Green Business is Good Business

Driving Scalable Business Growth

Champions are created when there is a new technology and markets are created: Ford, Intel, Microsoft, Google, Uber, Tesla - these are companies that built themselves on the success of new technologies. The new technologies and business models of the future are Green Business models and champions are being made today who understand the transition to Green Business.

There is a meaningful portion of customers for any business - both B2B and B2C - who desire to support businesses that are creating a positively-oriented world - often through reduced carbon emissions, sustainably sourced materials and responsibly produced products.

Green Business is both producing green products and generating additional business success through customer loyalty, market segmentation and increased profitability for the companies producing those green products and services.

Green Business examples abound in every industry and include: electric cars and trucks, renewable electricity, green banking, organic foods, sustainably-produced clothing, meat alternatives, recycled-content products, local-sourced products…the list is as long as there are industries.

Green Business can accomplish three main things:

1. Drive scalable and profitable growth for a company
2. Provide commercial alignment within an organization and without
3. Inspire talent in a marketplace which is increasingly based on meaning rather than money
   

Sustainability is a Cost Center

The old concept of sustainability in business has been around for a long time and might be familiar to many people when thinking about concepts such as “we plant one tree for each purchase,” or “we make a donation for each unit sold.” While these may be commendable activities they all suffer from the same downside: they are cost centers built into the price of a product or service. No one wants to scale a cost center.

The only business value of having planted a tree is that they believe the positive marketing impacts will outweigh the costs of planting that tree.

Cost centers are unfortunately not a scalable business model. Think about it - if planting one tree for every unit sold is profitable and the marketing story is successful, the business will never scale to planting 10 trees or planting 1000 trees per unit sold because the economics simply will not support that type of scaling. Few people would buy a $100 product where $99 is a donation to charity - they would simply buy the $1 product and make a donation of their choice and amount on their own time.

‍Green Business is a Growth Driver

A Green Product is a product that distinguishes itself from the other products in the market due to its environmental characteristics (or social benefits). Examples of Green Products and Services include fair trade produce, organic food, green bonds, renewable electricity, electric vehicles, renewable fuels, low-carbon cement, low-carbon steel, as some examples. When individuals or companies buy these products, they are likely doing so because they have an intrinsic motivation to align their business or personal lives to the environmental attributes of those products.

Here we notice that there will be a customer preference for these products with two general price segmentations:

• Core Group: Some people and companies are willing to pay more for Green Products and Services
• Expansion Group: Most, hopefully all, people and companies will choose Green Products and Services over their non-green alternatives, so long as the prices are similar

Assuming that for the most part, Green Products and Services come with a price premium (although this is not always the case), we see that the companies going into these areas can generate additional business value because they are:

• Competing in a smaller market with fewer participants - therefore able to gain market share among a certain subset of customers
• Able to charge a price premium and most likely generate additional profitability
• Gain stickiness and loyalty among their customers who identify with the mission of the product or service
  

Over time, the process of scaling these products and services will make them more efficient and therefore drive down the cost of production through economies of scale. It is easier to sell 100,000 electric cars at a profit than to sell 10. This process of improved Green Business processes will enable companies to increase their total share of market by driving down customer prices for Green Products and Services and accessing customers who have a desire to go green but have a slightly lower willingness to pay.

Because of the inherent nature of people preferring to go green, Green Products and Services have a fundamental advantage over others and as costs of going green are driven down over time, the companies who succeed in winning in the initial green markets will have a scalable long-term business advantage.

Green Business Generates Internal and External Alignment

Green Business is a set of strategic decisions that positions a company to capture this intrinsic demand for green products. Often Green products and services take the form of reduced greenhouse gas emissions (think electric cars vs. gasoline or diesel cars) but can also take many other forms such as organic foods, green banking, renewable energy-based solutions, and more.

It is usually more complicated to offer Green Business solutions than to operate with business as usual and therefore requires alignment about strategic investments of time, energy, focus and money from a company. This creates resource allocation discussion and alignment that are very healthy. Commercial alignment around Green Business helps to establish processes, products and systems that have an increased level of complexity while delivering a higher value to customers. In order to successfully deliver on the promise of Green Business, a company must build the systems and processes to enable their success.

For example, at sennder, we offer heavy duty transports with renewable diesel and electric trucks, which drastically reduce carbon emissions compared to fossil diesel (80%-100% reduction). It is significantly more complicated to operate heavy duty transports with electric trucks and with renewable diesel than to run with 100% fossil fuels like the rest of the markets. This Green Business implementation requires an ongoing investment of time, energy and concentration in order to establish the systems and capabilities to make these products run smoothly. For one example, we built the EARTH System, which automatically calculates the carbon emissions from every single transport we run based on truck type, fuel type (like EV, HVO, fossil diesel), distance and payload - without that system and many others, we could never manage the complexity of our Green Business. Now that we have this system in place, all employees and management have access to this data readily, which allows us to make informed decisions about the next stages of growth for our Green Business. This is the type of alignment that is generated by the implementation of Green Business.

Furthermore, the commercial alignment that takes place around Green Business is almost always based around new technologies - not old ones.  This means that companies who focus on implementing a Green Business strategy must include capabilities around the adoption of new technologies such as renewable energies, batteries, eMobility, biofuels, low-carbon cement, bioplastics, organic foods, green steel etc.

This forces an organization to be able to develop the muscle of marketing and selling new solutions and not just rely on what has worked in the past. This future-orientation of business procedures will ensure that employees are being trained in new technologies, that business processes are updated to match current and future best practice and that the commercial alignment around Green Business builds on itself over time.

‍Green Business Generates Inspired People

Let’s simply do a thought experiment: think about your group of friends and ask how many people would rather work at an electric car company making their current salary or get a 50% raise and work at a tobacco company. My experience says that there are armies of people who are knocking on the doors of companies with a Green Business purpose and very few clamoring to work at tobacco and oil companies.

Within traditional companies, the adoption of a Green Business strategy can be a transformational approach both for their business and for their people - keeping talented people motivated, engaged and excited about the implementation of scalable solutions that improve their business and the world.

Does Every Company Need a Chief Sustainability Officer (CSO)?

Each company, based on the level of their strategic implementation of Green Business will need to commit the appropriate resources to enable the correct level of support to drive success.

For companies who have Green Business as part of their entire corporate strategy, a CSO or C-Level responsible is likely to be a very important hire. This is when companies recognize that their business cannot be successful without the implementation of Green Business throughout the majority of their company. Signs that this could be the case include: investor and capital markets discussions including significant ESG and carbon emissions topics, multiple divisions of the company have meaningful Green Business already live, and that the future technology of the industry will be green oriented, such as the case with electric cars.

For companies in earlier stages of green development they will likely require first a focused approach to get started. A company committing to launching a first green product does not need a C-Level representative but should make sure to resource the product launch team with enough resources to ensure success: sales, marketing, purchasing etc. A company launching an entire Green Business line of products (think EVs within a car company) would want to have a senior leader who is experienced in product launch, company management and has the ability to deliver on the complex tasks related to a product line-launch. This would be similar to launching a new division of the company, and this should be staffed accordingly, most likely with C-Level support and buy-in if it is truly a strategic endeavor.

Going Green in the 2020s+

Most businesses, with few exceptions, will benefit their bottom lines by investing in Green Business. It is an opportunity to:

• Competing in a smaller market with fewer participants - therefore able to gain market share among a certain subset of customers
• Charge a price premium and most likely generate above-average profitability
• Gain stickiness and loyalty among their customers who identify with the mission of the product or service
  

Going Green is a way to ignite the employee base, drive profitable growth and make customers loyal for a long time. All principles of simply Good Business.

Simply put: Green Business is Good Business.

About our guest author: Graham Major-Ex

Graham Major-Ex studied economics in Vermont and Berlin and is Senior Director Green Business & eMobility at sennder. As the son of a climate scientist, he believes in sustainable entrepreneurship and is passionate about e-mobility, batteries, renewable energy and other climate solutions.