The Business Ethics Blog

Here’s a nice story — aimed at business readers — about the business end of going green: Do You Need To Be Green? (from BusinessWeek Online)

Here’s a taste:

Historically, sporting the green label has helped some small companies gain traction in a crowded market. It has allowed them to charge a premium for their products, often one as high as 20% to 30%. Those hefty markups are one reason many green companies have been profitable: A 2003 report by McKinsey & Co. found a portfolio of green and socially responsible companies returned between 5% and 14% annually in a 10-year period.

That’s likely to change as more big players enter the market, bringing competitors to sectors that haven’t encountered them. The enviable markups that have allowed small companies to become both green and profitable may become as endangered as the spotted owl. The onslaught has already started. France’s Group Danone took majority control of organic yogurt pioneer Stonyfield Farms in 2003, and Colgate-Palmolive purchased Tom’s of Maine in March of this year. Also in March, mega-retailer Wal-Mart Stores said it plans to double the number of organic foods it carries, to 400, and to “democratize” organic food by selling it at lower prices than are now readily available. “Larger producers will aim for volume, pushing organic to the mainstream. That means pricing pressure and prices coming down,” says John Stayton, co-founder and director of the Green MBA program at San Francisco’s New College of California. “There will be winners and losers, the losers being those smaller companies that can’t compete with larger producers.”

This story highlights the fact that going green isn’t just a social movement or a personal decision: it’s also a business decision, and a potential marketing opportunity. We can also see signs in this article of what Joseph Heath and Andrew Potter call The Rebel Sell. That is, it’s important and interesting to keep in mind that some people out there are making a lot of money out of selling groovy, organic, 100% post-consumer eco-friendly low-emission whatevers. To a certain extent, “green” is a brand-name like any other. Environmentally-oriented consumers have to remember that, like any other consumers, they are being marketed to.

Now this is not to downplay the importance of environmentally friendly products and services. Nor is it necessarily to devalue the work done by “green” businesses. If your business niche (your way of making money) is to market eco-friendly products to cash in on the eco-friendliness trend, I think that’s a world away from making your money marketing world-conquering SUV’s to cash in on the competitiveness of egocentric car-buyers. But given that business is becoming more green-savvy, and given that bigger businesses, at least, are turning their considerable marketing power to the promotion of the products they say are green, the coming years will demand a lot of consumers who want to make sure their purchases really are doing good, rather than just boarding the train.

Relevant reading:
Natural Capitalism: Creating the Next Industrial Revolution
Cradle to Cradle: Remaking the Way We Make Things
Green Living: The E Magazine Handbook for Living Lightly on the Earth
Nation of Rebels : Why Counterculture Became Consumer Culture