Can adapting to climate change be a business imperative - saving the planet at the same time as boosting the bottom line? In this piece, students Tom Owens and Phelim Tong use the example of car manufacturer NIO to argue that maybe we can have it all.
Tom and Phelim wrote this piece for a blog-writing competition as part of their assignment for MN10005 People and Organisations 2 module at the University of Bath School of Management.
Go Green or Go Home
As climate change becomes an ever more urgent problem, businesses and consumers alike are placing more value on corporate social and environmental responsibility. To gain a competitive advantage, many companies are shifting their focus towards how they can make their product more environmentally friendly, whether it be through the production process (eg. reducing carbon emissions) or through output (eg. electric cars). Increasingly, companies will have no choice but to do this, given the many legislative regulations and socio-political pressures such as increasing fuel prices, carbon taxes, and green tech subsidies. So how can companies make a profit in this new economic environment?
NIO’s Drive from Green to Gold
The automotive industry is arguably one of the leaders in both pollution as well as innovation. Given the need to reduce carbon emissions, car manufacturers are beginning to move towards hybrid and electric cars. One upcoming company is NIO, a Chinese manufacturer that specializes in designing and developing electric vehicles.
It is well known that China is one of the top polluters in the world, however it is also one of the leaders in green innovation. This type of environment fosters the creativity and ingenuity needed for companies like NIO to work effectively.
Let's examine what exactly makes NIO so competitive. Its ecological benefits are obvious given its electric motor, however it has multiple features that stand out from its competitors. Nomi is NIO’s very own voice assistant that controls certain functions of the car, from locking doors to turning on the AC. NIO cars also have a special battery that can be easily swapped out in three minutes. This partially solves one of the electric car industry’s largest problem of not being able to drive long distances, as Nomi can find charging stations that will swap out the battery (although at present, these stations are only on main highways in China). You’d think, given these features, that NIO cars are amongst the most expensive on the market, but this is not the case. A NIO ES8 is less than half the price of a Tesla X 75D. This aligns with NIO’s goal of affordable luxury: all the benefits of modern cars with reduced prices.
So how can NIO could possibly make money? The short answer is that it doesn’t - at least, not yet – but it was only founded in 2014. There is a high and growing demand for electric cars, whether it be for social status, saving money on gas, or wanting to reduce your carbon footprint. The fact that NIO offers alternative green technology, and is built upon green principles means it will have access to a relatively large, only partially tapped market share.
Furthermore, many governments, including that of China, subsidize R&D as well as the production of green products. NIO receive a subsidy of approximately 74,000RMB (1400GBP) per car. “Green” companies may also have a more motivated workforce. A study by UCLA found that employees at green companies are 16% more productive, and that they are “more motivated, receive better training, and benefit from better interpersonal relationships.” The increase in productivity will subsequently trickle down into increased efficiency and hence increased profits.
NIO is an example of how companies can save and make money by going green. Another example is Aston Martin, who have already seen revenue increases after announcing the conversion of classic engines to electrical systems, and pledging to be 100% hybrid.
That said, the issue goes much further than making money. Profitability often seems to be the only way to capture the attention of large corporations, however the issue of the environment we are living in goes much deeper.
Given the Intergovernmental Panel on Climate Change’s (IPCC’s) final warning about the future of our planet, governments and companies are scrambling to adapt and evolve to accommodate the 2050 zero carbon emission deadline. This essential paradigm shift will drive the global market towards greener products. Governments will start to introduce harsher legislation and increase subsidies, companies will invest more in R&D, and consumers will opt for purchasing greener products.
Resolving the ecological crisis should be amongst the top priorities for people everywhere. Going green must become a lifestyle that we all strive for, and that is what companies like NIO and Aston Martin are trying to do: find a middle-ground between comfort and ecological responsibility. Perhaps there is a chance that we can clean up the mess we made, save the planet, and make money doing it.
Header image by John Cameron on Unsplash