But one stood out not just because of the distinctiveness of its name but also because of its double provenance. Arcelik was the only company from the household appliances sector and one of the very few from the emerging world.
This double provenance matters enormously because both emerging markets and home appliances need to be at the heart of the green agenda if it is ever to succeed. Thanks to a combination of rapid economic growth (particularly in Asia) and rapid population growth (particularly in sub-Saharan Africa), the emerging world is set to be both the prime generator and leading victim of global warming. The problem is already severe. The air in cities such as Beijing and New Delhi is frequently dangerous. Half of Pakistan is currently underwater. Several Arab countries such as Qatar are intolerably hot for much of the year. All this will get worse as economic growth pours pollution into the atmosphere and turns millions of people into refugees.
The household appliance industry doesn’t attract anything like the attention that the automobile industry does. But it is one of the leading causes of pollution. Some 40% of global electricity consumption can be put down to appliances, lighting and industrial motor systems in homes and businesses: Every time you turn on your dishwasher or set your washing machine spinning, you are creating demand for electricity, which, in the emerging world, will often by fed by coal-fired power stations. Air conditioners will play a particularly important role in driving demand for electricity thanks to a combination of rising wealth and rising temperatures: The industry predicts that today’s 3.6 billion air conditioners are likely to increase to 14 billion by 2050.
Arcelik is Turkey’s leading household appliance company with a workforce of 45,000 and 12 household brands, including Grundig and Beko, under its umbrella. It is also a proud green champion which has been the top-placed home appliances company in the Dow Jones Sustainability Index for three years running (2019-2021). The company is re-engineering its factories to be carbon neutral. It has built two giant recycling plants in Turkey for electrical equipment that have so far processed more than 1.6 million appliances and is making all its packaging recyclable too, replacing styrofoam with recycled paper.
Now it’s focusing on something more difficult — making its products environment-neutral over their life cycles (90% of emissions come from the products after they have left the factory). The company recently invented a filter to capture microfibers that are shed during the washing process. At this year’s giant white goods exhibition in Berlin this month, Arcelik had several innovative new products on display: a washing machine-drier combination that stores water from the drier and uses it for the next washing cycle; a dishwasher that uses the left-over clean water from one washing cycle for the next; and a biodegradable fridge designed to disappear when you bury it in the garden. Arcelik’s aim is to reduce its total carbon footprint by 50% by the end of the decade.
Why is Arcelik putting such an emphasis on the environment? It’s widely assumed that the environment is a rich-world luxury and that emerging-world companies can best thrive by focusing on price and ignoring the environment, just as rich-world companies did in the 19th century when they filled the skies above Manchester and Pittsburgh with smoke. And yet here we have a Turkish company in a highly price-competitive business choosing a different path. Arcelik’s green turn has done nothing to damage either its investor returns or its growth prospects. The company’s share price has more than doubled over the past year, despite an inflation rate in Turkey that recently hit 80%. It continues to add new companies to its portfolio: Having purchased South Africa’s Defy in 2011 and Pakistan’s Dawlance in 2019, it has more recently bought Bangladesh’s Singer and 60% of Hitachi’s home appliance business outside Japan.
The first reason for Arcelik’s green pivot is industrial evolution. Even if emerging-market companies start by competing on price, they soon learn that they have to offer more to retain their customers. There is always somebody somewhere who will pay lower wages and cut more corners. And they start to think of ways of cementing customer loyalty by producing more attractive or innovative products. Arcelik employs 2,200 researchers in 28 R&D centers, for example. And they begin to question the idea that there is a simple trade-off between price and the environment: Making things more energy efficient can often make them cheaper and more robust, particularly in countries such as South Africa and Pakistan that have very unstable supplies of electricity.
The second reason is that emerging-market consumers have become increasingly sensitive to environmental degradation, not only because emerging markets are producing a large middle-class whose members can afford the luxury, but also because that degradation is becoming more costly for everyone. Turkey, like Greece and Italy, has seen a succession of forest fires in recent years that have forced tourist resorts to close. The population of Istanbul has grown from 3 million 40 years ago to 15.5 million today, with the influx of refugees from war-torn Syria prefiguring a tidal wave of refugees from climate change in the future. A 2017 scientific paper claims that Istanbul’s average annual temperature increased by 0.94 degrees Celsius (1.7 degrees Fahrenheit) between 1912 and 2016.
The third reason for the change is the company’s forceful CEO, Hakan Bulgurlu. Bulgurlu is much more cosmopolitan than most of the previous generation of Turkish CEOs: He spent the first five years of his life in Norway, where his parents were getting their PhDs, obtained his BA and MBA in the United States and lived in Hong Kong for 13 years. But he’s more than just a Western CEO with a Turkish passport. Arcelik has globalized with an eye to the emerging world: The company sells its products in 150 countries and has sales and marketing offices in 40, but all its production, with 30 factories in nine countries, takes place in the emerging world, particularly in the old Silk Road countries.
Bulgurlu says that the most interesting thing that’s happened in emerging markets in recent years is that CEOs have lost their automatic deference for Western models. They no longer believe that Westerners are the only people who can solve global problems, largely because they’ve made such a hash of solving their own problems. He is dismissive about Europe’s economy and America’s political system, though he acknowledges America’s genius for innovation. He is unapologetic about the factories that his company has in both Russia and China.
Bulgurlu is voluble about his commitment to the environment. He talks about his conversion moment six years ago when he visited the beach in Thailand where Leonardo DiCaprio’s film “The Beach” was set and found himself standing in a pile of plastics and other detritus, swarming with insects and maggots. He congratulates himself for making his company’s filter technology “open sourced” and available to competitors. In 2019 he climbed Mount Everest to draw attention to the melting of the Himalayan ice pack.
It’s easy to sniff at the vanity in all this. Bulgurlu seems to delight in blowing his own trumpet. He’s written a book about his Everest experience, “A Mountain to Climb,” and gave a keynote speech on climate change at the Berlin exhibition complete with a photo of him hobnobbing with Prince Charles, and many more on his Everest trip. He seems determined to become an emerging-market equivalent of a new Western phenomenon exemplified by Paul Polman, the former CEO of Unilever, or Marc Benioff, the founder and CEO of salesforce.com: a celebrity activist CEO as famous for the good causes that he champions as he is for the products he produces.
But self-publicity can be a good thing if it is tied to real results for a good cause. Far from joining every woke crusade, Bulgurlu is focused laser-like on the very real problem of global warming. And far from engaging in empty virtue-signaling, he is investing heavily in innovation of the sort that cuts costs while improving outputs. The conqueror of Everest says that the most important thing that he can do in his career is to change public perceptions about what is possible in the emerging world: to demonstrate that companies like his can thrive on the global stage while also adopting the highest environmental standards. Perhaps the greatest environmental revolution in recent years was to demonstrate that companies in general could be the source of solutions to the climate problem rather than just a source of emissions. By mastering the art of green innovation while also delivering decent results for its shareholders, Turkey’s washing machine and dishwasher giant is extending this revolution to the emerging world.
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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Adrian Wooldridge is the global business columnist for Bloomberg Opinion. A former writer at the Economist, he is author, most recently, of “The Aristocracy of Talent: How Meritocracy Made the Modern World.”
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