The economic downturn presents great opportunities for innovation.
IN mid-December, with the world in the firm grip of the downturn and the prospect of an even tighter squeeze in 2009 looming large, Rio Tinto's Sam Walsh told guests at the iron ore miner's subdued end-of-year drinks that the measure of a good company was not how it performed in the good times but how it responded to the bad.
It's not just about the cards you hold, he said, but how you play them. Whether Rio has played the right hand with Chinalco only time will tell but, more broadly, the thrust of his comments is echoing around corridors and boardrooms up and down the terrace.
How can we turn this negative environment into a positive? Where are the opportunities in this new brave world? What do we need to do to use this adversity to our advantage? In tough times like these, when money's too tight to mention, I'd have expected commitments to philanthropy and green policy areas to be cut or deferred (take the recently announced review of the emissions trading scheme, for example). But those in the 'sustainability space' say this is their time, their moment of opportunity.
In fact, one would have been forgiven for leaving the recent Committee for Economic Development of Australia forum on sustainability believing that not only was the recession one we had to have, but the old, oil-dependent economy was entirely to blame.
According to long-time sustainability champion Peter Newman, the crash was caused by car-dependent sub-prime mortgages vulnerable to a tripling in the fuel price.
"The decisions that were made with sub-prime mortgages in areas that were very car dependent were the end of that free-flow of credit, because it was into areas that were never going to survive once oil went up," he said.
There's a simplicity about this view I like, but I suspect there's a little more to it. And why was one left with the impression that, putting it crudely, this was the recession we had to have? In short, it's because necessity is the mother of invention. In other words, only when in crisis do we think outside the square and innovate. Supporting this view is an analysis by sustainability think-tank, The Natural Edge Project (TNEP) showing that, over the past few centuries, waves of innovation have been preceded by severe downturn. The second wave was in steam power and railroads, the fourth wave was in petrochemicals, electronics and aviation, the last wave information technology and digital networks and the next wave, the sixth, will be sustainability.
Professor Newman refers to these waves as 'black swans'. It's a reference to the moment Willem de Vlamingh entered the Swan River and became the first European to see swans that weren't white. It's that moment of surprise at witnessing the unexpected by virtue of our previous experience.
So, if the TNEP analysis is right, we are at a transition point, a severe downturn and on the cusp of a new wave, a new black swan. But will we embrace it?
"Many people can't see a future," Professor Newman told the forum. "There are people who believe the whole system will collapse and it will collapse if we don't make the transitions, if we don't adapt and see that it is a new economy."
This new economy is one with a focus on energy and resource efficiency, alternate fuels and carbon capture. It's about green buildings and sustainable transport. If Professor Newman is right, there is a wonderful opportunity to give the next wave, the new black swan of sustainability, a big injection of capital through government stimulus packages. But how many have seized the opportunity?
US President Obama has set-aside $US30 billion for the development of smart grid power network in his stimulus package. And once you've got the grid, just plug-in the electric vehicle. According to Professor Newman, the development of rechargeable, light and long-lasting lithium iron batteries is about to change the face of city transport and the day will soon come when electricity utilities pay us to drive plug-in vehicles that not only take energy from the (smart) grid but put it back for use at peak periods. It's the key to renewable cities like the proposed North Port Quay development off Fremantle, to which former premier Alan Carpenter gave short shrift.
And the capacity of these vehicles has changed significantly, with the lithium iron battery now allowing distances of 400 kilometres on one charge, a top speed of more than 200km/hour and an acceleration of 0-100km in four seconds (if that's your thing).
President Obama's package also includes a $US2 billion investment in new battery manufacturing facilities and there are tax incentives to buy electric vehicles and retro-fit your petrol guzzler. It puts our government's package of pink bats and bike paths into perspective.
n Tom Baddeley is State Director of CEDA - the Committee for Economic Development of Australia.