The trouble with “Green Business” is that it conjures up images of a movement without shedding much light on how focusing operations on sustainability leads to greater corporate profitability. While it is understandable that Marketing departments are excited about being viewed as “green“, from an operations point of view, it doesn’t really help the business understand how it should respond to green consumer preferences or pending environmental legislation (see Joel Makower’s “Why Doesn’t Green = Better?“).
Consumers are becoming increasingly aware of the environmental impacts of the products and services they choose, in fact, studies have shown that about 10% of customers today are willing to pay a little more for a “green” product while 25% of them couldn’t care less. From a Marketing perspective, however, the real prize is the remaining 65% of consumers who have yet to make up their minds. If building brand value is all about associating your products to newly identified needs and wants then it is especially true if the next generation of consumers choices differ from those of their parents. Savvy companies like Walmart view their customers in generational terms and know they must remain relevant on the environment and sustainability. They understand that young people today have a keen awareness of pollution, population growth, and resource depletion and the few lectures that parents do get from their children are all around recycling and energy use. If the environment and sustainability become intergenerational issues than we better get used to “green” marketing.
What about “green” operations, or more precisely Eco-Operations; haven’t we been doing Lean manufacturing for years and why isn’t that enough? It is true that Lean and Total Quality efforts of the past were very effective at eliminating waste but are not necessarily well calibrated to reduce future risks and costs in a resource constrained world. Lean manufacturing will tell you a great deal of how your current activities generate waste but won’t tell you much about how the cost of energy will impact you in the future and what you should be doing about it today. Lean will not shed much light on the cost of carbon or how it could ripple throughout the economy due to regulatory legislation. “Green Business” is then really about the sustainability of your operations, your supply chain and ultimately your products impact on the planet.
It is clear now that environmental regulations and their costs will only increase, whether from straight carbon taxes or more stringent limitations on the use of hazardous materials. In addition, resource limitations, whether of fuels or other raw materials, will also likely lead to cost increases in the future. Though many of these costs will be borne directly by suppliers rather than brand owners, they will eventually be passed on throughout the network resulting in higher-priced products. As costs rise, companies’ imperatives to heed and improve their environmental records will move from idealism and marketing strategy to a more straightforward economic concerns. The quest for profits will ultimately drive sustainability.