Consumer power of the ‘green’ market: how sustainable platforms and increased profit margins go hand-in-hand
Whether a business partakes in sustainable initiatives because it is an inherent part of its corporate foundation or because the business is ‘following the money’ by playing up to customer perception, it may not matter much to the consumer that does not feel strongly about the social and environmental future of the planet. However, for the consumer that cares, the different in the two cases — while they may look similar on the surface — is critically important.
Indeed, this may sound a bit harsh: no one would necessarily admit to ‘not caring’ about society or the environment. That is absurd. But the reality is that the consumers of today — those who are taking a proverbial hold of market trends and therefore subsequent corporate responses — lead with their blatant want for ‘green’ technology and socially conscience efforts. There is no lackluster or ambivalent intention about what the so-called ‘green’ consumers want from their producers. This ‘community’ of consumers is often referred to as the millennial customers who, collectively, represent an estimated $200 billion in annual buying power.
Cynthia Ringo, a managing partner at Double Bottom Line Investors (DBL), comments on the driving power of this aforementioned conscious consumer. Furthermore, such customers have been observed to initiate corporate responsibility, in response to its consumer interests.
“We have seen the millennial generation, and other socially-conscious consumers, push the companies and corporations they do business with to increase their social responsibility efforts,” said Ringo.
Moreover, companies are motivated to “increase transparency and sustainability in their supply chains, lower their carbon footprint and energy use and increase the diversity of their workforce and management,” added Ringo.
The DBL company name quite apparently resembles the previously mentioned triple bottom line principle, first introduced by John Elkington. Similar to the triple bottom line corporate ethos, which can be shortened to the three P’s, standing for people, planet, profit, the double bottom line similarly stands for people and planet as one “bottom line” and profit as another.
“Our firm uses venture capital to accelerate innovation in a way that positively affects an organization’s social impact, as well as its financial success,” explained Ringo. “We strongly believe these two drivers –positive social change and a healthy financial performance– are inherently connected,” she said.
The implementation of a “double bottom line” company goal structure, achieved by working with a firm like DBL investors, seems to imply success for the financial and social bottom lines, alike. Ringo adds that achieving such a structure can mean strong long-term financial success, as well as positive social, environmental and economic impact in the local community.
This relationship on which DBL stakes itself is in sharp contrast with a previously mentioned claim: that sustainable concerns and having a market driven frame of mind operate separately and even perhaps, are mutually exclusively.
A specific example was that of Patagonia; a company whose humble, organic beginnings — driven by the love of the outdoors and adventure of its founder, Yvon Chouinard — seems to perfectly encapsulate that which the (now international) company holds most dear: the production of unique, quality goods with the utmost focus on sustainability and maintaining integrity. (Such a platform, while perhaps not intentionally, could be considered to be the antithesis of profit-focused or market-driven.) After all, it was the best-selling piton-climbing tool — for which Chouinard Equipment, a precursor to Patagonia, was the largest distributor in the United States — that was phased out of production after it became clear that the gear was damaging the rock.
However, perhaps there is not, or is no longer, two sides of this story: that companies are either primarily driven by sustainable ventures, at the expense of market performance, or that businesses are financially focused and apart from which every other corporate goal takes a backseat.
In the case of DBL, Ringo believes that companies can achieve both lasting financial success, and at the same time effect positive social, environmental and economic impact in the local community.
“We have found that double bottom line practices that companies choose to adopt can be significantly beneficial to the fiscal bottom line both via direct benefits of cost savings and value creation; via indirect benefits of creating goodwill with their market, customers and community, and enhancing employee morale and retention,” stated Ringo.
One could submit that today’s market conditions are such that corporate sustainable initiative and fiscal gain are in fact, inextricably linked. In other words, the two are certainly not inherently separate. More specifically, it turns out that with a people/planet bottom line, there are literal cost savings involved in addition to the more immeasurable financial gain with the cultivation of customers and community support.
To put it simply, “they [companies] are also leveraging sustainability as a key marketing differentiator,” concluded Ringo.
One can reference various unique examples in which companies launch products with a specific (and intentional) environmental or social focus: The launch of products like Intel’s “conflict-free” microchips (which will replace historically, less sustainably made chips and exclude rare earth materials from countries with human rights violations); McDonald’s sustainable beef (which largely mitigates the footprint of its meat); and Safeway’s recycled paper bottles for laundry soap, reveal that sustainable consumer choices exist and are proliferating, at that.
In addition, the consumer market has seen companies that would not first come to mind as having any environmental or social ‘stake,’ nonetheless follow suit with sustainable initiatives. One such example, with which DBL works, is Pandora. So what does a free-access online radio have to do with sustainability?
This is not to mean that it only makes sense for a certain kind of business to have a sustainable corporate bottom line, but the Pandora radio example certainly challenges those that have a typical idea of what a sustainably focused company needs to ‘look’ like in its profile.
The DBL company platform believes “that green or sustainable practices can be integrated into any company no matter the industry,” said Ringo. Pandora completed all of the requirements for green business certification in 2010. Some of the projects that Pandora implemented were energy efficiency upgrades, better waste management, motion detector switches, and healthier in-company lunches and snacks, according to Ringo.
In such an example, the corporation’s sustainable practice implementations were not a media stunt or necessarily consumer-targeted. The company’s sustainability-focused adjustments were most certainly financially beneficial, but the company implementation also encouraged company employees to live healthier lives, while reducing the overall footprint of the company.
Perhaps becoming a greener company does not have to be consumer-targeted or something akin to a trend-following stunt.
Ringo submits that the sustainable or ‘green’ market trend indicates that sustainability and supply chain transparency are relevant to the consumer’s choice of brand. Logistically speaking, it makes sense that companies divulge their practices and sustainable practices in response to its consumer’s wants and demands.
The takeaway between corporate actors and the customer is conceivably, in the amount of power that the ‘green’ consumer holds, dictating corporate sustainability trends and insisting on transparency with respect to such practices.
Companies that claim to be green will be held accountable and those that truly are ‘green’ will be (fiscally) rewarded. Potentially moreover, ‘green’ consumers will less-frequently fall victim to supporting companies that, for example, use enticing green product packaging, though they may not be as sustainable or ‘green.’ Through corporate sustainability transparency at the behest of the customer, there is no place to hide for divisive corporate greenwashing and for the ill-informed consumer.
The ‘green’ consumer-producer relationship is in fact an exchange, believes Ringo. It is a relationship that benefits the consumer as well as the market, (not to mention society and the environment, respectively).
If a company is focusing on a ‘double bottom line,’ the consumer will be empowered by the same ideals that are integrated into the product that they are using, said Ringo. “This also has the effect of creating a positive feedback loop in the business place,” added Ringo, “Consumers who use companies with strong impact narratives often demand that from the other companies they interact with.”
