Nov 27 2007
Is It Finally Worthwhile for Corporations to “Go Green?”
Over the Thanksgiving weekend, I spoke with a friend who was involved in green product certification back in the early 1990s. My friend came away from her green certification experience feeling that it wasn’t really worthwhile for companies to certify their products as green. She concluded that the vast majority of consumers would buy “green” products that don’t cost more or that don’t cause any significant inconvenience. Granted there was a niche market of consumers who would pay more and would inconvenience themselves in order to be green. But this niche market was very, very small.
I wondered whether things had changed enough in the 17 years since Earth Day 1990 so that it’s finally worthwhile for mainstream companies to get serious about greening their product lines and operations. Of course, the biggest impetus behind any “greening” initiative is still likely to be pure economics. If a company can save money by adopting clean technology or green practices, then the decision is easy. But, aside from rising energy costs, has anything else changed about the market landscape that would drive companies to adopt environmentally sustainable business practices?
Clearly several things have changed since 1990. The data about climate change is more dramatic and more widely publicized, fueling interest and concern among two very important stakeholder groups for corporations – customers and employees.
There is increasing customer willingness to pay more for “green” products. The recent Deloitte Annual Holiday Survey of over 10,000 U.S. consumers reveals that nearly 20% of consumers will purchase more “eco-friendly” products this holiday season and that 17% say they are willing to pay more for them. My guess is that this group is much larger than the “niche market” of the early 90s.
There is emerging pressure on corporations from their employees. McKinsey & Co. recently surveyed CEOs about strategy and social issues. Among those surveyed, the stakeholder group with the most influence on their company’s social issues is employees – outstripping the influence by consumers, government, suppliers, boards or investors.
Companies that can articulate a vision of sustainable business practices may have an easier time attracting new employees. A recent MonsterTRAK survey found that 80% of those seeking entry-level jobs are interested in working for companies that have a positive impact on the environment.
The combined influences of customers and employees may finally produce the tipping point that makes it worthwhile for companies to take action on devising and implementing sustainability strategies. Indeed, more than 90% of CEOs surveyed in the McKinsey study say they “are doing more than they did 5 years ago to incorporate environmental, social and governance issues into their core strategies.” It’s a step in the right direction. And every such step makes for a more viable market for cleantech solutions – even those that do not have a high, immediately demonstrable ROI.
Yes, employees probably influence CEOs about social issues in a broad sense. But for action on green practices, I believe it still comes down to, after economics, PR. I see a lot of companies talking about sustainability for publicity purposes but not so many actually doing the sustainability walk. The good news is, that’s changing. More and more companies are “talking clean”, and slowly they’re starting to believe themselves. The overwhelming body of climate change data is a big factor in that.
It is true that garnering positive PR has been a big reason that companies have pursued sustainability strategies. It’s not easy being green – for people or corporations. Companies that set realistic sustainability goals and expectations, measure their results and constantly try to improve on them are worthy of our accolades even though they are not anywhere near perfect in their pursuit of sustainability (just as very, very few individuals are!).
Check out the interesting data in Going Green to Recruit and Retain Employees. Also, there was an article in the Wall Street Journal on How Going Green Draws Talent, Cuts Costs.