Can we invest in Green?
The Green movement is expanding like a wildfire across America and the world, and many companies are scrambling to jump into the bandwagon. I find it fascinating: the ?greens?, (or ?tree-huggers? or ?environmentalists?) have been out there for decades, warning us about the catastrophic damage our way of life was causing to the planet. Most people would see them as a small group of na?ve idealists (or radicals, in some cases) that made some good points, but that for the most part, grossly exaggerated the severity of the situation. As such, they were mocked and not taken very seriously. Now, they are not alone. Now, more and more people are becoming conscious about the environment and actively doing something about it. Green is quickly becoming mainstream.
What has changed? What made everyone suddenly pay attention? Most importantly perhaps, is this for real? Or is it just another fad like the carbs craze that will just fade away when consumers find another cause to embrace?
Believe it or not, the carbs craze and the green movement are related. They are expressions of the same set of values that are shaping society today. Paul Ray, in his book ?The Cultural Creatives: How 50 Million People Are Changing the World ?, coined the concept that has now been adopted to explain this set of values: LOHAS or Lifestyles of Health and Sustainability. LOHAS is described as ??a market segment focused on health and fitness, the environment, personal development, sustainable living, and social justice.? (http://www.lohas.com/). It sounds like a pretty hefty segment, doesn?t it? How is health and fitness related to social justice?? It all boils down to the pursuit of transcendental satisfaction. Inwardly driven consumers who look for holistic well-being: mind, body and soul. Consumers today demand more than the satisfaction of mere functional needs. A cup of coffee is not just a cup of coffee anymore: it must be an indulging, deeply satisfying sensorial experience that also makes them feel good because is healthy (cue in organic), allows them to help fellow human beings (enter Fair Trade) and fosters a pleasant, safe and clean environment they can enjoy (mix in sustainable and ecologically sound). Yeap, all that in a cup of coffee? or a shirt? or a car.
OK, but is this for real? There are a number of factors that tell me the underlying values behind this trend are not a short-term fad, but a new set of core principles and beliefs that are taking hold and truly dictating the way we run our lives. These principles are becoming the frame of reference in the decisions of what we buy. Some of the expressions may be temporary (like the carbs madness), but the values are here to stay. Some of those determining factors I referred to are:
Inward-driven mindset: Today?s world is exciting for the consumers. In a society of abundance, high living standards and instant connections, consumers can go beyond the satisfaction of immediate needs. The basic problems are taken care of, and consumers increasingly focus their attention and energy in satisfying what Maslow defined as higher-level needs, or, in their terms, higher pleasures. A high pleasure is one that transcends the mere functional and/or sensorial satisfaction, and involves emotional, intellectual or spiritual fulfillment. This pursuit of transcendental satisfaction means that the consumers nowadays are inwardly driven, that is, they are focused on fulfilling their inner motivations and aspirations, and are comfortable with putting their needs first rather than meeting others? expectations. By contrast -and as a way to complete the illustration of the concept-, a consumer in a situation where the main focus is addressing primary needs ?i.e. the post-war era mentioned in my previous posting- would be outwardly driven, because their satisfaction is heavily reliant on external factors ?i.e. peers, economy and environment-.
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Connected globalization: Globalization is not just an economic phenomenon, but a social and cultural one. We just can?t escape the world anymore. Technology and instant communications make us witnesses of the limitations and struggles of people around the world to survive and prosper. We can?t ignore it any more than we would ignore our next-door neighbor going through hard times. A good book on this topic is Tom Friedman?s ?The World Is Flat 3.0: A Brief History of the Twenty-first Century?
Scarcity: We are finally realizing that natural resources are truly limited, and that the competition for them is increasing. This is affecting us all through increased cost of living and eroded quality of life.
Global warming: ?- So, you were not kidding! It is for real, then??!!? Thank you, Mr. Gore.
Accessibility: I would dare to bet this is perhaps the most important factor in the change of attitude. People are doing something because now they can. Information, availability and cost make taking the right decisions easier and affordable.
Now that we?ve discussed the Green trend with some detail, let?s try to answer the pivotal question of this article: can we invest in Green? The answer is a categorical yes? but we have to be cautious: not everything that is green shines.
Everyone is jumping into the Green trend. Not everyone is doing it right though. Adopting ecologically friendly initiatives cannot be just a marketing plot. This is what is called ?green-washing? and consumers see right through it. A company needs to be sincere in its approach. It is a fundamental component of the authenticity consumers are looking for in their dealings with a company.
For a Green initiative to be successful -and therefore interesting as an investment opportunity-, we need to look for three key components: a) integrity; b) performance; and c) affordability. Let?s discuss these requirements:
Integrity: There are different levels of features a company can incorporate in a product in order to make it more eco-friendly. Some measures can be limited and represent just a small step in the right direction: for example, a change in packaging, using a little less plastic or incorporating recycled cardboard. Others can represent a radical and thorough re-design of a product or type of products, ensuring that everything in it significantly reduces its impact to the environment. All these steps are good: they all represent progress in the right direction. What is not right, though, is making just a small change and then try to hype it as major breakthrough in ecological responsibility. As indicated, consumers see right through these hypes and judge them as insincere attempts to prey on their genuine concerns. If as a company all you are doing is including 30% recycled post-consumer content in your cardboard boxes, just say it that way, and devote a little corner in you packaging to let consumers know; they will notice it and appreciate it. But don?t suddenly launch a full campaign touting that small change as the new ?eco-friendly pack? for your product and thump your chest about how concerned you are about the environment and how seriously you are taking your ecological responsibility. Nah? that does not cut it. It?s not authentic. On the other side of the spectrum, the more comprehensive is the change or the innovation, the more evidence consumers can see of a thought-through, purposefully designed product that comprehensively addresses their environmental concerns, then the stronger will be the manufacturer?s grounds to genuinely support the innovation in force and the higher the potential for consumers to pay attention and ultimately adopt the product. This thoroughness in the offer is what we need to look for in considering a potential investment opportunity.
Performance: There is one absolute truth with respect to Green. Consumers are willing to adopt products that are ecologically sound as long as those products perform as well or even better than conventional products. Period. As much as consumers want to do the right thing, they are not willing to wear soiled clothes, or eat tasteless food, or sacrifice aesthetics for the sake of the environment. The brands and products that promise to be environmentally friendly must also provide convincing arguments to make consumers believe they will perform well, and finally, they have to deliver on that promise.
Affordability: Consumers are willing to pay a little more for a more responsible product. But not a whole lot more. The closer the price of the eco-friendly product is to what the consumers are used to pay for that type of product, the higher it is the likelihood that consumers will switch to it. This is no surprise, though. Ultimately, we are playing with the good old value equation. Consumers are willing to pay more for products that have a greater value for them, that is, the ones that solve for a wider range of needs. What is the value of feeling good for fulfilling your responsibility with the planet? Hard to tell, but not that high in the big scheme of things. Yet, at a competitive price, it is a very relevant differentiator, and may tip the market share balance dramatically in favor of the eco-friendly contender. Therefore, look for competitive pricing when gauging a potential investment. The real volume and profit potential will be there.
A Company or product that meets this criteria will have a high likelihood to be successful, therefore profiling a sound investment opportunity.
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Seasoned Marketing executive with international experience in multinational companies. Insightful student of the consumers? values, aspirations and lifestyle. Passionate about smart marketing, investing and the cultural, political and technological shifts that shape society?s future. Keen observer of people and relentless challenger of the status quo.? Visit his blog at www.InvestByAds.com
Source: http://thegreenenergy4home.com/2011/09/03/can-we-invest-in-green/
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