Sizing up the green economy: NZ's top 50

A new light has been thrown on the size and makeup of the green economy, with the creation of a list that ranks New Zealand companies helping the environment.

The Green 50 list shows a sector in good heart, says Wayne Cartwright, a sustainability consultant and former professor of strategic management at the University of Auckland. Investors should take note, he suggests.

"It's my impression that through to quite recently there was a tendency, particularly for mainstream investors, to hold back from this area and for lenders to be highly wary as well. What can be seen here is that the sector has got beyond what you might view as a risky or dangerous stage."

The list is the work of Auckland market research firm New River, whose director, Roger Parker, says the idea was to identify those companies making the most money out of environmental improvement.

But the first challenge was to define "green business", Parker says.

"We interviewed multiple people across all sectors of the economy and asked them about companies that were improving the environment and were successful."
See more about the list here.

Here is a closer look at three of the top companies in New Zealand.

Nominations were sought and owners and managers of green firms were surveyed.

Potential candidates were divided into what he calls "type 1" and "type 2" companies. The second type are "sustainability players" such as Air New Zealand, which are having a positive effect by reducing waste and resource consumption. Although worthy, they didn't make the cut, partly because of the impossibility of separating their green and less-green sources of revenue.

Type 1 companies are those that focus on selling an environment-enhancing product, service or technology.

Both company types contribute to the green economy, Parker says, but New River's objective was to compile a "credible index ... not kind of black with just a bit of green".

The result is a list of 50 companies from the very large to the small, most of which - 71 per cent - are exporters, many of which are agribusinesses, and with combined annual revenue of more than $1.1 billion. One company on its own, waste management firm Transpacific Industries, accounts for about 40 per cent of the revenue figure, leaving average sales of the remainder at $14 million.

The list was whittled down from more than 150 companies. To be eligible, firms had to earn at least half their revenue from environmentally beneficial products or services. Those in the throes of an acquisition or other form of restructuring - including a state-owned enterprise - were excluded.

In ranking the firms, equal weight was given to revenue and growth over the past year. All but a handful, however, were not prepared to publicly disclose their annual sales.

The total revenue of the companies on the list grew by 17.5 per cent in the period, compared with a 1.2 per cent rise in overall GDP. That's an impressive rate of growth, Cartwright says.

"It's still early days for this sector - most of the companies involved are small or medium-size. It doesn't represent a large part of the New Zealand economy yet but the point is, it's growing rapidly."

The list serves a useful purpose in assuring investors that this is a sector worth "having a crack at", he says. For early-stage green companies that are paying a premium on their borrowings, easier access to money would be a boon.

As might be expected, many of those listed use their company name to signal the sector they're in, making creative use of variations on "eco", "enviro" and "energy". Collectively, they cover the spectrum of ways in which to turn a profit by improving the environment.

For example, turning organic waste into fertiliser keeps Christchurch company HotRot Organic Solutions and Taranaki's Revital Fertilisers in business. Precision Irrigation, based in Feilding, applies some intelligence along with the water that farmers spray on their paddocks, so areas that don't need a dousing, such as stockyards and sheds, are kept dry by GPS-controlled sprinklers.

Many in the index are relatively young companies cashing in on growing awareness of the need for - and opportunities presented by - caring for the environment. Auckland's Earthwise, however, has been making its cleaning products for nearly 50 years.

Christchurch company CrestClean is turning its environmentally friendly commercial cleaning business, which employs nearly 800 people, into an export product. The chemicals and recycling and energy-conservation practices it uses are being licensed to an Indian operation, with a Singapore deal also in the works.

Another common theme is companies either in the renewable energy market, or with a product, service or technology to improve energy efficiency. It can't be coincidence that two of the sunniest cities in the country, Tauranga and Nelson, are home to successful solar power companies.

Powersmart Solar, in the Bay of Plenty, is a relative newcomer, at 10 years old, while SolarCity, at the top of the South Island, has racked up several large solar energy projects in its 30 years, including installing panels on 3500 Canterbury homes.

Auckland company Eroad (where the "e" stands for electronic), meanwhile, provides a means for vehicle fleet operators to manage fuel consumption.

Cartwright divides the Green 50 companies into five groups: importers, distributors and local manufacturers of green technology or services; converters of waste into useful products; recycling technology developers; developers and implementers of processes for environmental improvement; and advisers and consultants.

Solving the environmental challenges thrown up by agriculture - and dairy farming in particular - is a fertile source of innovation, Cartwright says, and perhaps the most promising green growth opportunity.

"The innovators are farmers, and they're in partnership with some of the companies we see on the list.

"The index underplays this sector considerably. It's much larger than indicated and I guess the reason for that is these companies are not making a lot of money. But in my view it is the major growth area."

The tight criteria set by New River, into which Cartwright had input, explains why agribusinesses aren't better represented in the index. He says the basis on which it has been compiled stands up to scrutiny and is stricter than comparable overseas lists.

"In saying companies on the index have to be making an environmental improvement, making money and be growing are all very real and measurable criteria.

"But there are a whole lot of others out there that are impressive in different ways. They're investing a lot of money in technology and R&D, but they're not making any money."

Not yet, at any rate. When the exercise is repeated, however, Parker expects a company such as LanzaTech, which is close to commercialising a process for converting carbon monoxide into fuel and other chemical products, to make its mark.

IMPROVEMENT AREAS

Environment Improvement Areas

SECTORS AND GROWTH

Sectors represented and Growth