DO YOU NEED TO BE GREEN ?

[Anonymous]

Do You Need To Be Green?
As green goes mainstream, finding a smart green strategy is tougher — and more urgent — than ever
Karin
de Gier hasn’t always been green. In 2001 she founded San
Francisco-based Zwanette Design to produce cabinets, tables, and other
custom-made furniture. As she learned more about woodworking, de Gier
also learned more about toxic glues, sustainable forestry, and green
building principles. De Gier, now 45, soon realized green building was
in line with her own values. Out went the toxic glues. In came bamboo,
fiberboard, and woods certified by the Forestry Stewardship Council as
harvested from sustainably managed forests. And although de Gier had to
jack up prices 30% to cover her higher materials costs, orders for her
two-employee, $100,000 shop doubled last year, to 15. “There are some
very motivated and committed customers out there,” says de Gier.Those
committed customers are encouraging companies of all stripes to go
green. And for good reason: The Organic Trade Assn. says sales of
organic foods, now about $14 billion and 2.5% of the market for food,
are expected to expand by 20% annually over the next few years. Green
building is forecast to grow from a $7.4 billion market last year to
$38 billion in 2010, according to the National Association of Home
Builders. While each industry is affected in its own unique way and at
a different rate, it’s clear that for many, green business is a huge
opportunity. But is it one your company should tackle?That’s a timely
question, and answering it has probably never been trickier.
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.”Of course, the reach of the green movement may
well be determined by just how far prices fall, something that is still
uncertain. “Consumers are driven by time and money,” says Harry Balzer,
vice-president of the NPD Group, a consumer research firm based in Port
Washington, N.Y. “The wheels of permanent change are ease and
convenience, which organic doesn’t seem to offer over nonorganic
products, and low cost. If the prices don’t come down, it will remain a
niche.”All of which makes the decision of whether to go green more
difficult than ever. First, you’ve got to figure out what being green
actually means in your industry. Since the movement began in the 1970s
with a handful of farmers eschewing chemical pesticides, green has been
commonly understood as products made with organic ingredients. But the
term refers to processes, too: using fewer natural resources and less
energy. Increasingly, green companies have a socially responsible
agenda as well, paying living wages, supporting minority groups or
workers in less developed countries, and becoming active in their own
communities.Then decide what green means to your business. If you have
a services company, being green will most likely mean reexamining the
way you do business rather than changing the service you provide. If
you decide to make a green product, you’ll need to address not only
costs–they’ll likely go up–and marketing, but also credibility.

BABY STEPS
Going
green doesn’t have to involve an all-out change in philosophy. There’s
a lot to be said for taking baby steps and observing how they affect
your business, your customers, and your employees. Carol Cone, chairman
of Boston-based Cone Inc., which links companies with appropriate
causes, recommends that entrepreneurs look at greening their operations
before they think about changing any product, especially those that are
successful. “Try lessening the impact of your packaging,” she says. Are
you shipping your product in a box within a box, as Wal-Mart recently
asked its suppliers to stop doing? That’s easy enough to fix. “Lessen
your energy use,” she suggests. Maybe you could switch at least partly
to wind or solar power or a greener manufacturing process. A volunteer
program that meshes with your company’s goals might be another tack,
says Jacquelyn Ottman, founder of J. Ottman Consulting in New York,
which specializes in green product marketing. And make sure to promote
your achievements on your Web site and to your staff. “Your employees,
especially if they’re young, want to know about it,” says Cone. That
goes double for potential recruits.Another way to green your operations
is to reconsider your wage structure and benefits. Joshua Scott Onysko,
founder of Pangea Organics, a Boulder (Colo.) company that manufactured
and sold $3 million of “ecocentric body care” products in 2005, pays
each of his 15 workers at least $12.75 an hour. That’s more than $6
above the minimum wage, but it’s what Onysko considers to be a living
wage in his area. Mark Inman’s $3.5 million, Sebastopol (Calif.)
organic coffee company, Taylor Maid Farms, works with coffee farmers to
help them maintain organic methods, and also invests in schools and
clinics for the workers, all of which adds about 10 cents to each pound
of coffee it sells. Health insurance for Inman’s 15 employees is fully
paid by the company–workers don’t shell out for co-payments or
contribute to premiums. “If you claim to be a green company, you have
to act like one,” says Inman.Next is the tougher part: figuring out if
you need a green product. Here, the circumstances of your individual
business and industry loom even larger. Beyond food, industries that
are seeing a lot of green players include body care, building,
clothing, home furnishings, and, of course, energy. Start with a market
analysis, suggests Ottman.”Are your customers interested in buying
green? Are your competitors already offering green products, and if so,
what can you offer that is distinct from theirs?” It’s also worth
asking if a greener product will make your customers more loyal.

COST ANALYSIS
One
way to hedge your bets is to think about applying green principles to
new products, even if your core brand doesn’t change. “If you are not
in the green business, it is still a rapidly growing marketplace and
you should get into it,” says Gifford Pinchot, president of the
Bainbridge Graduate Institute in Bainbridge Island, Wash., which offers
an MBA in sustainable business. (He shares his name with his
grandfather, an early conservationist.) “It would be foolish not to
have organic items in your product line. You will want to be ready and
in position with a brand that has green as one of its features.”Any
such effort has to start with a close look at expenses, because
launching a green business or product generally costs more than taking
the road more traveled. The main reason: higher materials costs. An
8-ft.-by-4-ft. sheet of the bamboo used by Zwanette Designs costs $179,
vs. $120 for a sheet of maple. The coffee and teas Taylor Maid buys
have been certified organic by the USDA from small farms and
cooperatives in El Salvador, Nicaragua, and other countries, and cost
about $1.95 a pound, says President and CEO Inman. That compares with
35 cents from big suppliers that sell to Maxwell House and the like.
Pangea makes a soap that is 38% Tunisian olive oil, packed in recycled
egg cartons that cost 18 cents each. Plain old paper packaging or a box
costs about 5 cents a pop.For the time being, consumers seem willing to
cover those higher costs. Taylor Maid coffee retails online for $9.75
for 10 oz., vs. $6.50 a pound for Maxwell House. And Pangea’s soap
sells–quite well–for $6.99 a bar.As the novelty of green products
wears off, it’s going to get tougher to cover those costs. Using green
strategies to keep costs down will reinforce your eco-cred. Inman found
it was cheaper to pack his organic coffee in refillable steel cans than
in the paper bags that are the industry norm. And he worked with a
partner to design a coffee roaster that uses 85% less fuel than
traditional ones.Pangea’s Onysko limits advertising to a single ad in a
local magazine. Instead, he relies on word of mouth, helped by some
Web-savvy marketing, and posts on a variety of blogs of interest to his
likely buyers. When a blogger on treehugger.com recently complained
that it was impossible to find products that are both green and
affordable, Onysko answered with a post explaining why his products
cost more than many drugstore brands. Then he offered readers a chance
to try his products at half price for a week.

CLEVER MARKETING
As
green products proliferate, such innovative marketing will be key to
attracting consumers’ attention. One hurdle is overcoming the long-held
perception that green means shoddy. Early organic products were often
considered of lesser quality, says Ottman, and among a wide swath of
consumers “that stigma still exists.” Further, consumers have had
enough gloom-and-doom messages. “Consumers want upbeat messages,” says
Ottman. “They don’t want to hear about how the planet is going to hell
in a handbasket.”The challenge is to create a brand consumers will buy
whether or not it is good for the environment. “If you have an idea for
an alternative to cotton shirts, make sure it is fashionable first and
the green aspect is second or third down the list,” says Sonora Beam,
co-founder and creative director of Digital Hive Ecological Design, a
green consulting firm in San Francisco. Many people are buying green
products not because it’s the right thing to do, says Beam, “but
because they look or taste good.”So in 2003, when Jason, 36, and
Kimberly Graham-Nye, 35, introduced to the U.S. a biodegradable,
flushable diaper that had been sold in Australia, they were careful not
to call it an eco-diaper, which they thought sounded preachy and
boring. Instead, they called it gDiapers. Yes, the gDiapers box is made
of recyclable cardboard and features the words “for a healthy planet,”
but the “g” in the name is intentionally ambiguous. “It could mean
anything, like groovy,” says Jason Graham-Nye. “It has a fashion
element to it.”

A FOOT IN THE DOOR
Getting an organic
product into stores isn’t necessarily any easier than getting placement
for a traditional product. As with any new item, finding slots in
mass-market grocery chains can be difficult as well as costly, and many
supermarket chains are producing their own green labels. Whole Foods
Market, the nation’s largest organic retailer, is, not surprisingly, a
tough sell. So Onysko’s strategy is to target specialty stores and
consumers for whom Pangea is already an established organic brand. Last
year about 20% of Pangea’s sales came through spas.Taylor Maid sells
largely in independent specialty food stores such as New York’s Dean
& Deluca. But hotels, restaurants, and cafes, says Inman, “are the
more direct, fresher channel to expose consumers to the brand.” His
coffee is available in upscale hotels such as Shutters in Los Angeles
and in trendy wine-country restaurants in northern California.
Nongrocery retail sales made up 35% of last year’s revenues. And Inman
recently landed $1 million in financing from private investors to roll
out a chain of Taylor Maid cafes. “The goal is to be the green version
of Peet’s coffee,” says Inman. He plans to use green building materials
and solar and wind power and to sell a variety of organic food.Onysko
also envisions increasing his sales efforts in Australia, Europe, and
the Middle East. The next step could be to launch his own stores,
possibly day spas where his products will be available, he says. “We
are trying to build ourselves into a multinational without selling out
to one.” One green customer at a time

[Author]

June 15, 2006 at 10:58 AM