Wednesday, May 23, 2007/
Entrepreneur Paul Gilding has made a business out of going green. He shares his secrets with JACQUI WALKER.
Paul is in the business of selling carbon offsets. He guarantees that for every tonne of carbon emitted a tonne somewhere else is removed by installing energy efficient technology.
He bought Easy Being Green in 2005 and it now employs 120 people and turned over $40 million in 2006. He talks to Jacqui Walker.
To listen to the interview with Paul Gilding, click here.To download this mp3 file and listen to it later, right-click this link and “Save target as…” to your computer (Macs; option-click).
Jacqui Walker: Your personal journey for your entrepreneurship has been a very long and winding one. You’ve been in the army and in Greenpeace. Can you tell us how you came to be a green entrepreneur?
Paul Gilding: I guess it’s really a sign of the times that for someone like myself who spent his life as an activist, as a social change practitioner, if you like, that now I’ve come to a point where working in business is a good way of achieving those outcomes.
I started off at the age of 16 or so chaining myself to the gates of the South African embassy in an anti-apartheid protest. I went through a whole range of different organisations. I ended up working with Greenpeace in Australia and then internationally and with a deep and abiding passion for the idea of our living a life that was having an impact and doing something worthwhile. I have felt strongly for the past 15 years that climate change is the issue of our time.
The world has changed in a very profound way and now while I don’t in any way shy away from what Greenpeace does and did, there is a really significant role for entrepreneurs and for business people and anyone working inside the business community to take really significant action towards addressing these kinds of issues.
So how does your business model work, Paul?
Basically we believe that there is an emerging market, and I think our growth is evidence that that’s true, for cutting CO2 pollution. Now CO2 pollution, which comes from coal-fired power plants and driving our cars and so on, is the cause of climate change. If we want to stop climate change we have to reduce that pollution. So there is a market for reducing pollution.
Our basic business model is to cut CO2 pollution. We think it’s most effectively done at source and that is the coal-fired power stations creating most of the energy in Australia.
Our business model is to go into homes and businesses around Australia and install energy efficient equipment that cuts people’s power bills because we know that when we do that we cut CO2 pollution.
There is a market now for CO2 for carbon credits, which is what CO2 pollution is traded as. Therefore we cut pollution and then go and sell that pollution. So we can actually get paid to cut pollution.
And you do that in New South Wales don’t you, because there is a carbon trading system at work there? How does that work exactly and is it likely to come into other states?
We do most of it in New South Wales because there is an established carbon market in New South Wales. The NSW Government under Bob Carr said, ‘We’re going to cut CO2 pollution coming from the electricity sector, and we’re going to do that by putting a limit on how much can be emitted.’ If the companies involved in that sector cause more pollution than the limit, then they must pay for the right to do so.
In other words they must cut the pollution somewhere else by paying someone to cut it for them. So we’re approved and audited under the Government scheme and we promise to go and install light bulbs and similar equipment into homes and businesses.
The Government scheme works out how much CO2 pollution that will save and therefore for every individual action we take we get a certain amount of CO2 credit and we go and sell that in the marketplace and get paid for it by the electricity companies.
And how big is that market just in New South Wales? Your turnover in 2006 is $40 million. Are there other people that are doing what you are doing?
There are, very much so, but we were the first to take it to a really significant scale. It’s not only us. Some people go into power stations and make them more efficient in how they produce energy. Some will go into factories and industrial facilities and make their whole process of production more efficient and cut energy that way. There are people who go and plant trees to absorb the CO2 after it’s been emitted.
There’s a range of things you can do under this scheme, but there is certainly now hundreds of millions of dollars being traded under the New South Wales carbon trading scheme and that’s really a very powerful lesson for Australia on how to design a good scheme and how to get the most efficient way of cutting pollution to occur as fast as possible.
And is it likely to come into other states?
There is no question that there will be a national trading scheme in Australia. Exactly how that scheme is designed, what it allows and does not allow under it, is a very significant question yet to be determined, but there will be a national price on carbon.
There’ll be a national carbon trading scheme and then it will be up to the Government who designs that scheme as to what is included and what is not included because each scheme around the world is being designed in a different way.
And so it sounds like with things changing so quickly there are bound to be opportunities for entrepreneurs. Is that how you see it?
Look absolutely, and one of the reasons we’re in business is to cut CO2. But the other reason is to show the opportunities for entrepreneurs and business people in this area because we believe very strongly as a company 100% committed to action on the environmental issue. We’re committed to encouraging other businesses to compete with us to get involved in this space and to actually try and generate a much bigger momentum in the marketplace towards acting on climate change.
We can see climate change as a purely environmental issue or we can see it as being a major change to the global economy and we’re going to have to build new power stations, build new technology in a whole range of areas. And therefore create business opportunities on the back of that which is doing good for the world.
Certainly our people who work for Easy Being Green and for Ecoss Corp are feeling very good about their work every day because they’re being paid normal commercial salaries and doing good work for a good company. They’re actually helping to solve the great challenge of our time. That’s very satisfying both for the owners of businesses and the people who work there.
And how are you growing so fast? I mean you’ve built up your staff very quickly. What are some of the challenges that you’ve faced?
I think, really, it is a place for entrepreneurs because it’s a very risky, very rewarding, very exciting and very chaotic marketplace. We’re really inventing the industry that we work in as we go along. That’s a lovely, fun thing to do for an entrepreneur. It’s also an inherently risky thing to do in terms of business.
It’s changing all the time. Governments are redesigning schemes and new technology’s coming through, public attitude is shifting dramatically especially in Australia.
The challenges we face are the culmination of growth and cash flow and all the things you’d normally face in a business, but you’ve got all these sort of external drivers of that as well.
In the dotcom area, the big idea would always win but the market was being created by the demand for services directly; whereas in climate change, the market is also being defined by the public responsibility issue and the urgent need for action, the Government responding and creating new regulations, new frameworks within which business can work.
Yeah, I bet. And so do you think Australian medium-size enterprises are doing a good job of being environmentally friendly?
Well, I think the short answer is no. I think Australian business by and large has been left behind largely because in Australia under the Howard Government there’s been a lack of action on climate change. That’s just a fact, and it means the business community hasn’t been getting ready for a new carbon constrained economy that we’re moving into. So I think Australian industry has been a bit behind.
There’s certainly some really exciting progressive things happening in solar technology and a whole range of geothermal and other new technologies and so on. So there’s lots of entrepreneurship, lots of innovation happening.
I think by and large we’re an energy profligate country. We waste a lot of energy and that’s just a waste of money as well as an unnecessary cause of pollution. And that I think is an opportunity for rapid change now.
So what should companies do if they want to improve their environmental status?
I think the first and most important thing is to understand your impact, so in what way do you contribute to the problem? And you do that for two reasons. One, so you know what it is and you can reduce the impact and be a better environmental citizen; but also because it helps you to understand in what way are you involved in the carbon train.
How do you reduce CO2 pollution to save money as a business and what opportunities are there? Can you help your customers reduce their CO2 pollution? Are there new markets emerging in your area?
This is not just a green technology space. It’s very important to recognise that virtually any business in any sector is going to be affected by this issue. It could be software, it could be technology, it could be investment. It could be green tourism.
And how quickly is this going to happen?
I think that’s the big surprise everyone’s going to face in the next few years. I think we’ve all been surprised how fast the issue has arrived in the public consciousness. It’s going to keep on moving at that pace.
People think it’s arrived now we’re here. I think it’s actually just warming up. I think that the pace of change globally in response to climate change is going to be intense.
I think we’re going to see a lot more creative destruction than people were expecting. I think that means just massive amounts of capital flowing into the area with government support and with public support to try and drive the transformation that we need to see in the economy happening faster and faster.
So what will the economy look like in five years’ time in this sense?
Well I think there’s going to be Google-sized companies in this space that we haven’t even heard of yet. Five years probably means they’ve already been created somewhere but there’s going to be massive success stories in this space. There’s going to be some spectacular failures in this space, both start ups but also old companies that have been around for a long time and haven’t got ready for this new world. Some of the car companies, I think, are at serious risk in the US. So you’re going to see basically a lot more economic differentiation if you like between the winners and losers in the space.
It doesn’t mean it’s bad for the economy overall. It may be, but we’ll wait and see on that. What it means is that for individual actors in the economy there’s going to be some very significant shifts to come.
People I think are too focused on technology because I think there’s more to this than technology but in the technology space there will certainly be really dramatic growth.
Do you mean alternative fuel sources?
All sorts. Alternative fuel sources certainly. Solar, wind, etc. Bio fuels. But is there a great technology that we can apply to air travel coming through. Is there a different type of fuel we can use in aeroplanes? People are now talking about sailing ships – massive tankers and container ships that can be partly powered by sail.
There’s going to be some energy used and energy generation and also in behaviour change. Easy Being Green is a story about getting people to behave in a different way in their home, changing their light bulbs, putting in solar hot water and so on.
These are all multi-billion dollar opportunities even in Australia and so we’re going to see some really significant business models emerge whereby to grow new businesses, not with fancy new technologies, but with existing improvement technologies applied at a mass scale.
And so what does the future hold for your company Easy Being Green then? And Ecoss?
I think Ecoss certainly is an easier answer in a way because what Ecoss is now doing is saying, ‘Look, there’s a lot of opportunities based all around the place in this area’.
Easy Being Green is a great consumer company which can take the products to the mass consumer. We’re also looking into or actually I should say we’re at quite an advanced stage of developing an investment fund in this space to try to get more capital flowing into the new technologies that are going to have the biggest impact so we’re looking at joint ventures on venture capital.
We’ve got a consulting business that’s advising large companies, which is now growing very quickly as well.
Have you started raising money?
No, we haven’t yet. No we haven’t and we have found that we… people approaching us offering to give us money, which is a nice change for an entrepreneur, but we’re still recognising that the market is just starting to take off and the longer we can delay having to take in capital the better price we’ll get for the capital obviously. So we’re ready for that reality and will have to face it at some point. But so far we haven’t had to do that because we’ve been very successful in developing an organically growing business using our own money.
We’ll certainly at some point before too long I think have to face up to that. That possibility of being able to grow faster and have more environmental impact by virtue of raising capital.
Yeah, and that would be by selling some equity in Easy Being Green?
Well, we’ll look at all the options in that area. We’ve got three or four companies that we already have in this space that are part of the Ecoss system as we call it that are playing in different parts of the value chain in environmental solutions, so there’s a range of ways we can do that – either selling shares in the overall group or selling shares in the individual parts therefore.
What do you think your turnover will be in 2007?
Look I think we’re probably reliably forecasting a 50% growth this year.
The business is so dynamic it’s very hard to predict. I don’t expect to have a steady path growth over coming years. I expect to see some pretty wild gyrations in the business but certainly the overall trend is going to be very strongly upward. We grew effectively from virtually no turnover to spending cash in 2005, to $40 million turnover in 2006, so I think we’ll see some further gyrations but certainly all positive over the longer term.
So you can imagine the company being listed one day, I guess?
Certainly. That’s certainly a possibility. It won’t necessarily be listed because I think we’re a bit unusual in this space in that we’re what I call a pure social purpose company; that we are definitely a company that wants to grow and wants to be profitable and be very successful but the reason we’re in business is to drive social change – not to grow a business for its own sake.
And, as I say, social change, I mean cutting CO2 pollution at source. So we’ll do what we need to do and make our business successful in achieving its purpose of affecting climate change and slowing it down. And if we need to list to do that then we’ll list and if we don’t, if we need to stay private to do that then we’ll stay private.
We’ll do whatever is most effective for our objective, not just list for its own sake.
You’ve gone from not-for-profit organisations to a for-profit organisation and you’ve alluded to this already, but are there any conflicts there for you between being in business and being an environmentalist?
Not at all, actually. It’s a very interesting question and one that we get asked and talk about internally a lot. You know, where is the conflict, is there a conflict and we just reject the old-fashioned idea that good things happen by non-profits and bad things happen by for-profits. We seek not just to grow a business that has a good environmental impact, we also seek to show to the world that you can be a for-profit company which is designed as a business and operates as a business whose prime purpose in life is to achieve its objectives, which aren’t necessarily financial.
There is a very strong theoretical basis to the idea that if you stay focused on your social purpose and deliver that into society more broadly, you would actually (by the way) be more successful commercially, but that to us is a means to an end. We seek to be successful commercially in order to have greater impact in order to help people act on climate change. Not to make money for its own sake.
Money’s not a big motivator. Really at the end of the day for most people – despite the incredible focus on it in society – the reality is that none of us are actually fundamentally motivated by money. Money is a symbol of success, a measure of progress and so on but no one lies on their deathbed wishing they’re made more money. They lie on their deathbed wishing they’d done more valuable things or contributed more to society or to their family or done more for their kids, and that’s what we’re seeking here – a business that is focused on meaning and social benefit and see the money side of that as being a means to an end rather than a need in itself.
Thank you so much for joining us at Smart Company.
Good, great, happy to tell the story. Hopefully a lot of people will copy us and get into the market place and help us to achieve the environmental outcomes that we’re seeking.