In spirit of Earth Day and with budgets in mind, IBISWorld has identified some key markets to help companies achieve their sustainability goals and the strategies to do so for the best price. Some of the mentioned markets include:
- Reduce Environmental Footprint
- Manage Output
- Save Energy
Saving on Sustainability
Whether driven by environmental consciousness or EPA regulation, businesses can adopt sustainable practices without breaking the bank.
By: IBISWorld Research Editors, Lindsay Holloway & Christa Price
While many US companies are making swift moves toward eco-friendliness to boost their corporate images or because they truly care, many others simply have to because of the nature of their businesses or ever-stricter environmental regulation. For instance, the daily operations of energy and manufacturing companies’ already necessitate monitoring of output and waste. Meanwhile, EPA legislation revisions planned this year are expected to expand the pool of companies at risk of costly noncompliance fines if they don’t implement more sustainable practices.
Already taking those steps are behemoths like Bank of America and its internal recycling program, Hewlett Packard and its e-waste initiative and Walmart and its use of energy-efficient lighting. While these corporate giants may have the necessary funds and resources to make drastic investments in sustainability, there are many steps businesses of all sizes can take to lessen their negative impact on the environment or simply stay compliant as regulation tightens. And with the right purchasing strategies, businesses can avoid taking an axe to their bottom line. IBISWorld has identified some key products and services that can help companies achieve their sustainability goals, as well as the strategies to do so for the best price.
Reduce Your Environmental Footprint
The advent and growing adoption of high-speed internet, mobile computing devices and cloud-based services have truly launched the “go paperless” movement, allowing businesses to not only reduce paper usage, but also trim costs and clutter and improve efficiency and connectivity. Both riding and facilitating these trends are products and services like online file storage, digital transaction management software and backup archival software.
Prices are in steady, long-term decline for online file storage services and digital transaction management software. Falling production costs combined with high competition in these markets contribute to forecast price declines of 7.7% and 2.9%, respectively, in 2015. As such, buyers should not feel rushed to make a decision on a supplier or lock in current prices with a long-term contract.
Backup archival software, on the other hand, is a near necessity for most businesses, so the market is currently in the suppliers’ favor. “There are no direct substitutes for the software and the market is highly concentrated, with little price competition among suppliers,” says IBISWorld research analyst Dale Schmidt. As such, buyers are encouraged to act fast and lock in current prices with multiyear contracts to avoid the 2.8% price growth forecast for 2015. Fortunately for buyers, low price volatility across all three markets indicates low risk of price spikes, allowing buyers to confidently budget for purchases.
If paperless operations aren’t an option, businesses can at least do their part to recycle and reduce waste. Although recycling service prices are only anticipated to increase 1.3% this year, they are on a steady upward trajectory as landfills overflow. Fortunately, buyers can often bundle this service with solid waste collection and disposal to secure a discounted rate. Volume and waste transport mileage discounts may also be available. Because recycling is a widespread and standardized practice, buyers can easily compare options across suppliers.
Tire collection and disposal and hazardous waste disposal services offer more niche means of waste management for businesses that require it. But because of the specialized and environmentally hazardous nature of these services, substitutes are limited and the markets are highly regulated. As such, suppliers have little motivation to negotiate on price – prices are forecast to increase 2.1% and 1.6%, respectively, in 2015. To help soften price growth, buyers should inquire about discounts on transport mileage and volume orders. Additionally, some standard waste collection companies may offer supplementary services for hazardous waste removal that can be bundled for a discount.
Manage Your Output
Air quality is a chief concern for businesses with operations that have the potential to release harmful chemicals into the air. As such, their industries are highly regulated, with the Clean Air Act (CAA), Mercury and Air Toxics Standards and carbon emissions caps playing major roles. For instance, this year, a number of revisions to the CAA will call for businesses to not only be more conscious of their output, but also reduce their carbon emissions.
Combined with rising demand and tightening regulation, prices for carbon management services, air quality monitoring services and air quality testing equipment are forecast to increase 4.4%, 3.5% and 2.4%, respectively, in 2015. While products and services in these markets are costly on average, prices are fairly transparent, allowing buyers to compare and leverage multiple offers.
By signing long-term contracts with suppliers of carbon management and air quality monitoring services, buyers may be eligible to receive discounted prices or favorable contract conditions, such as flexible payment schedules or quicker repair response times in the event of equipment failure. Additionally, according to IBISWorld research analyst Ian Buchanan, “air quality monitoring can sometimes be bundled with environmental planning and remediation services, often resulting in a discount while eliminating the need to source from multiple vendors.”
Air quality testing equipment is typically purchased on an ad-hoc basis, so buyers typically cannot leverage contractual agreements with suppliers. They can often secure discounted per-unit prices when purchasing large orders, however, and then use those large orders as leverage for various perks, such as extended warranties or reduced shipping costs.
Lighting and energy are two of the most significant sources of waste for every business; fortunately, there are different options for not only monitoring energy use, but also taking control of it. Building lighting control systems allow users to conveniently and centrally manage the lighting for an entire building, maximizing energy efficiency and reducing energy costs.
The market for these systems has a limited number of suppliers and high market share concentration. As such, suppliers have the upper hand in negotiations and are anticipated to raise prices 1.8% this year. Similar to other markets with forecast price growth, the main strategy for securing the best price is to act fast and lock in prices before they go up. Fortunately, price growth is historically mild and price volatility is low, benefiting buyers that may not be able to commit to a vendor now.
Greater efficiency and cost savings can also be achieved through the use of eco-friendly commercial lighting fixtures, such as LED and CFL lighting. “Similar to lighting systems, energy-efficient fixtures offer long-term energy savings that eventually surpass the high upfront unit price,” adds IBISWorld research analyst Sean Windle. Commercial lighting fixture prices are only expected to increase 0.9% this year, allowing buyers to take their time making purchasing decisions.
Wholesalers make up an estimated 57.0% of commercial lighting fixture suppliers. The large pool of wholesalers means buyers have plenty of supplier and product options and can pit competing wholesalers against one another. Buyers sourcing multiple fixtures and related products can potentially bundle purchases to save money.
Energy management control systems are a good option for buyers looking to manage and decrease energy use in numerous facets of their businesses. These systems optimize the use of heat, light, ventilation and electrical infrastructure to improve efficiency and reduce costs. While some suppliers provide after-sale service to advise on the efficient use of these systems, businesses may desire separate, more comprehensive energy and utility consulting services.
For the best deal on energy management systems, considering their price is expected to rise 1.2% this year, buyers should look to local and regional suppliers, which make up 66% of the market. In addition to potentially lower delivery costs, small local vendors are often more willing to negotiate prices to secure contracts. The same is true in the highly fragmented energy consulting services market, with local and specialty consultants reducing prices or offering incentives to win contracts. Multiyear contracts can help buyers lock in lower prices early, but because consulting service prices are only forecast to grow 0.7% in 2015, buyers can take their time to evaluate suppliers.
Sustainable Long-Term Savings
While environmental consciousness may not always be the driving force behind businesses’ desire to procure products and services such as these, any buyer can leverage individual market conditions to attain the best prices. Whether securing multiyear contracts early on, sourcing from small local suppliers or taking advantage of volume and bundling discounts, buyers can take steps to save while lessening their negative effects on the environment and potentially minimizing regulatory fines. Of the markets discussed, the majority are experiencing steady price increases in line with rising demand, heightened environmental regulation and the “green” business boom. So as more businesses seek to manage their waste, monitor energy use and implement other eco-friendly practices, it is now more important than ever to understand the markets and strategize for the best price.
For a printable Saving on Sustainability, click here.