Some Companies Fail to Assess
Dark Side of Going 'Green'

Friday, April 18, 2008

by Jon Entine and Rick Miller

What's the hottest topic in business these days? If marketing campaigns and blogging are fair measures, it's the explosion of interest in "green" issues. There are green homes, green beauty care and green investing.

Earth Day is upon us, and corporate sustainability programs are launching faster than you can say "greenwash." But businesses need to have a sound understanding of not just the rewards, but the risks of going green.

Entering the sustainable arena can bring direct benefits. Procter & Gamble Co. estimates it will save billions in the next decade by expanding its sustainability initiatives in manufacturing and transportation. But many green benefits are harder to measure, such as attracting better employees, stimulating innovation and improving customer relationships.

But before going green, consider this:
In the crosshairs vs. Under the radar. Launching green marketing campaigns may generate publicity, but that's not always good. If your corporation has been flying under the green radar, advocacy groups will take notice when you begin touting your new environmentally friendly pet food. They either view such efforts as too little, too late, or they become hypercritical of a corporation's other practices, which leads to the next point.

If you go green, go green. There's no halfway about it. If you launch a green product or service, someone will start looking into your manufacturing processes, waste management, subcontractors, even unrelated areas such as the treatment of factory workers.

British Petroleum fell victim to this after renaming itself BP in 2002, coining the glib nickname "Beyond Petroleum" and promoting itself as a leader in alternative energy. Its executives began attending ethics conferences and cozying up to advocacy groups.

That blew up in BP's face, literally, after an explosion in its Texas refinery triggered a series of investigations that exposed BP as an ethical problem child. Its green initiatives, once touted as forward-thinking, were suddenly dismissed as brazen greenwashing. It's a fact of business that programs and products are often shelved due to economic factors, changing legislation and new competitors. But once you go green, there's no going back.

Consider Ford Motor. After taking over as CEO in 2001, William Ford Jr. marked the automaker's embrace of environmentalism with a $2 billion redesign of its iconic River Rouge plant.

Ford started developing hybrid technology and it worked, for a time. A global opinion survey hailed Ford as the industry's environmental leader.

But faced with the low profits from flexible-fuel cars and draining revenue to support sustainable efforts, Ford was forced to scale back green initiatives to preserve jobs - and was promptly crucified in the press.

What are the lessons here? Companies need to carefully assess their capabilities and limits, anticipate marketplace changes, and take a hard look at the competitive landscape. Only then can they soberly assess the risks and rewards of going green.

Green marketing offers the opportunity to differentiate products in a commodity marketplace and create "integrity premiums" that increase profit margins. But if the media and advocacy groups believe that integrity is a mere marketing strategy, it can open the company up to harsh scrutiny.

Jon Entine is scholar-in-residence at Miami University (Ohio) and adjunct fellow with the American Enterprise Institute in Washington, DC. Jon is also an award-winning freelance journalist. Rick Miller is president of Northlich public relations and Jon Entine is a senior counselor at the American Enterprise Institute and Northlich.