This business was built on consumption. Now its primary focus is energy conservation

A century ago the world’s biggest light bulb manufacturers got together and decided their light bulbs were lasting too long. The longer the bulbs lasted, the less they would sell. Collectively they agreed to make bulbs which would burn out more quickly.

Good business in the 1920s was about selling more products. Energy consumption and hazardous waste did not trouble investors or consumers.

One of those original companies, Philips, still exists today, now under the name Signify. But in the 2020s it is a very different business – operating in a world with very different priorities.

In Europe, it’s estimated that a switch to commercial LED lighting could save 100 million tonnes of carbon emissions per year – the equivalent benefit generated by 130 million acres of forest.

Signify is also working to develop new applications including smart farming, where smart lights adjust to the requirements of plant species, and sterilisation by UV lighting. Transmitting broadband data via light waves is another emerging technology.

Saida continues: “It’s not only about the products or innovative technologies. Many profitable businesses make products that result in positive environmental or other outcomes, and I wouldn’t back them with clients’ money. I need evidence of the business’s commitment in terms of how it is run. What’s the culture? What’s the ambition? The managers can talk about sustainability targets, but where’s the evidence in terms of performance?”

Saida Eggerstedt, Schroders’ Head of Sustainable Credit, explains: “When I look to invest clients’ money I’m wanting to see a business that is strong and healthy and able to meet its financial promises. But I need to see more than that. I need to see that the business’ activities play a part in solving some of the world’s problems. Sustainability features – long-term benefits to society – are core investment considerations.”

Critical among those problems are issues around energy and waste. Signify, as the world’s largest lighting manufacturer, is a leader in LED technologies, where huge reductions in energy consumption can still be achieved.

As a business Signify achieved carbon neutrality in 2020. All of its energy comes from renewable sources. Over 80% of its revenues derive from sustainable products, and 90% of its manufacturing waste is recycled. Increasingly, its lighting products are 3D-printed using recycled materials.

“We’re monitoring the business, talking to it, holding it to account – not only in terms of financial outcomes but in relation to all these other aspects of its performance like carbon neutrality,” Saida says. “When clients entrust us to put their money to good use, that is what they’re demanding of us.”