Waning Opportunity to be Early Mover on Green

November 18, 2007

Today, consumers increasingly associate themselves with social responsibility, particularly on the environment:  BBMG recently reported that US consumers increasingly say that words like “socially responsible” (88% say these as words describe them “well”, 39% as “very well”) and “environmentally friendly” (86% well, 34% very well) describe them.  Additionally, Edelman reported that consumers are not just talking, but taking action:  40% of US consumers are more involved in social causes than they were two years ago and expect their brands to do the same.  The top issue that consumers care about globally?  Protecting the environment (92% of those surveyed).

As such, it should not be surprising that many leading companies today are responding by aligning their brands with more socially reponsible and eco-friendly activites and attributes (See “Defining Green Brand Leadership”, Marketing Green, October 29, 2007). There are several reasons why these companies feel the urgency to act:  First, they simply may be trying to stay relevant by aligning more closely with the evolving expectations that consumers have for the companies they purchase from and the brands they associate with. 

Second, they may be trying to secure a competitive advantage in the market as an early mover on green.  Pioneer status may bestow the companies credibly in the space, and perhaps enable them to reach new customer segments that have a strong affinity for the environment.  

 

Finally, companies recognize that it may be easier and far less costly to reposition a traditional brand as green today than it will be after Congress passes regulation that mandates all companies to do so.  Companies that wait for federal intervention will likely have to play catch-up when it does happen by complying with new mandates while convincing consumers of their green credentials.  By then, however, companies may have to do so in a crowded media space (because every company playing catch up will have to do similar) and face skeptical consumers who may question whether corporate motivations are genuine or simply done to comply with federal mandates.

 

Marketers should recognize that the window of opportunity is closing for brands to establish themselves as an early mover in the green space.  Today, not only is US consumer sentiment shifting, but the political winds are as well.  Backed or perhaps empowered by recent court rulings, politicians in Washington are floating legislation on climate change that will move the US closer to a time when being green is less of a differentiator than simply a cost of doing business.  Here is what has been happening:

States – led by both Democrats and Republicans – are pressing for change: With the announcement of the Midwestern Regional Greenhouse Gas Reduction Accord (MRGGRA) last week, 24 states have now committed to greenhouse gas emission targets.

States with Green House Gas Emission Targets 

states-with-ghg-targets_pdf.gif

based on Pew Center research and announcement of MRGGRA accord

 

Moreover, several state governors are actively campaigning for change.  For example, a recently launched TV campaign by the Environmental Defense Action Fund featuring three western governors, Arnold Schwarzenegger (R-CA), Brian Schweitzer (D-MT) and Jon Huntsman (R-UT) should help increase pressure on Congress to act.  This commercial is significant not only because it features two Republicans but that the governors represent Western states that traditionally champion states’ rights and frown on federal intervention.

Finally, major federal court decisions – three in seven months – hold regulators responsible for considering climate change risk when setting pollution standards.  The most recent ruling handed down last week by the federal Court of Appeals in San Fransciso overturned the Bush administration’s proposed fuel standards for light trucks and SUVs, stating regulators “failed to thoroughly assess the economic impact of tailpipe emissions that contribute to climate change”.  In doing so, the court sided with the plaintive that included 13 states and cities.

Political sentiment is shifting in the US in favor of action on climate change.  Marketers should consider taking action soon rather than later to green their brands in order to avoid playing catch-up afterwards.  Once Congress takes action, companies will lose the opportunity to build green credentials and shape their brand ahead of the pack.  Those that wait may struggle to catch up as consumers may question the integrity of their motivations. 


Greening Consumption

November 14, 2007

An Interview with Michel Gelobter, Founder and EVP of Cooler

Long-time environmental activist Paul Hawkins once described “green consumerism” as an oxymoron.  Indeed, “green consumption” makes Wikipedia’s “List of Genuine Oxymora”.   The reason: consumption by its very nature has an impact on the environment – to some degree or another – and therefore, is hard to call truly green.

 

Yet, short of reducing consumption, many consumers, manufacturers and retailers are focusing on greener consumption – a term which implies shifting to products and services that have a lower environmental impact, though in many cases, not specifying by how much.

 

Today, there are positive signs that demand for greener products is increasing sharply.  In fact, the Natural Marketing Institute reports that the $200+ billion Lifestyles of Health and Sustainability (LOHAS) market is expected to double by 2010 and quadruple by 2015.  

There are many online retailers and content sites that offer green products directly or simply help consumers navigate the market.  They include three primary categories:

Green online retailers: Many online retailers have emerged that are dedicated to serving the green market including Buy Green, Earth Friendly Goods, Eco ChoicesEcoWise, Gaiam, Green Feet, Green Home, Green Shop (UK), Green Shopper, Green Shopping (UK), Green Store, Indigenous, Natural Collection (UK), Nigel’s Eco Store (UK), Rogue Natural Living, Shop Green (PriceGrabber), The Green Office and VivaTerra among others.

General online retailers. Several general merchandisers and portals have embedded a green section into their existing offering, including Amazon and MSN among others.

Green directories: Finally, other online sites have positioned themselves as green directories, product search engines and shopping guides.  Sites include EcoBusinessLink, EcoMall, EcoSeek, Evolvist, Evolve Shopping, Green Deals Daily, Great Green Goods (blog), Green People, Green Providers Directory (UK), Green Shopping Guide (UK), Guide Me Green (UK), Haute*Nature (blog) National Green Pages, Pristine Planet, and TheFindGreen among others.  Perhaps the most comprehensive guide to online eco-friendly shopping is published by thepurplebook

Yet, despite this growth rate, LOHAS spending is still a drop in the budget when it comes to US consumer buying power – estimated at more that $10 trillion in 2007.  As such, the greater challenge is to shift spending on mainstream products to greener ones and do so in a way that also provides the incentive for mainstream manufacturers to reduce the carbon footprint of their products over time.

There are many ways to motivate the purchase of greener products across the purchase funnel.  Here are a few examples:

Make existing products greener.  Product companies have the opportunity to green their products – including sourcing, use and disposal.  Greening a product in the first place, of course, is the best way to reduce its environmental footprint.  Companies are motivated to do so for a variety of reasons including increased consumer demand, pressure from partners across the supply chain and risk to the brand simply by being complacent.

One of the best examples is Wal-Mart.  For example, it has identified $10 billion in potential savings simply by decreasing product packaging.  It has also required its suppliers to reduce the environmental impact of the products that it sells (eg, more concentrated laundry detergent formulas reduce the use of energy for transportation) while expanding the market for others (eg, by selling fluorescent bulbs at lower cost under its own private label). 

Due perhaps, in part, to Wal-Mart’s pressure and lead, Procter & Gamble has responded with a commitment to sell $20 billion worth of greener products over the next five years.  It has also joined the Supply Chain Leadership Coalition, an industry organization that pressures suppliers to publish information on carbon emissions, to help it reduce the impact of its suppliers as well.

 

Motivate greener choices.  Product companies and retailers can influence behavior by interjecting green as a considered attribute in the purchase decision.  There are several ways to do so including the use of eco-labels, ratings, promotional benefits or green rewards tied to a loyalty program.  Eco-labels and ratings impact consumer purchase decisions by providing relevant environmental information at the point of sale – and indirectly motivate greener product design and manufacturing decisions by making green a differentiating attribute. 

 

Today, eco-labels are actively being used or under consideration by manufacturers, (eg, HP, Dell), retailer (eg, Wal-Mart, Home Depot) and government regulators.   Moreover, several organizations have taken the lead in developing or aggregating green rating systems including Green Seal, Consumer Report’s Green Choices, the US EPA’s Energy Star and independent Better World Shopper.  Moreover, sites like Alonovo allow users to filter products based on their own green values.

 

Promotional benefits and rewards can also influence consumer purchase behavior.  Marketing Green explores both of these levers in two previous blog entries. (“Green Labels as Drivers of Consumption and Loyalty Programs”, March 19, 2007; “Testing Green Promotional Benefits to Drive Acquisition”, September 16, 2007).

 

Offset environment impact.  Today, more and more companies and consumers are turning to carbon offsets (and renewable energy credits or RECs) to mitigate the environmental impact of products manufactured or purchased.  While the offset mechanism may vary – from purchasing allowances on a carbon exchange to investing in renewable energy projects – the effect is similar: offsets reduce the carbon impact of consumption by effectively removing the equivalent amount from the environment elsewhere. 

 

While carbon offsets are not without controversy, they can be a powerful way to mitigate the impact of consumption.  There are several ways that carbon offsets are purchased today:

 

First, carbon offsets can be voluntary.  Retailers can provide options to do so – as most airline sites do today, for example – or consumers can purchase them directly from many brokers including Atmosfair (Germany) Better World Club, Carbon Fund, Carbon Leaf (UK), Carbon Zero (Canada), Climate Care, Climate Counter, Climate Friendly, ClimatMundi, CO2 Balance, My Climate, Native Energy, Offset Carbon Company (UK), Offsetters (Canada), Solar Electric Light Fund, Sustainable Travel International, Target Neutral (UK), Terrapass, The Carbon Neutral Company, TreeBanking, and Uniglobe Travel among others. 

Typically, retailers play no more than a passive role in facilitating carbon offset purchases by providing the mechanism to do so on their site.  In many cases, it is no more than an additional option available during the check-out process.  The case of Virgin Atlantic is different, however; in response to low voluntary purchases, Virgin is now actively selling carbon offsets to customers while in-flight.  Sunvil Holidays (UK) goes one step further by putting the burden on the consumer to opt-out of – rather than opt-in to – purchasing a carbon offset by embedding it directly into the cost of its vacation packages. 

Second, carbon offsets can be structured into the transaction itself – treated as a promotional expense, embedded in the purchase price or covered as part of the transaction fee.  Companies as diverse as insurance giant Allstate, UK’s Silver Jet and Fiji Water are making their products carbon natural (or even carbon negative) as a way to differentiate their offering.  In this case the product company is absorbing the cost directly or raising its price to cover the added expense. (Interestingly, Allstate is offering to offset the carbon emissions from the automobiles that it insures).

 

Alternatively, credit card transaction fees can be used to offset carbon emissions as well.  Recently, issuers including Barclays, GE, MetaBank, Triodos Bank and Wells Fargo have launched green cards while Bank of America and upstart Brighter Planet have announced their intentions to do so.  These cards divert a portion of their fees to mitigate the impact of the products purchased through a donation to a non-profit organization or direct purchase of carbon offsets. 

 

Such card programs have advantages and disadvantages.  Given their reach, credit cards can green a significant amount of consumer spending simply by providing the incentive to consumers to make their purchases on a card with green benefits.  Yet, to do so, cardholders must trade in personal benefits earned from traditional reward programs (eg, airline miles) for ones that provide more societal benefits.

 

Alternatively, a promising, new retail model has emerged that divert a portion of revenues earned through affiliate marketing programs to pay to offset the carbon from products purchased.  In doing so, sites such as Cooler and Earth Moment enable consumers to purchase products from traditional retailers while offsetting the carbon impact of these purchase in the process.  Such a model is compelling to consumers as, from their perspective, the cost of the carbon offset is absorbed by the retailer and they can green their purchases while using their existing credit cards. 

 

While numerous companies are involved in carbon offsetting, Cooler has clearly been one of the most innovative players in the space.  Distributing 8 million products from 400 retailers, Cooler provides consumers with the largest selection of products that can be purchased with an embedded carbon offset.

 

Recently, I had the opportunity of sitting down with Michel Gelobter, Founder and Executive Vice-President at Cooler.  We discussed the recent launch of his company, its B2B and B2C offerings and the challenges that we all face in greening consumption.  Here are his words:

Marketing Green:  By offsetting the carbon impact of products purchased, Climate Cooler has the potential to change the game in the online retail space.  What was the impetus for starting the company? 

Cooler:  We wanted to find ways to create the momentum in the consumer space for taking action on climate change.  That exploration led to what has now become Cooler.  Cooler is distinguished by being the first site where you can purchase practically anything you can buy on the Internet – except for maybe a plane ticket – in a way that eliminates the global warming impact through the point of sale.   

Our mission as a company is to connect every purchase with a solution for global warming.  We do that with three offerings.  The first is that we use the country’s only product and service carbon calculator that was developed jointly by Carnegie Mellon and Berkeley.   

MG: Does it calculate the entire impact of the product, that is, how it is manufactured, used and disposed of? 

C: It is just to the point of sale: how it is manufactured and transported.  But, the innovative piece is that it adds the retail component which ranges usually from 20-30% of a product’s carbon footprint. 

MG: How about shipping? 

C: Yeah, it includes that too.  But [the environmental impact] tends to be much lower which can be a surprise to our customer base. 

The second piece of this offering is our basket of carbon offsets or pollution prevention and renewable investments that have been unanimously approved by the world’s best environmental organizations.  And finally, we set out to create a basis on which consumers could take action in a way that was trusted and transparent.  And that is what Cooler is about.   

We also give people a way to track their impact and start thinking about carbon budgeting.  We already have the My Impact page which tells [consumers] what they are emitting.  After all, 40% of the average American’s carbon footprint is in consumption of goods and services.  

MG: So do you view part of the value that you bring is educating consumers on their true environmental impact? 

C: In the consumer space, absolutely.   

The bigger piece of the business is really the B2B offering.  Companies started coming to us and saying: “How can I put your works into my gears so when people come to my website – or bricks and mortar store – they can get a carbon neutral product.”

Our B2B offering is called Cooler Compete which is basically a way for companies to know, offset and reduce the global warming impact of the products that they sell.  And the difference is that those companies are going to make a choice about who pays for [the offset].  We think that most of our business customers are going to absorb the costs of carbon neutrality. 

MG: What services are you providing in the B2B space? 

C: First, we are providing the [carbon emission] calculation.  Our calculator is really revolutionary.  We are using a method that is, on average, more accurate [than existing calculators].  It is based on an approach called economic input/output analysis, whereby we calculate the footprint of a product directly through the economy.  Instead of looking at a shoe and saying “where did that leather come from?”, we say “how much of the leather industry did this company use?”.   

Peer-reviewed studies show that this method is, on average, more [inclusive] from an environmental perspective because it includes more of the carbon footprint than [other] analysis. 

The second service is really a reduction service, that is, a list of the top contributors to your carbon impact.  That is usually enough to motivate companies to bench mark against those numbers and reduce their impact.  

Finally, companies buy offsets with us.  We don’t actually make any profit from our offsets – we pass the costs directly through.  But our basket of offsets is very high quality.  

MG: You are ambitious in trying to serve two different audiences with very distinct offerings. 

C: Yes, but the website in some sense can be seen as a technology showcase.  The web site gives [companies] the sense like “Oh, this is what it could look like.”  So that is why the website is really critical.   

MG: In your B2C work, who is the typical customer that you are targeting? 

C: We are partnering with environmental organizations so our early go-to-market strategy is [targeting] the members of our partner organizations.  Now we are trying to move from the environmental group members to more of the LOHAS crowd.  Over time, we will target a broader and broader swath of the American public as more people become conscious of this issue. 

MG: How important is viral to your marketing strategy?

C: Viral would be great.  Right now, we are honing our technology platform to make that more potent.  For example, when you tell a friend, we are able to report back to you how much your friends offset.  We can also have people compete to see who is more carbon neutral.   

MG: How does the B2C business model work?  Is it an affiliate model? 

C: It is.  On average, if we refer someone [to an online retailer that subsequently makes a purchase], we get 6% [of the total sale].  The cost of the [carbon] offset ranges from 0.7 to 1.5% and we keep the rest for the business. 

MG: Are there plans to offset carbon emissions from the use and disposal of the products that you sell? CC: We do not have any plans to address that now. MG: How receptive are consumers today to carbon offsets? 

C:  I think we are easily 10 to 20 years out from having a stable, trustworthy, well-defined commodity market for offsets.  One of the reasons we partnered with the environmental groups is to give consumers assurances that at any moment in time, the best decisions are being made.  

MG: Do you think offsets take on more meaning when the US market moves from a voluntary to a mandated cap and trade system? 

C: No. I think personally that people need to take action now.  Our offsets are additional so they are already above and beyond everything done today.  We follow three criteria that are summarized as follows: real, additional and positive. 

“Real” means that we are taking carbon out of the atmosphere when you buy something.  We are not just meeting the next increment of energy demand with cleaner energy.  We’re actually capturing or reducing an emission somewhere else in the world, hopefully in the United States.   

“Additional” means that this would not have happened where it not for your purchase.   And “positive” means doing more for the world than just helping the climate.  It means helping to create jobs or generate more environmental protection or biodiversity. 

It is going to be a long time before governments are actually cutting emissions by 80%; by 2050, unfortunately.  Until that time and maybe well beyond it, we want to be the place where consumers can know that by acting their doing their part above and beyond what government is doing.  

MG: It is conceivable that your success could provide incentive for others to enter the market and that one day, offsets will simply be a threshold to compete? 

C: Of course, we would love it as a company and a social event if this became a must have.  And we are going to do our best to make sure that happens.  That is one of the reasons why we started the company. 

MG: Will this actually help solve global warming? 

C: I absolutely think it’s a huge part of the solution.  We can not be paralyzed by the fact that shopping and consumption is part of the problem.  We have to go in and fix it.  People have been trading goods for money for a long time and the system’s broken.  And climate change is actually a huge archetype for a wide range of ways to reknit the fabric of shopping with the fabric of community and earth care.


Going Green to Recruit and Retain Employees

November 10, 2007

“I have never seen anything equal to sustainability as far as attracting, motivating, and bring people together.”  --- Ray C. Anderson, Founder and Chairman of Interface in AmericanWay Magazine, October 1, 2007

As the baby boomers retire, the US labor market is expected to tighten, as the new generation of workers is simply much smaller than the one it is replacing.  Indeed, by 2010, the Bureau of Labor Statistics is projecting a shortfall of 10MM workers in the US.   In such a tight labor market, employers will have to pull out all stops to continue to attract top talent.  One way employers are learning to differentiate is to market their companies to employees and prospects as green.

Indeed, green may be a powerful recruitment and retention tool.  According to an recent Ipsos Mori survey, 80% of respondents across 15 developed nations would prefer working for a company that “has a good reputation for environmental responsibility” – the figure was 81% in the US. 

Most interestingly, it appears that more respondents – across all countries surveyed - were more concerned about working for an environmentally responsible company than purchasing from one.  One potential reason: “employees feel a significant sense of responsibility and association with their employer’s actions concerning the environment.”

              Preference for an Environmentally Responsible Company

 

employee-retention-charts_v1pdf.gif

 

Data from “Corporate Environmental Behavior and the Impact on Brands”, Tangberg and Ipsos MORI survey, October 2007; n = 16,823; Green employment preference: % of respondents that agreed with the following statement: "I would prefer to work for a company that has a good reputation for environmental responsibility”; Green purchase preference: % of respondents that agreed with the following statement: "I would be more likely to purchase products of services from a company with a good reputation for environmental responsibility”

The study points out that German (and perhaps Japanese) workers have a seemingly low preference for working for an environmentally responsible company.  This may be a bit deceiving, however, as green may not be a differentiator in markets where strict environmental regulations are simply a threshold to compete.

Interesting, there was there was relatively little difference in preference based on age based on a blended view of responses across all 15 countries.  The youngest workers – 24 years or younger – have the lowest preference for working for an environmentally responsible company.  This is somewhat surprising, as GenY is often cited for its relative social consciousness.

Preference to Work for an Environmentally Responsible Company by Age

employee-retention-charts_v2.gif

Data from “Corporate Environmental Behavior and the Impact on Brands”, Tangberg and Ipsos MORI survey, October 2007; n = 16,823

 

Encouragingly, there are signs that employers are beginning to recognize the importance of green in their recruitment and retention efforts.  A recent survey of UK employers by Chartered Institute of Personnel and Development (CIPD) suggests that many companies are responding by greening their operations and encouraging more eco friendly behavior at the office.

                                   Employee Environmental Activities

  

employee-retention-charts_v3pdf.gif

Data from “Labor Market Outlook", CIPD, Summer 2007; n = 757 UK employers

 

Moreover, some companies offer green benefits directly to employees –including incentives to purchase a hybrid or take public transportation or car pool, encourage working remotely or even subsidizing the purchase of renewable energy at home.  CIPD offers a useful green guide for HR officials on its site.

Yet, there seems to be an obvious disconnect at companies today: while green is increasingly an HR issue, the HR department is positioned to influence environmental policy at less than half the companies surveyed.
 

                  Departmental Responsibility for Environmental Policy
  employee-retention-charts_v4pdf.gif

Data from “Labor Market Outlook”, CIPD, Summer 2007; n = 757 UK employers

As the labor market becomes more competitive, companies will have to maintain a competitive edge in order to continue to attract top talent.    

Green can be an important differentiator given the interest in working for an environmentally responsible company by workers globally.  As such, HR officials should weigh in in order to shape environmental policy and benefits.  Moreover, these officials should actively market their companies' green activities to prospects and employees alike; their ability to recruit and retain future talent in an increasingly competitive labor market may depend on it.   

Postscript: An insightful article, "How Going Green Draws Talent, Cuts Costs" appeared in the Wall Street Journal three days after my posting. 


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