What exactly is a green business?

And does being one really add to the bottom line?
Danesh Daryanani, Today Online 2 Feb 08;

AL GORE has almost single-handedly raised the awareness of, and for, green.

Not too long ago, talk of being a green business was met with a degree of scepticism. Initial impressions of green talk were that it was the domain of hippie-type, tree-huggers.

However, over the years, it started to be taken seriously and today, green business is a reality and a strategic imperative for governments and corporations alike.

As a result, consumers' attitudes towards green businesses have changed. The results of the 2007 ImagePower Green Brands Survey conducted by Landor in the United States showed that green awareness is no longer just marginal. It has moved into the collective consciousness of the American consumer.

This trend is also catching on in Singapore — consumers are now looking not only at the products that a company sells but how it does its business.

Mr Thomas Thomas, executive director of the Singapore Compact, a national society that functions to further corporate social responsibility in Singapore, said: "There has been heightened interest over the last three years because companies realise they will no longer just be measured on making profits but how they make them."

According to a recent McKinsey study, 95 per cent of CEOs surveyed believe that society has a higher expectation than it did five years ago that companies will assume public responsibilities. This means that organisational behaviour is being watched more closely, and brands are being held to their promises.

Businesses can no longer adopt green as a "marginal" strategy but instead need to ensure that it is embedded into general company propaganda. One may question the motives behind some companies' decision to embrace green, but the bottom line is, it's a good thing.

Defining a green brand or a green business is not easy. There are no clear ways to define one brand from being more "green" than another. Some standards include measuring the "carbon footprint" of a company — how much recycling a company engages in, the level of involvement by employees in green activities or any number of other measures. However, the definitions of what makes a green company vary greatly.

The United Nations Global Compact suggests 10 principles for businesses in the areas of human rights, labour, the environment and anti-corruption.

Out of these, three concern the environment:

Principle 7 states that "businesses should support a precautionary approach to environmental challenges";

Principle 8 encourages businesses to "undertake initiatives to promote greater environmental responsibility" and;

Principle 9 asks businesses to "encourage the development and diffusion of environmentally-friendly technologies".

These are fairly broad principles and companies can do much, or little, within them.

However, to position an entity as green also involves adopting an active and proactive approach in communicating what the company does in the area of the environment in general.

As companies find it increasingly worth their while to go green, the question arises: Does green, as a business strategy, have any brand benefits?

There are some industries which have come under heavier scrutiny due to the nature of their businesses. Take, for example, the energy, automotive, paper or the airline industry. Due to the direct impact their businesses have on the environment, the level of scrutiny from both the public and state regulators is very high.

As a result, some companies, such as Shell and GE, have long had in place well-developed strategies and actions to ensure that while they conduct business, they do so with minimum impact on the environment. Indeed, these companies have also gone out of their way to make a positive impact on the environment. (See box).

However, for other companies — unless they are, say, manufacturing energy-saving devices — developing a green brand is not much use from a brand differentiating point of view.

Ultimately, the company sells what it is out to sell. That is where its brand-building efforts need to focus on. Positioning a company as "green" where green is not relevant will not add much value to the value proposition of the company.

For example, there may be value in having a "green" car but to be a "green" bank will add no value to the brand. But even for the bank, not being green these days can have a negative impact among its customers.

This is because green is here to stay and ultimately, being green has become a matter of collective responsibility — the "cost" for the privilege of conducting business.

For a company, going green should be a table-stake item; similar to keeping within the law of the country where it is operating. Just like keeping accurate accounting is a prerequisite, considering the impact of a company's operations on the environment should be mandatory.

In other words, while there are no real benefits to being green, there would be a real disadvantage for not being "green".

The writer has spent more than 20 years in marketing and held senior Asia-Pacific roles in Nokia, Shell and Samsung.