Before you start reading this project report, you will have to ask yourself a very important question: Do I care about the environment and am I willing to pay for ‘saving’ the environment? Well that is the fundamental idea of my small-scale project. Are people willing to pay more for a ‘green’ product? The green principle is one of the most discussed subjects in the world nowadays. Being green is more popular than ever. Political parties everywhere put green measurements on their electionsprogram. I am willing to find out if een green corporate image has an effect on customers. Are customers willing to pay more for green products? Do they chose for more expensive but green products when they can chose between a cheaper non-green product or a more expensive but green product? What are the advantages for an entrepeneur to produce his goods in a green way and what are the disadvantages? Does being green always means being more expensive?
To be able answering these questions In consequence I set up a smal-scale research project. I have started my research by reading the AS Level and A Level Business Studies book by Peter Stimpson and more particular Chapter 4 of the book about business objectives and strategies. In my report I wil talk about these strategies and objectives being green in a lot of firms and their influence on the market. Further I looked for the necessary information on the EBSCO host for academic articles. Like I thought before I begun my research there where quite a lot of hits on this subject. Green is ‘in’.
The method I used for this small-scale project is rather simple and limited. In the first place it is a small-scale research project so I didn’t do an actual interrogation by CEO’s orf CFO’s or amongst the customers theirselves. What I have done is what you could call a pre-research. It goes for the actual research and is actually just collecting and reading relevant literature about the particular case. I did the literature review, formulating research questions and point out some hypothesises. The results you can find in this work are therefore my hypothesises. To find the fundamental information I have searched in the Academic Search Elite database on EBSCO. Trought this database I found enough artciles for this project.
To give an answer on my first research question – Are people willing to pay more for green products – I found some interesting articles on EBSCO prooving my hypothesis.
The environment offers retailers the change to appeal to shoppers’ values and earn themselves a slightly thicker margin. TNS, a research firm, reported that a quarter of UK shoppers say they are prepared to pay more for goods that come from companies that pay employees a fair wage and protect the environment. (Harding 2007:16)
(Soruce: Harding, J (2007) ’The Green Rush’, News Statesman, 29 January 2007)
Like I expected customers are willing to pay more for more ethical correct produced goods. If you look at some tv or radiospots these days their are lots of them with a green colour, like for example the case of Michelin, they claim their tyres to live 20% longer than those of their most important competitors and have less rollresistance. Due to that cars equiped with Michelin-tyres consume less fuel. This is promoted in an amusing radio commercial with the emphasis on the green features of the tyre. The use of fuel and a longer lifetime for their tyres results in a lower CO2 emmision and so on. (Source: www.michelin.be) Also accdording to Lee Scott, Wal-Mart’s CEO, customers are willing to pay more for green goods than they are for other ones. “ I think their are stores, Whole Foods for example, where the greener the product is, the more people are willing to pay for it.” (Scott 2007) (Source: Newsmaker Q&A (2007) ‘Wal-Mart: On the side of the angels’, Business Week online, 30 March 2007)
On my second research question – What are the advantages and disadvantages for an entrepreneur to produce his goods in a green way? – I found several interesting answers, but their is one answer that covers them all. That one is making more profits.
“Adopting more environmentally-friendly approaches is not always an oveall cost. In fact, in many cases it can lead to better business outcomes” (Schaper c. 2006) Obviously there are many advantages linked with green business for enterprises. In first instance, many firms are able to reduce their material costs by lowering their pollution outputs and cutting back on the quantities of raw materials they use. Secondly, they are more likely to survive over a longer period. A third advantage is a greater consumer loyalty. Thanks to media green has become an amazingly popular phenomenon, which leads to a great market demand for eco-friendly products. Studies have shown that up to 20% of consumers may be willing to pay more for green goods or services like I already said before. At last, green business can motivate their employees. Such green firms are often seen as places that are more desirable to work in, wich increases their ability to recruit and retain the most skilled staff. (Source: Dr. Schaper, M. (c. 2006) ‘Being a green entrepreneur: does it make business sense?’, Businessdate, c. 2006)
Now I have discussed the advantages of green entrepreneurship I am wondering what the disadvantages are. Well disadvantges of eco-friendly production are difficult to find. Actually, I only found one relevant disadvantage that covers them all: higher working costs. However, this is not directly a disadvantage. Like I said before being green does not always mean making more costs, on the contrary. Green business usually leads to lower working costs. Only in the beginning, when a company starts working green, these costs could be higher than revenues.
My third and last research question – Does being green always means being more expensive? – is almost entirely answered already. Environmental pressures are not necessarily about spending money to keep on the right side of the legislation and not making any extra profit. By anticipating changes in customer practices and environmental legislation investments now being considered by companies will stay profitable in the long term, and companies won’t run into the problem of continually fixing up existing processes to comply with progressively tightening legislation
(Clift c. 1994) (Soruce: Ward, M. (1994) ‘Life cycle: the preferred environmentall strategy’, Chemcial week, 27 april 1994)
This quote of Mike Ward says that it couls be that investing in environmental-friendly techniques and productionsystems may cost lots of money now and can influence the total business benefits but on the long run these investments will be very profitable and lead to a more stable and profitable company.
Analysts are not as interested in pollution prevention and waste reduction as they are in yield improvement, sales growth cost management, and cash and earnings generation as a result of improved environmental management strategies. The $ 1.5 billion/year that DuPont spends on environmental management is only a fraction of the company’s $ 40 billion/year revenues. (Stevens R. 1996)
(Source: Sissell, K. (1996) ‘Merging business and environment’, Chemical Week, vol. 158, Issue 38)
Like Stevens says, companies do not act like this way without their own proper reasons.Obviously making more profit is the most important reason for turning the company in a green direction. Although many companies are investing a lot in green technology their budgets for environmental management still ammount only a fraction of the total business revenues says Stevens.
During my research, I found some articles proving my last hypothesis. There must be a deeper reason than just take care of the environment for enterprises turning green suddingly. I can prove this with the next article:
Their are two dirty secrets and one redeeming truth behind British business’s sudden eagerness to kick off it’s brogues and slip into a pair of Birkenstocks. The firts is that this modern ‘green rush’ is motivated by the same force that drove men to the Klondike. In the long term, it may be aubout saving the planet. Meanwhile, it’s about turning a profit. More precisely, it’s about marketing. (Harding 2007)
(Soruce: Harding, J (2007) ’The Green Rush’, News Statesman, 29 January 2007)
Also the article of Sissell where Stevens says analysts are more interested in making more profits than they are in pollution prevention proves this statement.
We can easely find some examples of comapnies turning suddenly green. Their is for example the case of Birtish Petroleum changing it’s corporate logo from the familiar crest to that of a flower resembling a sunflower, trying to repositioning the business towards a more caring and environmentally concerned organisation. (Source: Stimpson, P (2005) AS Level and A Level Business Studies (5th printing), Cambridge University Press, Cambridge, Chapter 4) Another example out of a rather unexpected corner is the example of Dayton, Ohio. William Hill replaced the old setup with thin clients for 60% of the staff and PCs for the rest, stratgically positioned for optimum use. He opted for this method for technological reason on one hand, but for cost reasons on the other hand. He saw a corresponding drop in how much energy his organisation uses. Even so, the real impulse for green computing, also called sustainable computing, is the green cash that eco-friendly decisions can save. “There’s always a company out there doing something to be eco-friendly, but for most companies, it has to make money sense” (Boliolo 2006) (Source: Pratt, M. (2006) ‘It’s not easy being green’, Computerworld, 20 March 2006)
Historically, corparations thougt keeping an eye on the environment also meant taking an eye off shareholders. That has changed dramatically in the past few years. Now there are reminders everywhere that a growing number of companies see the interest of investors and those of the environment as closely aligned. (Source: Thomson, TS. (2006) ‘Green is Good for Business’, Business Week, 5 August 2006)
To end my small-project report let me point out the conclusions about my findings. I may conclude that 25% of the (British) people are willing to pay more for eco-friendly products than for other not eco-friendly products. That is quite a large group, but probably this group will still grow havely following the general trends.
Further green entrepreneurship has many advantages such as a reduction of their material costs, a longer change to survive as firm, a greater consumer loyalty and it is easier to motivate your staff as a green entrepreneur. The disadvantages of green production can be summarised in one general idea: higher production costs on short-term, but on the long run green companies will be more competitive than non-green ones.
Thirdly it is not alway more expensive being green than not being it. Being environmental-friendly almost always leads to making more profits due to higher profit margins – green sells and stands good – and lower production costs in the end.
An astonighing finding is the underlying reason for companies to become green. It may be about saving the environment on theoutside, but underneath it is just about making more profits.
Although all companies want to create a green corporate image and culture they still invest too less in green technology in comparisson to their total sales revenues. Businesses have to raise their budgets for green management if they want to stay competetive in the future.
The sudden green revolution can be partially assigned to media. As long as green stays popular – and on this moment it seems that green will stay popular, maybe even more popular than it already is, for a very long period – business will find new manners to create some competitive advantages towards other competitors. Businesses will keep (ab)using the green hype as long as it will stay profitable for them. But in the end, thanks to those greater changes for making (more) profits, business will trun green and as a result nature will improve. The futere, in my eyes, looks bright for nature.
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Harding, J (2007) ’The Green Rush’, News Statesman, 29 January 2007.
Michelin autobandenfabrikant 2007.
Newsmaker Q&A (2007) ‘Wal-Mart: On the side of the angels’, Business Week online, 30 March 2007.
Pratt, M (2006) ‘It’s not easy being green’, Computerworld, 20 March 2006.
Schaper, M. (c. 2006) ‘Being a green entrepreneur: does it make business sense?’, Businessdate, c. 2006.
Sissell, K. (1996) ‘Merging business and environment’, Chemical Week, vol. 158, Issue 38.
Stimpson, P (2005) AS Level and A Level Business Studies (5th printing), Cambridge University Press, Cambridge, Chapter 4.
Thomson, TS. (2006) ‘Green is Good for Business’, Business Week, 5 August 2006.
Ward, M. (1994) ‘Life cycle: the preferred environmentall strategy’, Chemcial week, 27 april 1994.