Sustainable Business

Marketplace success for a sustainable product is measured by the same metrics as a non-sustainable product, plus several additional social and environmental metrics.

A basic premise in business is that regardless of a company’s approach to sustainability, solid business fundamentals will always be a requirement, as every company itself must be self-sustaining. These fundamental business practices include producing products consumers will purchase, maintaining customer focus, proper expense management, and revenue generation. A balanced marketing scorecard enables the organization to maintain a holistic view of the impact and benefits of marketing efforts from a financial, customer, internal efficiency, and growth perspective (Marketing Teacher, 2010).  Some of the measures would include ROI, market share, customer satisfaction, brand loyalty, marketing plan cycle time, plans delivered within budget, process improvement methodologies.

As natural resources have become scarcer, sustainable business practices have become an imperative. “The business-case for sustainability demonstrates both the direct imminent financial pressure on existing business models and the new opportunities which can be created. Ultimately it’s all about engaging the consumer, and those businesses that can show the consumer that there is no need to sacrifice price and quality for sustainability will become the market makers of tomorrow” (“Deloitte,” 2009, para. 13).

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Two days ago, The Center for Disease Control (CDC) issued one of the largest egg recalls in U.S. History. The CDC recalled 32 million cartons of eggs produced at the Write State Egg Farm in Galt, Iowa, which caused 2,000 salmonella-related illnesses in 17 states (MSNBC, 2010). Salmonella outbreaks are linked to filthy production conditions and unsafe food handling. Privately held by Jack DeCoster, the Wright County Egg Farm was found guilty of breaking numerous safety, environmental, pollution, and immigration laws. The Wright County Egg Farm is an industrial hen laying egg operation, where in one barn alone, there were 81,000 hens confined to battery cages. Mercy for Animals videotaped the shocking conditions and inhumane treatment of animals during an undercover investigation, which led to Wright County Egg Farm pleading guilty to 10 counts of animal cruelty (Neisman, 2010).

Eggs are a staple of the worldwide diet, with several green alternatives added to the product line in recent years. The Kroger grocery store offers several types of brown grade A eggs, with price differences related to production methods and environmental benefit claims.

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The marketing mix, consisting of seven components, is critical to every marketing plan. The recent inclusion of people, process, and physical evidence to the list allows marketing managers to more completely analyze the end-to-end processes involved in creating customer value. In green marketing, all aspects of the marketing mix require special consideration to ensure the full implementation of sustainable capabilities across the company.

Muji is an example of a company that has implemented the 7 P’s of the marketing mix in a sustainable manner. Muji manufactures 7,000 consumer products sold in 330 stores worldwide and on the internet. Muji is short for Mujirushi Ryohin, which means “no brand quality goods” (Aaker, 2009). Using a minimalist design that purposefully removes extraneous functionality, Muji creates high quality, functional products that are “low priced for a reason” (“What is Muji,” n.d., para. 1). Muji is also firmly committed to sustainable practices such as renewable forest products, fair trade, recycling, and avoiding harmful materials (Currie, 2008).

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SmartDraw (2008) defines product positioning as the process that marketing uses to create a clear and distinct image of a product in the minds of customers within the context of the overall market. It entails understanding a customer’s wants, needs, and perceptions and then determining the unique value or niche that the product can fill (SmartDraw, 2008). Product re-positioning is the process of changing existing perceptions of a product.

A tool to assist with visualizing a product’s position in the marketplace is a product positioning matrix. To create the matrix, the marketing professional identifies two key factors which represent trade-offs for the consumer. The researcher plots the product and its competitors on the matrix, with the size of each circle representing market share. The value of a product positioning map is that it visually depicts where the market may be saturated and where there are opportunities for new products entreats. Here is an example for the auto industry.

The process of product positioning does not change for sustainable products. However, a company can reassess existing products and their relative position in an increasingly sustainable marketplace. Brita water filters is an example of full product repositioning to capitalize on the public’s growing environmental concerns and enable the company to operate more sustainably. In 2002, Brita water filters were 70% of the water filter market (Unrha & Ettenson, 2010). In 2007 with the explosion of bottled water sales, Brita’s business floundered to the point that Clorox threatened to sell the business. At the same time, bottled water critics, environmentalists and watchdog groups were highlighting the waste resulting from millions of bottles filling landfills. Brita marketing managers saw the opportunity to reposition their product by pursuing “a strategy to tout Brita’s green attributes, educate consumers about bottle waste, and encourage a switch to green alternatives” (Unrha & Ettenson, 2010, para. 8). Brita did not stop there. They also started a filter recycling program through a partnership with Preserve and Whole Foods (Brita, 2010). Finally, Brita implemented the FilterForGood program, a campaign to allow customers to pledge to reduce bottled water waste. This is also an example of B3: Change Usage in the marketing grid of shared responsibility between the company and the customer by “asking your customers to do their bit once they have bought your product. In this way, a company can have a much greater impact…. You do your bit and we do ours” (Grant, 2007, p. 173).

References

Brita (2010). Better for the environment & your wallet. Retrieved August 11, 2010, from http://www.brita.com/?locale=us&utm_source=google&utm_medium=cpc&utm_term=brita+water&utm_campaign=SEM-Brand

Grant, J. (2007). The green marketing manifesto. West Sussex, England: John Wiley & Sons LTD.

SmartDraw (2009). Working smarter with product positioning matrix diagrams. Retrieved August 11, 2010, from http://www.smartdraw.com/learn/worksmarter/diagrams/Working-Smarter-with-Positioning-Matrix.pdf

Unruh, G., & Ettenson, R. (2010). Growing green: Three smart paths to developing sustainable products. The Harvard Business Review, 88(6), 43-50.

While doing research for this post, I found GE’s Model Miners clean coal Ecomagination commercial.  I must admit, I watched it several times because the song and images are very captivating.  The commercial ends with the only words spoken in the commercial.

Imagine if a 250-year supply of energy were right here at home.  Now, thanks to emissions reducing technology from GE Energy, harnessing the power of coal is looking more beautiful every day.  Another product of pure Ecomagination.  GE.  Imagination at work. (General Electric, 2005)

This commercial is a blatant example of greenwashing.  GE is depicting one of the most dangerous, difficult, and dirty jobs in the world as sexy and provocative.  The beautiful models wear tank tops and caste provocative looks at the camera, enticing viewers to believe in the message.  GE chooses a captivating song with outstanding recall, familiar to many.  GE closes the commercial by inviting us to believe that coal is becoming more beautiful as an energy source.  It also implies that we are misguided if we do not mine local sources of coal.  In reality, burning coal releases carbon dioxide, sulfur dioxide, nitrogen oxide and is a major contributor to global warming (Dowdey, 2010).

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The American Marketing Association (2007) defines traditional marketing as “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large” (para 2). Traditional marketing focuses on understanding customer needs and assisting the organization to incorporate these needs into products and services. Marketing also analyzes external forces by performing competitive analysis, assessing economic conditions and recognizing emerging megatrends, all of which affect consumer attitudes and spending behaviors. Because the intention of marketing is to encourage consumers to purchase the firm’s goods and services, traditional marketing is accused of contributing to our consumption-oriented society.

As the public has become increasingly concerned about diminishing natural resources, and environmental degradation, the public has accused traditional marketing of greenwashing. Peattie and Crane (2005) detail five types of greenwashing.

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Income support to U.S. farmers is highly complex and a longstanding contentious policy issue. The policies were put in place in the 1930’s as farming productivity increased faster than demand, despite a growing world population (Griswold, Slivinski & Preble, 2005). Per acre yields increased dramatically due to technology advances, bioengineered seed, heavy use of fertilizers, large scale farming practices and irrigation improvements. The U.S. government instituted payments to farmers in the form of subsidies to keep farmers farming in spite of falling prices driven by higher production. In the latter part of the century, subsidies were also used as a form of protectionism, to ensure U.S. farm commodities remained globally competitive, as more countries implemented regulatory policies which included farming subsidies (Burns, 2003). There is continued debate regarding the social benefits and harm of these subsidies. In fact, a survey asked 245 U.S. agricultural economists if current policies are socially preferred; 50% answered yes, whereas 50% responded no (Gardner, 2001).

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The Forest Service is a federal agency, which is part of the U.S. Department of Agriculture (USDA). With a 2010 budget of $5.2 billion, the Forest Service is responsible for managing 193 million acres of national forest land (USGA, 2007). Although the Forest Service manages several programs that involve timber production, the Forest Products Program is responsible for the majority of timber sales related activities. This program is funded by both private logging receipts, as well as taxpayer funding through five appropriation vehicles: Knutson-Vandenberg (K-V) Trust Fund, the Salvage Sale Fund, the Brush Disposal Fund, the Timber Sales Pipeline Restoration Fund and stewardship contracting revenue.

Government agencies, taxpayer watchdog groups, and environmental organizations have repeatedly conducted studies that show that the Forest Service timber production program is not economically cost effective. Gorte (2004) submitted a report to congressional requestors stating “below-cost timber sales have been debated by Congress sporadically for more than two decades, but no policy to address the issue has been adopted legislatively or administratively” (para. 1). Gorte further explains that there is ongoing debate and lack of action to address annual net losses to taxpayers, environmental damages, and the economic impact of subsidized logging on timber companies operating on privately owned lands.

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The statement that “environmental resources are invaluable and therefore, cannot be adequately captured into an economic framework” is, in my view, invalid. On the contrary, because environmental resources are limited, it is even more important that rigorous economics are employed to quantify the full value of the resource and resulting product or service.

The National Oceanic and Atmospheric Administration (NOAA, n.d.) web site explains, “The economy and the environment are inextricably linked. The environment supplies the raw materials and energy that are used to produce the goods that we consume. Waste generated by this production process is either recycled or dumped back into the environment (“The Circular Flow,” para. 8). The economic laws of supply and demand explain the relationship between price and the quantity produced of a given product and how economic benefits are derived from the conversion of raw materials into products. As an example, as raw material prices increase due to diminishing natural resources, supply will decline. The perceived value of the good produced from this resource will determine whether consumers will be willing to pay the higher price. These shortages of the natural resource and the resulting high prices drives alternatives or substitutes to be identified and efforts to conserve or renew the resource where possible (Field, 2008, p. 31).

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The Forestry Service defines Oregon old growth forests as trees that are 250 years or older.  In 1992, the state of Oregon had 5 million acres of old growth forest, which represented 20% of the total forested land.  This is a decrease from 14.2 million acres of old growth forest in 1945, with the reduction due to urban expansion, agriculture and the construction of roads, reservoirs, and power lines.  (Bolsinger & Waddell, 1993). 

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