Being Green the Smart Way

by HSG on Aug 09, 2013 in Brain Candy

Businesses “Going Green” is so commonplace now it’s more than just an encouraging a trend; it’s become expected of companies big and small. In fact, consumers frequently place more of an obligation on companies to go green than they do themselves. The last few years—the infancy of what may turn out to be a green revolution—have really proven that there are many ways to go green, and that some of these ways are much more financially sound than others. But rather than providing a cut and dry list of green options and their pros and cons, I’d like to take a look at the bigger picture incentives for businesses going green and how consumers are responding.

 

What does it mean to be green?

 

That’s an important question to ask, because the answer usually varies depending on whom you’re talking to. When exploring reasons for why this may be, I think it’s important to point out a quote by Stanford MBA Aldo King, who, after taking a green marketing seminar in 2009 said, “being green is a process.” Keeping that in mind, a loose but generally accepted definition of green products and practices is that they must be better for the environment than the alternatives to be considered as such.

 

Though even that seemingly fair definition is only sometimes plausible. Take the example of the Toyota Prius. It’s a green product if the transportation alternative is considered a non-hybrid vehicle that consumes gasoline at a voracious rate, but not if the alternative is a bicycle. This all being said, it should come as no surprise how many different ways there are to go green, and how much the results and financial consequences from doing such can vary.

 

Case Studies

 

For example, the city of Durango, Colorado, saved $45,000 a year (40%) by switching back to coal power from renewable energy. Had they not made the switch back, they would have had to lay off employees to afford the renewable power, something that’s, understandably, very difficult to justify for most managers.

 

On the other hand, Wal-Mart saved $200 million a year in fuel costs by installing generators in its fleet of trucks. They stand to save an additional $3.4 billion by asking their suppliers to reduce packaging by 5%.  Though 5% may not sound like a lot, it makes a big difference when you consider the sheer volume of Wal-Mart’s inventory. Think about how much less space they will take up at landfills now. The move is sure to benefit their bottom line, as their waste-haul bill should be substantially less. And, if Wal-Mart was able to negotiate a lower price from their suppliers based on lesser packaging and then pass the product on to their customers at the same price as before packaging was reduced, they will have increased their margins significantly as well. An interesting article outlining 10 lessons that other businesses can learn from Wal-Mart going green can be read here.

 

 

 

Do Consumers Actually Care?

 

If the following data on consumer interaction with green products has any correlation to their interaction with green businesses, it would appear that people do care, but only up to a certain point. They are “lukewarm” towards going green, as one report put it. The following statistics come from a July 2012 Ipsos poll conducted with RetailMeNot.com.

 

·         3% of consumers are committed to always buying green

·         6% of consumers are committed to never buying green

·         40% of consumers buy green when they are readily available and there is no big cost difference

·         51% of consumers buy whichever product suits their needs

·         46% of consumers are more likely to buy a product if it is environmentally friendly.

·         59% said they wouldn’t pay more for a product because it is green.

 

A New York Times article from 2011 corroborated this last bullet, citing a consumer products consultant as saying “Every consumer says, ‘I want to help the environment, I’m looking for eco-friendly products.’ But if it’s one or two pennies higher in price, they’re not going to buy it.”

 

As one can imagine, this sentiment is even stronger during a recession. In 2008, Clorox released its Green Works product line and saw sales that topped $100 million. In 2011, a year that saw the country still very much limping out of the recession, sales had fallen to around $60 million a year.

 

One discouraging data point not listed here but included in an AdWeek studyon consumers and green products is that people who are already attuned to corporate environmental responsibility are some of the green movement’s toughest critics, regarding all green product development as nothing but a marketing ploy.

 

The Green Gap

 

Unfortunately, as is the case with many things humans say, our desires to go green and help the planet do not match up with our actions. This could stem from a lack in education. For instance, according to the Cone Communications survey mentioned above, 85% of people surveyed think it’s a company’s responsibility to make sure its customers are properly educated on green products’ usages. It’s then no surprise that 71% of people surveyed said that they wished companies would do a better job in communicating environmental terms and benefits.

 

That’s largely because consumers hold businesses to a higher environmental standard—some might say it’s a double standard—than they hold themselves. Cone Communications’ SVP of Sustainable Business Practices Liz Gorman says “The new green gap is about consumers only taking the idea of responsibility so far, despite feeling responsible for proper use and disposal. They’re buying with the environment in mind, but they rely on the companies to provide access and education to truly close the loop.” This to me is just the manifestation of consumers expecting businesses to be visionaries that lead the way in the energy revolution.

 

Tangible & Intangible Benefits

 

This data suggests to me that companies should go green in a way that saves them money long term, not purely to look responsible in the eyes of their customers, customers who probably aren’t going to pay for your products if their being green makes them even a penny or two more expensive. Tax and legal benefits for companies that go green have certainly helped to make negligibly different costs for green products more within reach. There are other kinds of benefits that do not necessarily impact a company’s bottom line, but will give them a sterling reputation in the eyes of environmentalist customers and hopefully make employees feel good about working for a company with sustainable practices. I realize that no skilled CEO or boardroom will ever change their company’s direction strictly for these soft benefits, but they are good to remember as positive consequences that should follow any business’s green commitment.

 

Conclusion

 

There will come a point in time when it is a safe bet to produce green products that cost a little more but are friendlier to the planet, because human beings will eventually have to start caring more about their environment than a dollar or two more on a bottle of cleaner. Ideally, green products would be no more expensive than others, but we’re a ways off before that happens.

 

For now, it seems as though companies are best advised to work on making themselves sustainable in a way that cuts costs and that can me touted in marketing collateral. Just don’t expect your customers to foot any extra costs associated with getting there! 

 

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Questions to answer:

 

1.      Is the money companies put into being green returned to any degree in the new business they get from advertising this fact?

2.      Is going green worth having to lay off employees so they can afford it?

3.      How much can it cost a business to go green?

4.      Do consumers really care? When, if ever, is a company being green the one factor that makes a consumer choose one company over another?

 

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http://smallbusiness.chron.com/disadvantages-going-green-corporation-3318.html

 

Going green can pass higher costs onto the consumer, as there isn’t enough “green” infrastructure yet.

 

Also a large faction of consumers who won’t support companies that go green, for one reason or another.

 

Greenwashing – the process of lying about how green your business actually is. If uncovered, can lead to widespread customer backlash.

 

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http://analysts.cision.com/when-companies-go-green-a-press-release-is-worth-more-than-the-paper-its-printed-on/

 

Consumers are generally skeptical of corporations actually going green. This could be because many believe the media has a generally negative point of view when it comes to the environment, as they normally only report on it when things go wrong.

 

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http://smallbusiness.chron.com/businesses-should-green-766.html

 

There are plenty of soft benefits to going green, but at the end of the day, all businesses care fist and foremost about the bottom line.

 

Soft benefits:

 

Reduced Waste

Improved Workplace

Sustainability

 

Hard benefits:

 

 Legal and Tax advantages

Public Response

Reduced Waste

 

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How Wal Mart went green the financially sound way

 

http://www.forbes.com/sites/kerryadolan/2011/05/16/can-going-green-make-wal-mart-cool/

 

Saved money through fuel efficiency and packaging, primarily.

 

http://spiritualityhealth.com/articles/ten-lessons-wal-mart-going-green

 

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easier to go green now before it’s too late and more expensive?

 

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http://www.networksolutions.com/smallbusiness/2012/07/do-consumers-care-about-buying-green/

 

Good breakdown of data showing how much consumers care about green products or service providers. Notable stats:

 

Purchasing habits:

 

·         3% committed to always buying green

·         6% committed to never buying green

·         40% when they are readily available and there is no big cost difference

·         51% buy whichever product suits their needs

 

Likelihood:  

 

·         46% are more likely to buy a product if it is environmentally friendly.

·         34% say it doesn’t make a difference

·         59% say they aren’t willing to pay a higher price for green products.

·         41% say they are willing to pay a little more for them.

 

Psychological Influence

 

·         57% say they think about environmental impact when making every day purchases.

·         29% admit they sure of the environmental impact of their purchases.

 

This same study described customers as usually being “lukewarm” towards green companies and products.

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http://www.gsb.stanford.edu/news/bmag/sbsm0909/feature-psychology-green-business.html

 

Green is a relevant term.

 

Important to remember that green must be achieved in a way that doesn’t not drastically reduce the quality of a product. The first electric car only had a range of 40 miles.

 

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http://www.cbsnews.com/8301-505123_162-34140057/do-consumers-care-if-youre-green/

 

“consumers expect more from green companies than they do themselves.”

 

People who are tepid about rewarding virtuous companies could well be energetic about punishing the unvirtuous. 

 

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http://www.fastcoexist.com/1681858/the-gap-between-what-consumers-say-and-do-about-green-brands

 

Good breakdown on the percentage of customers that walk their environmental talk.

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