Low carbon revolution and the emergence of the green-glomerate

Given how often parallels are drawn between the Industrial Revolution and the emerging low carbon revolution, it is remarkable how little detailed analysis there has been of the similarities that exist between the 19th century phenomenon that provided the foundations for the modern world and the imminent shift in the global economy that represents the last best hope of saving us from the ravages of climate change.

While the urgent need to decarbonise represents a unique challenge, there is no doubt that keen students of corporate history should be able to draw lessons from the Industrial Revolution (not to mention the mass market, IT and globalisation revolutions that followed) to help ascertain how the low carbon revolution will pan out.

One area where parallels are increasingly apparent is in the re-emergence of a certain type of multi-faceted, partially self-supporting, tightly-integrated company or conglomerate that heartily rejects the "stick-to-your-knitting" specialisation that dominated corporate thinking for much of the 20th century. Let's call them the green-glomerates.

The idea of a vertically-integrated company that controls not only a large chunk of its own supply chain, but also expands to provide itself with many of the services the market or the government has failed to deliver, is not new. It was given perhaps its most famous realisation in the early years of the Industrial Revolution with the emergence of those business philanthropists who, not content with building the factories that fuelled the British Empire, also built the houses, schools, roads and hospitals that they needed to ensure they had a healthy and educated workforce.

Historians still argue as to whether the desire of these businessmen to extend their operations well beyond their primary activities was motivated by genuine philanthropy or a hard-nosed desire to keep their business running smoothly at a time when neither the government nor other firms were capable of delivering the infrastructure they needed. But regardless of their motivation villages and suburbs across the UK, such as Bournville in the Midlands, Saltaire in Bradford and Port Sunlight near Liverpool owe their existence to 19th century industrialists like the Cadburys, William Hesketh Lever and Titus Salt.

Despite a few notable exceptions, this concept of sprawling yet highly-integrated businesses happy to make long-term investments that genuinely reshape the environment in which they operate has been in steady decline ever since. In fact, by the end of the 20th century businesses' rejection of issues and operations that went beyond what they deemed as their core competence had become so complete that we saw the birth of virtual companies - multi-billion dollar brands that did little except manage the outsourcing of their actual activities to third-party companies.

However, signs are now emerging that suggest the complexity of the business challenge presented by climate change could herald a revival of the multi-pronged generalist business model - a return of the conglomerate.

The most obvious evidence for this trend is found in the form of the engineering giants that never really gave up the conglomerate model. GE and Siemens, for example, have quickly realised that their sprawling operations are the perfect breeding ground for the integrated low carbon developments that are required to tackle the climate change challenge. Both companies have moved remarkably quickly for organisations of their size to tap the booming low carbon markets, no doubt helped by the fact that they not only produce the wind turbines that provide renewable energy, but also either understand or produce the smart grids that will transmit the energy, and the devices that will use it.

However, what is most interesting about these emerging green-glomerates is that other, traditionally specialised, businesses are showing an interest in following suit. As so often with new trends, the bellwether is provided by Google. All the attention may have been on its attempt to break into the mobile phone market, but in recent weeks the company has also quietly applied for permission to trade wholesale electricity in the US. Add in the fact that it has spent much of the past two years undertaking highly visible investments in renewable energy firms and significantly less visible research projects of its own into low carbon energy generation and there is ample evidence that Google is looking to move beyond its internet boundaries. The rationale appears simple: energy firms will struggle to provide Google with the reliable and green energy that it feels it needs, so it is looking to provide it itself.

Even startups are getting in on the trend. Earlier this week, I interviewed Antony Blakey, executive chairman of engineering firm Ultra Green, an eight year-old company which, despite the fact it is only just moving towards commercialisation already has its finger in countless low carbon technology pies. Blakey's vision for a group providing next-generation biofuels, waste-to-energy systems, biomass power and energy-efficient construction is staggeringly ambitious, and I imagine the company would be pretty happy if just one or two of its ideas takes off over the next few years. But what Ultra Green clearly understands is that the links between biofuels, biomass power plants, waste-to-energy systems and the energy efficient buildings and vehicles that will use the energy they generate and provide the waste feedstocks they rely on are so tight and so self-perpetuating that a company operating in every part of the chain has a huge advantage.

We are seeing a similarly multi-faceted approach from Ecotricity which, having positioned itself as a provider of green electricity and established its founder Dale Vince as number one in the Sunday Times Green Rich List, is already turning its attention to the development of energy storage systems, algae-based fuels, electric cars and electric agricultural equipment. Vince says that the company identified early on that the only way to tackle climate change was to decarbonise the three carbon-intensive sectors of energy, transport and food production and is now working its way through the list.

As with the Victorian industrialists of old, it is unclear if the emergence of these green-glomerates is motivated by philanthropy, commercial nous, or as is most likely a mixture of the two. But as more and more firms realise that the low carbon revolution requires not just occasional improvements in individual technologies, but the entire re-development of our infrastructure and economy, we can expect growing numbers to ditch specialisation in favour of seeing the bigger picture.