Wednesday, January 30, 2008

Re:Don't Bother with the "Green" Consumer

Over at Harvard Business Review Steve Bishop has written a piece called 'Don't Bother With the "Green" Consumer'. There is also quite an extensive debate about this beneath the post. Whilst i am a green consumer and would therefore welcome more businesses angling in my direction i must say that i agree with Steve's logic.  In my response , however, i go on to set the issue in what seems to me to be a nessicary context. Marketing and strategy can be seperated of course but i think that putting them together works nicely. GE have done this with Eco-Magination and i think it works well, its hard to accuse a company of green washing when they are one of the worlds leading manufactures of wind turbines!

So my response...


How should companies pursue the green agenda?

Steve Bishop makes the valid point that there is not room for most large companies to exist exclusively in the 'green consumer' market. It is also said of environmentally concious consumption that the largest cost isn't the price on the ticket but the 'opportunity cost', or in my preferred words, in the connotations and implications of our choice. Thanks to effective marketing people believe that consumption embodies their values. It is also true that people will go out of there way to be internally consistent, buying products marketed primarily as green would open a Pandora's box of ethical judgements, the car, the holiday...this is not a small choice! I will address this weary but concerned majority momentarily, but it is worth noting that the 'green consumer' minority is growing and therefore large companies may wish to specifically address this group through new and distinctive brands.

For companies wishing to remain planted in the conservative mainstream I believe that addressing these issues subtly and pragmatically is the key. Understandably steve approaches this issue from a consumer and marketing perspective. Personally i see a Pandora's box that needs to be opened—the crux of this discussion is sustainability as a strategic issue. Broader perspectives based on government, business efficiency, consumer and inter-business relationships give a more substantial measure of where the widespread green conciousness is heading specifically for products not destined for people who accept the 'green consumer' label.

What is needed is a strategy of increased resource efficiency. I would not make this case on the recent groundswell of consumer interest alone. I do make the case based on several mutually supportive drivers coming together. Firstly, as businesses look more closely at manufacturing, packaging and transport they are realising that this is smart business. Resources have a cost, and increasingly so to does all sorts of waste including greenhouse gases. An example of reducing resource usage that i am familiar with is from Boots the pharmacy in the UK which is vertically integrated, making, transporting and retailing many of there own products. Boots studied the carbon footprint of there own shampoo and discovered that by using recycled PET in their bottles they could gain a green advantage and save money! This works for there profits, the environment, and the brand; in the UK it is striking that even people who aren't at all environmental are often passionate about recycling and consider those who don't to be lazy. Recycled bottles are a subtle way to use less resources, save money, and have a marginal advantage over competitors, certainly and advantage with eco-shopper but also with many average people.

But saving money, protecting the environment and appealing to customers may not be enough; the real danger is Walmart, and Boots, and British Telecom, and all the other organisations who are starting to add environmental performance to the criteria that they have for stocking or procuring goods. Environmental score cards are entering the arena and you don't want to come last (it will cost your margins or even the deal) and the likes of BT are taking on procurement standards that forbid them from purchasing technologies that aren't more efficient that the pieces they replace. Business is being pushed by cost reductions from resource savings and pulled by demand from customers and other businesses. These forces are acting now, but there are others which promise to become an even more prominent concern.

Asia is in the ascendency, the developed world is undergoing a massive expansion, our reserves of resources are not. Some are concerned about 'peak oil' and general resource depletion. In general i am not, but i do recognise that increased prices for raw materials of all kinds, from grains to ores will become a major pressure on a wide range of businesses. Add to this the inevitable coming of a price of carbon and business faces a rocky road. Resource inefficiency, which under close inspection in recent time, appears to be at often embarrassing levels, is going to become about the biggest crime in business. What i would like to stress particularly is the scale and rate of change that we are currently embarking on. If the international community can get its act together on climate change then in accordance with the conservative estimates of the IPCC the globe will have to reduce emissions 60% by 2050, whilst the economy quadruples! The question that i wish businesses where asking more is not, how can we get the win-win but, what strategy should we take to out moreover our competitors on our way to a low carbon economy. Can we make efficiency gains and carbon reductions of the scale required? If not, is there a business model that we could adapt to allow us to do so?

Reducing the amount of packaging on a product is an interesting example of the sort of virtuous cycle that we need to be looking at. Reducing the amount of individual packaging saves packaging, it also saves boxes that these packages go into, which corresponds to fuel usage. That is a small step, and Walmart is reporting these savings in the hundreds of millions. A larger change, the sort of thing that might give you a real advantage would be doing away with products and selling services. If your customer needs large volumes of solvent which are expensive, perhaps you could start collecting the solvent once it has been used once and purifying it before renting it out again, Du Pont decided to do just this. Or how about people who need good quality flooring? Sometimes it goes bare in small patches but the whole carpet is replaced. Now 'flooring services' are offered by Interface and an annual fee is paid, carpet tiles are used and replaced as required.

The key areas of work for greening a product (not necessarily the brand) are:

  • Minimizing resource usage. ( Can you remove packaging or manufacture the product more efficiently, or even provide service instead?)
  • Minimizing lifetime input. (Make 'made to last' a brand priority, offer repairs, reduce energy use and promote as energy saving)
  • Manufacture with intent for recycling. (Carefully choose materials, take care on choosing glues and resigns, decide on disassembly method)

Improving performance in these areas often leads to win-win-win results for cost-environment-brands. However businesses should also realise that there are very real risks of market loss and regulatory costs if innovations in these areas are not made.

Further reading:
Amory Lovins, 'Natural Capitalism'
Kenny Tang, 'Carbon Down: Profits Up'
William McDonough, 'Cradle to Cradle'

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