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 user 2006-06-15 at 10:58:00 am Views: 53
  • #15756

    Do You Need To Be Green?
    As green goes mainstream, finding a smart green strategy is tougher — and more urgent — than ever
    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.

    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.

    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 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.

    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.”

    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