Green Business Booms in the USA

Green Business Grows Up
Jennifer Bogo, E Magazine
July , 2000

The American supermarket has always offered a virtual cornucopia of goods,
but never before has the selection been quite so eclectic, or so green. Scan
the shelves today and find toothpaste that contains no saccharin,
preservatives or dyes and comes in 100 percent recycled paperboard packaging;
vegetable-based, biodegradable, chlorine-free laundry detergent; a
colorful array of organic yogurts and ice cream that comes in unbleached
paper pints. Flip through a catalog for flashlights and radios that generate
their own electricity, or fleeces made from the soda bottles you may have
recycled on your very own curb. Pick up the phone to call Grandma, and your
long distance company automatically donates money to a worthy nonprofit.

Only 30 years ago, "green business" was a sleepy backwater, presided over by
relatively moribund firms that catered to a small cult of "health fanatics."
The products themselves were poorly marketed, expensive, and often
ineffective in use. But the new generation of companies -- including
Tom's of Maine, Seventh Generation, Stonyfield Farms, Ben & Jerry's, Real
Goods, Patagonia and Working Assets -- was smarter than that. They aimed their
products at mainstream consumers, and went head-to-head in quality with
established supermarket brands. In time, they were able to compete in
price as well, breaking down one of the last consumer resistance barriers. The
result has been incredible growth of a category that barely existed 30 years
ago. This is now a $7.9 billion industry, with a large and devoted
consumer base.

The bewildering array of exhibitors that gather each year for the
"Eco-Expos" on either coast are proof-positive of this retail
phenomenon. The Expo-West, held in Anaheim, California this past March,
boasted over 2,400 booths showcasing natural products from organic textiles
to pet shampoos, and drew 30,000 attendees. "People come thinking it'll
be a cottage industry," says Susan Benanati, vice president of marketing
for New Hope Natural Media, which organizes the event. "And they get
blown away."

The Novelty of It All

The sheer novelty of the new products has helped secure their place in the
mainstream marketplace. Once there, the results have been impressive.
Stonyfield Farms, the nation's fastest-growing yogurt company, is now
number five in the country, according to Food Processing. But CEO Gary
Hirshberg recalls a time when, fresh from milking the cows, he would
literally kick the manure off his boots and walk into meetings with retailers.

"We found our way onto the shelves with a combination of chutzpah and naivete,"
says Hirshberg, still somewhat amazed. "The reason we got there is that they
saw we were offering something different, a little curious and even
weird to them. They didn't buy into our politics or even care."

But the popularity of such "curious" products is sweeping the politics
along, to the great good fortune of local communities and the environment.
Stonyfield, for instance, awards grants to dairy farmers to promote sustainable
agriculture, prints environmental messages on yogurt lids, and donates 10
percent of profits to efforts like organic farming associations and
environmental radio. Stonyfield also began the daunting task of reducing its
contribution to global warming, and is now offsetting 2,000 tons of carbon
dioxide, 100 percent of its emissions, with reforestation projects.

Now a printed guide, Stonyfield's Carbon Cookbook is distributed to help
other businesses make similar environmental choices. The White Dog
Cafe in Philadelphia, Pennsylvania is the first restaurant in the Chefs
Collaborative, a growing coalition that encourages restaurant owners to buy
directly from local farmers, to use it to measure and offset its carbon
emissions as well. The Cookbook is one more proactive tool for owner Judy
Wicks, who already buys alternative power, ensuring that 44 percent of the
cafe's electricity comes directly from windmills. Restaurants, she feels, are
an especially effective business medium for reaching outside the choir of
established activists to deliver an environmental message.

"We like to say we use good food to lure innocent customers into social
activism," Wicks half jokes. Besides great locally and organically grown
meals, the cafe serves up eco-tours, which this year will take customers
into the countryside with a regional planner to examine the effects of urban
sprawl; an annual Farmer Sunday Supper, each course of which is dedicated to a
local farmer who discusses issues that affect the farm; and table talks, which
feature speakers on issues from biotechnology to globalization. "By
being outspoken about what we believe in, we develop a community of
like-minded people who share our values," says Wicks.

And that community is making its presence known. "Our customers don't
just like our ice cream -- they like what our company stands for. They like
how doing business with us makes them feel," write Ben Cohen and Jerry
Greenfield in Ben & Jerry's Double Dip, a written testament to the popularity,
and profitability, of socially responsible business. "Our experience
is that you don't have to sacrifice social involvement on the altar of
maximized profits. One builds on the other." The concept of being a
values-led business has grown from an outlandish dream for idealistic
entrepreneurs to a reality whose roots are cemented firmly in the marketplace.

From Market Niche to Mainstream

This retail phenomenon is perhaps nowhere so obvious as in natural food
stores, once an anomaly on the retail landscape, but now within a short drive
of most Americans, and doing $1 million in business. They're also dealing in
much more than just granola. In 1999 alone, according to SPINS data,
environmentally friendly paper products like toilet paper, paper towels and
coffee filters experienced tremendous growth in natural stores, jumping 20
percent in sales. Likewise, personal care items like feminine products and
baby diapers leapt 26 percent and household cleaners, near 30 percent.

Once content to let customers swing by the natural food store down the street
to pick up alternative items, supermarkets have since realized that
people began buying their household staples there, too. The result is the
invasion of natural products to mainstream grocery aisles, a concerted
effort from retailers to lure wayward shoppers back. "People who buy natural
products are no longer a handful of consumers committed to environmental
ideals," says Laurie Demerritt, vice president of marketing for the Hartman
Group. "That dedicated group of individuals is diffusing into the
marketplace."

Last year, a Hartman survey of 26,000 consumers revealed that close to a
third had purchased organic foods or products in the last three months, 60
percent were open to the idea, and only 10 percent were disinterested. This
represents a dramatic change from just two years prior, when 40 percent would
not even consider broadening their shopping horizons. Despite the
burgeoning interest in natural products, brand loyalty hasn't
necessarily followed suit. Over 80 percent of the organic food buyers
surveyed couldn't name a single brand, while some named mainstream products
like Cheerios.

This response has been eye-opening for environmentalists, who are amazed to
learn how far green thinking has penetrated into mainstream shopping,
and it's also meant an open door for new companies trying to work their way
in. The recognition will come, assures Demerritt. In the meantime, people
continue to put their money for products they see as better for them --
and as time passes other attributes will likely become important as well.

Corporate Consciousness

Armed with the proper tools, shoppers are already making this transition
apparent. The Council on Economic Priorities' Shopping for a Better World
ranks brand-name products according to social-conscious categories like hiring
practices, corporate giving and environmental policy, assuring
consumers that their purchase of toothpaste or breakfast cereal is truly
reinforcing positive values. The book, which has sold over a million copies
since its first printing in 1988, has found its listings translated directly
into marketplace behavior. Four out of every five of the book's readers say it
has influenced their choices in the supermarket enough to switch brands.

In turn, companies are realizing that people will pay more for a product they
can believe in. According to the 1999 Roper Starch Green Gauge report, people
will spend nearly eight percent above and beyond the cost of the item for
energy-efficient major appliances, and six percent more for electricity-saving
home computers. They will shell out close to another six percent for
biodegradable plastic packaging, recycled-paper products and cars that
are a third less polluting.

And while it would be foolish not to cash in on the growing consumer
consciousness and higher price premiums that frequently go hand-in-hand,
environmental improvements often save corporate headquarters money, too.

Reducing use of raw materials saved Xerox $45 million in 1998, as more than
72,000 tons of old machines were recycled or refurbished by the company.

A recently introduced 97 percent recyclable photocopier not only exceeds
all standards for energy efficiency, but is expected to save $1 billion
through long-term remanufacturing of reusable parts.

Anheuser-Busch, the world's largest beer brewing company, is expecting to
save 500 million gallons of water and $60 million a year by reducing utility
usage. BankAmerica, the largest small business lender in the U.S., saved $7.1
million by reconditioning and reissuing more than 35,000 pieces of equipment,
everything from typewriters to ATMs.

Perrigo, a leading manufacturer of store brand pharmaceuticals, improved
indoor air quality and saved $35,000 a year simply by switching to
environmentally benign cleaning products for its facilities.

And renewed corporate commitment to environmentally preferable goods and
services has only served to strengthen their growing market. Imagine, for
instance, the potential effect on supply when McDonald's, the world's
largest food retailer with over 24,000 restaurants, spends more than $3
billion on recycled-content products, from playground equipment to tray
liners, as it has since 1990. Or when the U.S. federal government, the single
largest consumer in the world, mandates that federal agencies identify and
purchase products that create less of a burden on the environment, as a 1998
Executive Order requires.

A Chair at the Table

As added incentive, shareholder money is increasingly being funneled toward
the companies with the best social and environmental records. Socially
responsible investing (SRI) allows people to divert financial support from
companies with questionable corporate practices and reward those that act
responsibly. According to the Social Investment Forum, more than $2 trillion
is invested in the U.S. in a socially responsible manner, up 82 percent from
1997. That's one dollar of every eight under management in the United States.
Even Greenpeace, famous for dramatic direct-action stunts like scaling
buildings to hang banners and blockading whaling vessels with rubber
rafts, has taken to the boardroom. In March, the international nonprofit
bought 4,400 shares of oil giant Royal Dutch/Shell, and proposed in its annual
shareholder meeting that Shell build a solar panel factory capable of
producing five million panels a year, enough to equip 250,000 homes with a
two-kilowatt system. Greenpeace's appeal was not to the company's social
conscience, but to its bottom line. A report commissioned by the
environmental action group estimates investment in the solar factory would
garner a 15 percent return, more than the average profit of Shell's activity
in oil and gas.

"It's not about whether you own stock A or B, but making stock A or B better
companies." says Patick McVeigh, executive vice president with Trillium
Asset Management. Trillium not only screens for the good and bad actors in
the environmental community, but advocates on the part of its investors,
most recently joining in the successful effort to pressure Home Depot over the
use of old-growth lumber. "Pulling money is a last resort," says McVeigh.
"If we are invested we feel we have a responsibility to insure they are
operating in fashion we're comfortable with, and will raise our voices if
they're falling short."

The collective voice of socially responsible investors resulted in 220
shareholder resolutions filed in more than 150 U.S. companies in 1999. Some
54 directly requested environmental improvements, such as the long-term
phase out of chlorine-bleached paper, an immediate halt to drilling in the
Arctic National Wildlife Refuge, and detailed reports on emissions of
greenhouse gases.

Last year, of the more than 175 separate socially screened mutual funds
in the U.S., 79 percent included screens for environmental criteria. One
of the newest, Portfolio 21, raises the bar even higher by investing money only
in those companies that incorporate sustainability into the core of their
business practices. A year of research and 1,500 company analyses later, a
narrow field of 30 made the rigorous cut. Astropower, which produces solar
energy cells that are more efficient and cheaper to run than its
competitors; and Sony, which has scored breakthroughs in energy efficiency and
plans to make every product environmentally sensitive by the end of
2000, are two which meet its standards.

Hewson Batzell, CEO of Innovest, a New York City investment advisory firm,
believes that regardless of the industry sector, the companies with the
best environmental performance have the best financial future. "If you're a
nice person it doesn't matter," Batzell says, "but you will ultimately be ahead
of competitors, and be able to make strategic moves faster." So far the
numbers are proving him right. From 1997 to 1999, the assets from all of
the socially responsible investments grew at twice the rate of all assets in
the United States.

Taking a Natural Step

"We're at an interesting place," says Carsten Henningsen, chairman of
Portfolio 21. "It's a place where ecology and economy come together,
where doing what's right for the planet also becomes a financial advantage." A
fresh focus on product design, energy efficiency, materials consumption and
waste management is making it clear that environmental considerations are
more than just green business, they're good business. Perhaps this is the
biggest revolution in business today -- the one that's sweeping established
corporations in all industry sectors.

The most wholehearted of these companies follow a philosophy called
The Natural Step, developed by Swedish cancer doctor Karl-Henrik Robert in
1989. The Natural Step, which has since become an international movement,
offers a framework for incorporating sustainable practices into existing
cycles, revolutionizing business from the floor of the board room to the
floor of the shop. It acknowledges that there are important economic benefits
to be gained by learning to operate in harmony with nature, and significant
consequences to hitting her limits.

International furniture-maker IKEA was the first major corporation to adopt
The Natural Step 10 years ago. For a $7 billion company with over 40,000
workers and 150 stores in 28 countries, this is no minor goal. And the effects
of completely realigning a large corporation with environmental goals
(from the common-sense approach of building longer-lasting products with
stricter standards and incorporating green principles into store design to
training thousands of employees in environmental awareness) is not minor,
either. "It is not enough to be friendly toward the environment," says
Anders Moberg, IKEA's president. "We must adapt to it."

The principle of adapting to and imitating the cycles of nature has also
inspired a shift from flat product sales to a continuous flow of services,
focusing on the customer's needs while inspiring a higher quality and
durability of goods. Interface, one of the best examples, has created a carpet
that uses 35 percent less material with twice the life span. In a new leasing
arrangement, the company owns the carpet but replaces tiles as they wear
out, both reducing 97 percent of the resource flow and tripling profits.

Electrolux, Swedish maker of solar-powered lawnmowers and extremely
water-efficient home appliances (its dishwasher uses less than four gallons
per cycle), has likewise given away 7,000 washing machines to homes on the
Swedish island of Gotland. The company instead charges for each load of
laundry washed, promoting more efficient behavior, and ultimately
conserving water and energy.

The success stories are setting an example none too soon. Every year,
another 50 trillion pounds of waste is created by the U.S. alone, less than
two percent of which is recycled. Add in wastewater, and the total tops 250
trillion. Every hour 5,000 acres of forest cover disappear and every
second, 750 metric tons of topsoil are lost. Over the past century, the
surface of the Earth has warmed one degree, aided by the 6.5 billion tons
of carbon that are each year converted to a greenhouse gas. And this century,
population will once again double, but resources per person will drop by
one-half to three-fourths.

Until recently, "these issues were not mere straws but wet hay bales that
would break the backs of the whole team of camels," says Paul Hawken, author of
Natural Capitalism.

But Hawken predicts we are on the verge of another industrial revolution, one
based on the value of natural resources as well as economic ones. "For every
company that has publicly committed to this path, a dozen more are watching
and studying," says Hawken. "Their success, and every move they make
toward sustainability, will greatly influence and determine the future of
this planet."

* * *

Unfortunately, not all environmental claims can be taken at face value.
Americans are more likely to conduct business with companies that support
strong causes like environmental protection, reveals a Cone/Roper
report. A majority of 61 percent would like to see those ethics communicated
in the companies' marketing, and so many are putting it there, regardless
of their ability to back it up. Earth Day 2000's "Don't Be Fooled" report
(www.earth-day2000.org) highlights the worst of this past year's
"greenwashers," companies that make false or misleading environmental
claims. The practice has become so well documented in recent years that the
term "greenwash" now shows up in the Concise Oxford English Dictionary.

And being a "true blue green" company is no guarantee of success. Three of
the most environmentally sound toilet papers have all been "recycled" in
recent years, falling victim to low consumer demand. Just as they started
to achieve recognition, Ashdun Industries' CARE products bowed to the
marketing clout and instant retail dominance of mainstream competitors
like Proctor and Gamble's Brawny paper towel. Two independent and "green"
magazines, Buzzworm and Garbage, also found it too tough to compete. "The
readership of all the environmental magazines in the world combined isn't a
fraction of that of TV Guide or People," says E Magazine's publisher,
Doug Moss. "While a majority of Americans are self-proclaimed
environmentalists, few connect caring for the planet with consumer-driven
lifestyles."

That may soon change. Struggling enterprise may find solace in growing
support systems like the Social Venture Network, and its Social Venture
Institute, founded by Hirshberg in 1996 to mentor green businesses. They may
find solidarity in the membership list of Businesses for Social Responsibility
which has more than 1,400 affiliates, including American Express, General
Motors, Time Warner and Wal-Mart.

And they may take comfort in the new generation of business leaders, led in
part by the student-driven network of business graduate students, Net Impact.
By reassessing the traditional career path of corporate leadership, these
future CEOs plan to make social values an integral part of the new economy --
an economy which, according to Managing Director Daniel O'Connor, "situates
business within the context of an evolving humanity, not as an end in
itself, but as a means to a better way of life for all."

Jennifer Bogo is associate editor of E,
The Environmental Magazine, where this article first appeared.[AlterNet]