Going Green: The Corporate Perspective
Today, across the world it can be seen that environmental issues are the most pressing issues of our time. From global warming to waste disposal, these are issues that impact our day to day lives. But, many companies are still reluctant to use green practices because they believe that it will only increase their costs and yield no benefits. This article starts by citing some examples of companies which have gone green and talks about the benefits that they have received, and then goes on to talk about what are some of the golden rules that accompany needs to consider while going green.
Going Green– How it has benefited companies
First, I would like to begin by stating some examples of companies that have succeeded in cutting costs and increasing profits by turning to green products and green marketing.
· State Bank of India: By using eco and power friendly equipment in its 10,000 new ATMs, this banking giant has not only saved power costs and earned carbon credits, but also set the right example for others to follow. SBI is also entered into green service known as “Green Channel Counter”. It is providing many services like; paper less banking, no deposit slip, no withdrawal form, no cheques, no money transactions form. All these transaction are done through SBI shopping & ATM cards. The State Bank of India has also become the first Indian bank to harness wind energy through a 15-megawatt wind farm developed by Suzlon Energy. The wind project is the first step in the State Bank of India's green banking program dedicated to the reduction of its carbon footprint and promotion of energy efficient processes, especially among the bank's clients.
· Wipro's Green Machines: Wipro Infotech was India's first company to launch environment friendly computer peripherals. For the Indian market, Wipro has launched a new range of desktops and laptops called Wipro Greenware. These products are RoHS (Restriction of Hazardous Substances) compliant thus reducing e-waste in the environment. It has been shown through surveys that this approach has had a wide appeal with customers and has helped improve the image of the company considerably.
· Indian Oil's Green Agenda: Indian Oil has invested about Rs. 7,000 crore so far in green fuel projects at its refineries; ongoing projects account for a further Rs. 5,000 crore. The R&D Centre of Indian Oil is engaged in the formulations of eco-friendly biodegradable lube formulations. In the country's pursuit of alternative sources of energy, Indian Oil is focusing on CNG (compressed natural gas), Auto gas (LPG), ethanol blended petrol, bio-diesel, and Hydrogen energy. As it has been predicted that the world supply of petroleum, oil and natural gas is going to dwindle rapidly over the next few decades, this can be seen as a very wise move by Indian Oil. By moving onto alternative energy sources and green alternatives, Indian Oil is trying to create a permanent hold in the energy market by looking at the future and preparing itself for oil and petroleum shortages.
Now, let us look at what are the REASONS why going green benefits companies and helps them make more money:
· Cost of Profit Issues - Disposing of environmentally harmful by-products, such as polychlorinated biphenyl (PCB) contaminated oil are becoming increasingly costly and in some cases difficult. Therefore firms that can reduce harmful wastes may incur substantial cost savings. When attempting to minimize waste, firms are often forced to re-examine their production processes. In these cases they often develop more effective production processes that not only reduce waste, but reduce the need for some raw materials. This serves as a double cost savings, since both waste and raw material are reduced. In other cases firms attempt to find end - of - pipe solutions, instead of minimizing waste. In these situations firms try to find markets or uses for their waste materials, where one firm's waste becomes another firm's input of production. One Australian example of this is a firm who produces acidic waste water as a by-product of production and sells it to a firm involved in neutralizing base materials
· Opportunities - As demand changes, many firms see these changes as an opportunity to exploit and have a competitive advantage over firms marketing non environmentally responsible alternatives. There is a pool of customers growing rapidly who are concerned about the environment friendliness of the products they consume and use. For a competitive company, it is necessary that they change their product and marketing strategy to cater to this customer pool. Some examples are:
Ø McDonald's replaced its clam shell packaging with waxed paper because of increased consumer concern relating to polystyrene production and Ozone depletion.
Ø Tuna manufacturers modified their fishing techniques because of the increased concern over driftnet fishing, and the resulting death of dolphins.
· Government Pressure - As with all marketing related activities, governments want to "protect" consumer and society; this protection has significant green marketing implications. Government offers tax cuts and tax benefits to companies that are environmentally friendly and thus, provides an opportunity for companies to cut costs by going green.
· Competitive Pressure - Another major force in the environmental marketing area has been firms' desire to maintain their competitive position. In many cases firms observe competitors promoting their environmental behaviors and attempt to emulate this behavior. In some instances this competitive pressure has caused an entire industry to modify and thus reduce its detrimental environmental behavior. For example when one tuna manufacture stopped using driftnets the others followed suit.
· Social Responsibility and Image - Many firms are beginning to realize that they are members of the wider community and therefore must behave in an environmentally responsible fashion. Companies have realized that having a “green” image goes down well with customers rather than an image that shows them as “environment unfriendly”. This results in environmental issues being integrated into the firm's corporate culture.
GOLDEN RULES OF GOING GREEN – What to do and what not to do
· Know your Customer: Make sure that the consumer is aware of and concerned about the issues that your product attempts to address, (Whirlpool learned the hard way that consumers wouldn't pay a premium for a CFC-free Journal of Engineering, Science and Management Education refrigerator because consumers didn’t know what CFCs were.)
· Educating your customers and making it KNOWN that you are going green: It isn't just a matter of letting people know you're doing whatever you're doing to protect the environment, but also a matter of letting them know why it matters. Otherwise, for a significant portion of your target market, it's a case of "So what?" and your green marketing campaign goes nowhere.
Ø An example of a company that has gone green but failed to market it properly is Coca-Cola. They have invested large sums of money in various recycling activities, as well as having modified their packaging to minimize its environmental impact. While being concerned about the environment, Coke has not used this concern as a marketing tool. Thus many consumers may not realize that Coke is a very environmentally committed organization. Another firm who is very environmentally responsible but does not promote this fact, at least outside the organization, is Walt Disney World (WDW). WDW has an extensive waste management program and infrastructure in place, yet these facilities are not highlighted in their general tourist promotional activities.
· Consider Your Pricing: If you're charging a premium for your product-and many environmentally preferable products cost more due to use of higher-quality ingredients-make sure those consumers afford the premium and feel it's worth it. Design environmental products to perform as well as (or better than) alternatives. Promote and deliver the consumer desired value of environmental products and target relevant consumer market segments. Broaden mainstream appeal by bundling consumer desired value into environmental products.
· Calibration of consumer knowledge: Educate consumers with marketing messages that connect environmental attributes with desired consumer value. Frame environmental product attributes as “solutions” for consumer needs. Create engaging and educational internet sites about environmental products desired consumer value
· Credibility of product claim: Employ environmental product and consumer benefit claims that are specific and meaningful. Procure product endorsements or eco-certifications from trustworthy third parties and educate consumers about the meaning behind those endorsements and eco-certifications.
As customers all over the world are becoming more conscious, going green is the way to go for companies. The examples above have shown how going green has helped companies cut costs, improve their image and create a permanent hold over their industries by considering alternate energy sources. It is necessary though, for companies to take certain things into consideration before taking a step towards going green, but if implemented successfully, it could create a win win situation for the planet, customers and companies.
Lavanya Bhamidipati & Vedika Agrawal
B.A. (H) Economics, 1st year
Going Green– How it has benefited companies
First, I would like to begin by stating some examples of companies that have succeeded in cutting costs and increasing profits by turning to green products and green marketing.
· State Bank of India: By using eco and power friendly equipment in its 10,000 new ATMs, this banking giant has not only saved power costs and earned carbon credits, but also set the right example for others to follow. SBI is also entered into green service known as “Green Channel Counter”. It is providing many services like; paper less banking, no deposit slip, no withdrawal form, no cheques, no money transactions form. All these transaction are done through SBI shopping & ATM cards. The State Bank of India has also become the first Indian bank to harness wind energy through a 15-megawatt wind farm developed by Suzlon Energy. The wind project is the first step in the State Bank of India's green banking program dedicated to the reduction of its carbon footprint and promotion of energy efficient processes, especially among the bank's clients.
· Wipro's Green Machines: Wipro Infotech was India's first company to launch environment friendly computer peripherals. For the Indian market, Wipro has launched a new range of desktops and laptops called Wipro Greenware. These products are RoHS (Restriction of Hazardous Substances) compliant thus reducing e-waste in the environment. It has been shown through surveys that this approach has had a wide appeal with customers and has helped improve the image of the company considerably.
· Indian Oil's Green Agenda: Indian Oil has invested about Rs. 7,000 crore so far in green fuel projects at its refineries; ongoing projects account for a further Rs. 5,000 crore. The R&D Centre of Indian Oil is engaged in the formulations of eco-friendly biodegradable lube formulations. In the country's pursuit of alternative sources of energy, Indian Oil is focusing on CNG (compressed natural gas), Auto gas (LPG), ethanol blended petrol, bio-diesel, and Hydrogen energy. As it has been predicted that the world supply of petroleum, oil and natural gas is going to dwindle rapidly over the next few decades, this can be seen as a very wise move by Indian Oil. By moving onto alternative energy sources and green alternatives, Indian Oil is trying to create a permanent hold in the energy market by looking at the future and preparing itself for oil and petroleum shortages.
Now, let us look at what are the REASONS why going green benefits companies and helps them make more money:
· Cost of Profit Issues - Disposing of environmentally harmful by-products, such as polychlorinated biphenyl (PCB) contaminated oil are becoming increasingly costly and in some cases difficult. Therefore firms that can reduce harmful wastes may incur substantial cost savings. When attempting to minimize waste, firms are often forced to re-examine their production processes. In these cases they often develop more effective production processes that not only reduce waste, but reduce the need for some raw materials. This serves as a double cost savings, since both waste and raw material are reduced. In other cases firms attempt to find end - of - pipe solutions, instead of minimizing waste. In these situations firms try to find markets or uses for their waste materials, where one firm's waste becomes another firm's input of production. One Australian example of this is a firm who produces acidic waste water as a by-product of production and sells it to a firm involved in neutralizing base materials
· Opportunities - As demand changes, many firms see these changes as an opportunity to exploit and have a competitive advantage over firms marketing non environmentally responsible alternatives. There is a pool of customers growing rapidly who are concerned about the environment friendliness of the products they consume and use. For a competitive company, it is necessary that they change their product and marketing strategy to cater to this customer pool. Some examples are:
Ø McDonald's replaced its clam shell packaging with waxed paper because of increased consumer concern relating to polystyrene production and Ozone depletion.
Ø Tuna manufacturers modified their fishing techniques because of the increased concern over driftnet fishing, and the resulting death of dolphins.
· Government Pressure - As with all marketing related activities, governments want to "protect" consumer and society; this protection has significant green marketing implications. Government offers tax cuts and tax benefits to companies that are environmentally friendly and thus, provides an opportunity for companies to cut costs by going green.
· Competitive Pressure - Another major force in the environmental marketing area has been firms' desire to maintain their competitive position. In many cases firms observe competitors promoting their environmental behaviors and attempt to emulate this behavior. In some instances this competitive pressure has caused an entire industry to modify and thus reduce its detrimental environmental behavior. For example when one tuna manufacture stopped using driftnets the others followed suit.
· Social Responsibility and Image - Many firms are beginning to realize that they are members of the wider community and therefore must behave in an environmentally responsible fashion. Companies have realized that having a “green” image goes down well with customers rather than an image that shows them as “environment unfriendly”. This results in environmental issues being integrated into the firm's corporate culture.
GOLDEN RULES OF GOING GREEN – What to do and what not to do
· Know your Customer: Make sure that the consumer is aware of and concerned about the issues that your product attempts to address, (Whirlpool learned the hard way that consumers wouldn't pay a premium for a CFC-free Journal of Engineering, Science and Management Education refrigerator because consumers didn’t know what CFCs were.)
· Educating your customers and making it KNOWN that you are going green: It isn't just a matter of letting people know you're doing whatever you're doing to protect the environment, but also a matter of letting them know why it matters. Otherwise, for a significant portion of your target market, it's a case of "So what?" and your green marketing campaign goes nowhere.
Ø An example of a company that has gone green but failed to market it properly is Coca-Cola. They have invested large sums of money in various recycling activities, as well as having modified their packaging to minimize its environmental impact. While being concerned about the environment, Coke has not used this concern as a marketing tool. Thus many consumers may not realize that Coke is a very environmentally committed organization. Another firm who is very environmentally responsible but does not promote this fact, at least outside the organization, is Walt Disney World (WDW). WDW has an extensive waste management program and infrastructure in place, yet these facilities are not highlighted in their general tourist promotional activities.
· Consider Your Pricing: If you're charging a premium for your product-and many environmentally preferable products cost more due to use of higher-quality ingredients-make sure those consumers afford the premium and feel it's worth it. Design environmental products to perform as well as (or better than) alternatives. Promote and deliver the consumer desired value of environmental products and target relevant consumer market segments. Broaden mainstream appeal by bundling consumer desired value into environmental products.
· Calibration of consumer knowledge: Educate consumers with marketing messages that connect environmental attributes with desired consumer value. Frame environmental product attributes as “solutions” for consumer needs. Create engaging and educational internet sites about environmental products desired consumer value
· Credibility of product claim: Employ environmental product and consumer benefit claims that are specific and meaningful. Procure product endorsements or eco-certifications from trustworthy third parties and educate consumers about the meaning behind those endorsements and eco-certifications.
As customers all over the world are becoming more conscious, going green is the way to go for companies. The examples above have shown how going green has helped companies cut costs, improve their image and create a permanent hold over their industries by considering alternate energy sources. It is necessary though, for companies to take certain things into consideration before taking a step towards going green, but if implemented successfully, it could create a win win situation for the planet, customers and companies.
Lavanya Bhamidipati & Vedika Agrawal
B.A. (H) Economics, 1st year