by using recycled second-hand items and developing environment-friendly products in order not just to protect the environment and but also to make profit, is in vogue these days.

By protecting the environment, companies go beyond enhancing their image as an “environmentally conscious company,” to increase their earnings. Experts say, “Not long from now, customers will demand environment-friendly products only. If businesses don’t get ready, they will lag behind others in this new market.”

Existing products that are pro-environment are either too expensive or too difficult to use. For example, cars powered by what is considered a clean energy source, hydrogen, have taken a long time to be marketed as they were very expensive, and hydrogen stations were hard to find. However, for the last few years, customers have developed a better understanding about environment-friendly vehicles, and more of these vehicles using the state-of-the-art technologies have started to hit the market. Toyota’s fuel-efficient hybrid models are a good example.

An American company, General Electric (GE), under a project called “Ecomagination,” has set a revenue target of 20 billion USD in the environment-friendly business sector by 2010. Solar trains, emissions-reduced airplane engines, and highly efficient light bulbs are some of their business items. Already, some of these GE businesses, such as wind power plants, fuel cells using solar energy, and hydrogen energy have contributed to the firm’s sales growth by 10.1 billion USD last year.

Recycling used items allows companies to both protect the environment and make money. LG Electronics is recycling used home appliances collected from countries including Korea, Europe, North America, and Japan, and the proportion of recoverable parts and materials is in the 60~70% range. Samsung Electronics, HP, and Nokia are other companies that use second-hand home appliances to manufacture brand new products, thereby cutting costs.

Even garbage can be turned into revenue-making products. Forcebel, a landfill reclamation company, digs into landfills to pick out recyclables in trash. Wooden and plastic materials are recycled to produce power, while steel and aggregates are reused for construction. The landfills are then used for land to build on or to fill with another layer of rubbish, creating added value.

Choi Gwang-lim, the head of the Business Institute for Sustainable Development, an affiliate of the Korea Chamber of Commerce and Industry, said, “In the past, manufacturing, selling, servicing were all parts of the value chain, but now there are two more elements that have been added: collecting and recycling. Value created from this new chain will be rewarded companies with strengthened competitiveness in the future.”

The alternative energy industry is where this new trend is most welcome. LG CNS, Hyundai Heavy Industries, and Eagon Industries are some of the companies that have moved on to or that have invested in developing solar power generation. Woosung-Nextier, after acquiring wind power generator maker Kowintec, announced that it will designate a wind power generation sector as its new growth engine.

Many Chinese companies also are working hard in this field. The reason: China is experiencing a dramatic increase in energy consumption, therefore “affordable energy sources” are desperately needed. Suntech Power, a leading manufacturer of fuel cells in China, has become the world’s top ten fuel cell maker after only six years since the company foundation in 2001.

Kim Hong-gon, the head of the Clean Energy Center at the Korea Institute of Science and Technology (KIST), said, “Hydrogen fuel cells are affordable and easy to charge, while solar fuel cells generate almost no utilities fees. Investment will rise as technologies are rapidly commercialized.”

Environmental technologies that enable businesses to both protect the environment and to generate high profit, are attracting more and more investors. Last year in Silicon Valley, a news article titled, “John Doerr invested in environment technologies,” made headlines. Doerr is a famous venture capitalist who made more than 1 billion USD after making investments in Amazon and Google. His announcement that he would invest 100 million USD in venture firms developing environmental technologies spoke volumes. This meant that venture capitalists, who are extremely sensitive about the profitability of changing technologies, have started to make their moves. In other words, the future of environment technologies has turned out to be quite bright.

Kim Jin-ho, the chief researcher at the Korea National Cleaner Production Center, said, “Customers still think that issues related to the environment are part of their corporate social responsibility. However, for companies, it is a profit-generating business item. Those firms that have secured environment technologies are asking governments and international organizations to introduce related environment regulations so as to increase their profitability.”

This rapid change is leading to optimistic views toward the possibility of environment-friendly products. William Moomaw, a professor at Tufts University and the author of the Intergovernmental Panel on Climate Change (IPCC) report, said, “Just like in 1905 when just 3% of households had an access to electricity, the same percentage of households use alternative energy sources at the moment. No one predicted such a rapid penetration of electricity, and the same model will apply to alternative energy sources.”

sanhkim@donga.com