By Michael Gurau
As a venture capital investor in northern New England, I've made several investments in companies that could be called green or sustainable. Three are food companies that use only natural ingredients, grown without modifiers (e.g., bovine growth hormones) or genetic alteration. A fourth is a natural skin care company (ingredients include only food, plants and minerals); the fifth, a "clean-tech” company whose advanced materials address energy consumption.
The question is: Are these companies truly green or sustainable?
With no standards or data, there is limited consensus on what constitutes "sustainable” and/or "green.” The most general description of a green/sustainable business is a business that attends to a broader variety of stakeholders (employees, environment, communities) than solely shareholders. The term sustainable suggests that the company, in the course of its activities in the marketplace, is at least neutral to the environment (air, water, land) and nurturing toward its employees.
Each industry sector would have its own definition of green/sustainable, according to its products (or services) and business model and according to its commitment level to pursue all possible best practices. A paper mill's environmental issues are different than those of a software company or a retail store. Even within a given industry, there are few agreed-upon standards for what constitutes green or sustainable behavior.
Historically, the image of a "green” company in the marketplace was one that was (a) run by liberal ex-hippies and (b) unlike their capitalistic brethren, not focused exclusively on financial measures of success (for example, an equal or greater focus on the environment, the community and/or the employees). Often, the image matched the behavior – witness Ben & Jerry's. That image is transforming, with mainstream companies jumping on the bandwagon.
Two of the world's largest U.S. corporations have recently made moves (and marketing efforts) to implement certain green practices, such as renewable energy. General Electric, excoriated some decades ago for dumping chemicals in the Hudson, can now be found on the cover of Forbes touting its movement to embrace green products and practices. Wal-Mart is also undergoing a green/sustainable movement in its operating and sourcing processes; like GE, Wal-Mart has had its share of critics for a variety of employment and business practices.
What matters most is the intention and commitment of a company's management and owners. It may be impractical (for financial or other reasons) to go "whole hog” in converting a company from its current practices to the ideal green or sustainable version. Smaller companies are more challenged by capital than are their larger competitors – it often requires investment to make significant changes in a company's operations. Regardless, if a senior team is committed to moving toward a better set of practices and policies, even modest change can make a big difference.
The starting point of a green or sustainable practice tends to focus on energy consumption (addressing lighting, HVAC and power systems; seeking renewable energy options). Additional low-hanging fruit (easy, inexpensive to implement) can be found in recycling and conservation, such as turning off lights and computer screens when not in use or reducing paper consumption.
Beyond these practices (which every company in every industry sector can undertake), companies' actions can vary widely from sector to sector. For example, Shaw Industries completely re-invented its business model from selling carpets to customers (products which, at the end of their useful lives, end up in landfills) to a supplier-centered, recurring-revenue model to make carpet squares that can be replaced and recycled. This move has not only improved its business model (creating an annuity, coupled with the benefit of an ongoing relationship with its customers) but has dramatically reduced its cost of operation and environment footprint – a win-win situation.
Whether you do the simple basics or the wholesale extreme makeover (as Shaw did), you should take advantage of the marketing boost that your actions will create. Assuming that you are serious about your commitment to greening, you'll find a receptive consumer group that values your changes. The segment of the population for whom these (and related) "values” are important has been large and growing for years. Paul Ray described a demographic group known as LOHAS (Lifestyles of Health and Sustainability) consumers – a market of more than 80 million well-educated, relatively high-income individuals. Their buying decisions are directed toward natural and organic foods, alternative energy providers, and – more generally – companies that possess an enlightened capitalism.
Contrary to the assumption that it costs more to be green, you can actually reduce your cost of operation (lighting and recycling) while at the same time increase the quality of your company's culture by creating an expression of values that can attract and retain high-quality employees. Whole Foods Market, once the bastion of idealistic '60s types, is now a Fortune 500 company, ranked as one of the Best Companies to Work For (given its culture), according to a leading business magazine.
Beyond public players, small companies are reaping the rewards of this trend. Venture capital investment is flocking to the clean-tech sector; mergers-and-acquisition activity is at an all-time high in many of the LOHAS sectors.
So where might you start?
In closing, remember this: Sustainability is no longer the domain of liberal hippies. It's now a good business practice that can increase your revenue, decrease your operating costs, improve your market image and create a desirable, values-centered workplace.
Michael Gurau is president of CEI Community Ventures (website), a venture capital fund targeting investments in Vermont, New Hampshire and Maine. He can be reached at his email.
Last modified August 17 2007 09:54 AM
