Greening Consumption

Marketing_green_jpegOriginally posted Nov. 14, 2007
by David Wigder, Marketing Green

An Interview with Michel Gelobter, Founder and EVP of Cooler

Long-time environmental activist Paul Hawkins once described “green consumerism” as an oxymoron. Indeed, “green consumption” makes Wikipedia’s “List of Genuine Oxymora”. The
reason: consumption by its very nature has an impact on the environment
– to some degree or another – and therefore, is hard to call truly
green.
 



Yet,
short of reducing consumption, many consumers, manufacturers and
retailers are focusing on greener consumption – a term which implies
shifting to products and services that have a lower environmental
impact, though in many cases, not specifying by how much.

 

Today, there are positive signs that demand for greener products is increasing sharply. In fact, the Natural Marketing Institute reports that the $200+ billion Lifestyles of Health and Sustainability (LOHAS) market is expected to double by 2010 and quadruple by 2015.

There are many online retailers
and content sites that offer green products directly or simply help
consumers navigate the market. They include three primary categories:

Green online retailers: Many online retailers have emerged that are dedicated to serving the green market including Buy Green, Earth Friendly Goods, Eco Choices, EcoWise, Gaiam, Green Feet, Green Home, Green Shop (UK), Green Shopper, Green Shopping (UK), Green Store, Indigenous, Natural Collection (UK), Nigel’s Eco Store (UK), Rogue Natural Living, Shop Green (PriceGrabber), The Green Office and VivaTerra among others.

General online retailers. Several general merchandisers and portals have embedded a green section into their existing offering, including Amazon and MSN among others.

Green directories: Finally, other online sites have positioned themselves as green directories, product search engines and shopping guides. Sites include EcoBusinessLink, EcoMall, Evolve Shopping, Green Deals Daily, Great Green Goods (blog), Green People, Green Providers Directory (UK), Green Shopping Guide (UK), National Green Pages, Pristine Planet, and TheFindGreen among others.

Yet, despite this growth rate,
LOHAS spending is still a drop in the budget when it comes to US
consumer buying power – estimated at more that $10 trillion in 2007. As
such, the greater challenge is to shift spending on mainstream products
to greener ones and do so in a way that also provides the incentive for
mainstream manufacturers to reduce the carbon footprint of their
products over time.

There are many ways to motivate the purchase of greener products across the purchase funnel. Here are a few examples:

Make existing products greener. Product companies have the opportunity to green their products – including sourcing, use and disposal. Greening a product in the first place, of course, is the best way to reduce its environmental footprint. Companies
are motivated to do so for a variety of reasons including increased
consumer demand, pressure from partners across the supply chain
and risk to the brand simply by being complacent.

One of the best examples is Wal-Mart. For example, it has identified $10 billion in potential savings
simply by decreasing product packaging.  It has also required its
suppliers to reduce the environmental impact of the products that it
sells (eg, more concentrated laundry detergent formulas reduce the use
of energy for transportation) while
expanding the market for others (eg, by selling fluorescent bulbs at lower cost under its own private label).

Due perhaps, in part, to Wal-Mart’s pressure and lead, Procter & Gamble has responded with a commitment to sell $20 billion worth of greener products over the next five years. It has also joined the Supply Chain Leadership Coalition,
an industry organization that pressures suppliers to publish
information on carbon emissions, to help it reduce the impact of its
suppliers as well.

 

Motivate greener choices. Product companies and retailers can influence behavior by interjecting green as a considered attribute in the purchase decision. There
are several ways to do so including the use of eco-labels, ratings,
promotional benefits or green rewards tied to a loyalty program.
Eco-labels
and ratings impact consumer purchase decisions by providing relevant
environmental information at the point of sale – and indirectly
motivate greener product design and manufacturing decisions by making
green a differentiating attribute.

 

Today, eco-labels are actively being used or under consideration by manufacturers, (eg, HP, Dell), retailer (eg, Wal-Mart, Home Depot) and government regulators. Moreover, several organizations have taken the lead in developing green rating systems including Green Seal, Consumer Report’s Green Choices, the US EPA’s Energy Star and independent Better World Shopper.

 

Promotional benefits and rewards can also influence consumer purchase behavior. Marketing Green explores both of these levers in two previous blog entries. (“Green Labels as Drivers of Consumption and Loyalty Programs”, March 19, 2007; “Testing Green Promotional Benefits to Drive Acquisition”, September 16, 2007).

 

Offset environment impact. Today,
more and more companies and consumers are turning to carbon offsets
(and renewable energy credits or RECs) to mitigate the environmental
impact of products manufactured or purchased. While the
offset mechanism may vary – from purchasing allowances on a carbon
exchange to investing in renewable energy projects – the effect is
similar: offsets reduce the carbon impact of consumption by effectively
removing the equivalent amount from the environment elsewhere.

 

While carbon offsets are not without controversy, they can be a powerful way to mitigate the impact of consumption. There are several ways that carbon offsets are purchased today:

 

First, carbon offsets can be voluntary. Retailers
can provide options to do so – as most airline sites do today, for
example – or consumers can purchase them directly from many brokers
including Atmosfair (Germany) Better World Club, Carbon Fund, Carbon Leaf (UK), Carbon Zero (Canada), Climate Care, Climate Counter, Climate Friendly, ClimatMundi, CO2 Balance, My Climate, Native Energy, Offset Carbon Company (UK), Offsetters (Canada), Solar Electric Light Fund, Sustainable Travel International, Target Neutral (UK), Terrapass, The Carbon Neutral Company, TreeBanking, and Uniglobe Travel among others.

Typically, retailers play no more
than a passive role in facilitating carbon offset purchases by
providing the mechanism to do so on their site. In many cases, it is no more than an additional option available during the check-out process. The case of Virgin Atlantic is different, however; in response to low voluntary purchases, Virgin is now actively selling carbon offsets to customers while in-flight.

Second,
carbon offsets can be structured into the transaction itself – treated
as a promotional expense, embedded in the purchase price or covered as
part of the transaction fee. 
Companies as diverse as insurance giant Allstate, UK’s Silver Jet and Fiji Water are making their products carbon natural (or even carbon negative) as a way to differentiate their offering. In
this case the product company is absorbing the cost directly or raising
its price to cover the added expense. (Interestingly, Allstate is
offering to offset the carbon emissions from the automobiles that it
insures).

 

Alternatively, credit card transaction fees can be used to offset carbon emissions as well. Recently, issuers including Barclays, GE, MetaBank, Triodos Bank and Wells Fargo have launched green cards while Bank of America and upstart Brighter Planet have announced their intentions to do so. These
cards divert a portion of their fees to mitigate the impact of the
products purchased through a donation to a non-profit organization or
direct purchase of carbon offsets.

 

Such card programs have advantages and disadvantages. Given
their reach, credit cards can green a significant amount of consumer
spending simply by providing the incentive to consumers to make their
purchases on a card with green benefits. Yet, to do so,
cardholders must trade in personal benefits earned from traditional
reward programs (eg, airline miles) for ones that provide more societal
benefits.

 

Alternatively,
a promising, new retail model has emerged that divert a portion of
revenues earned through affiliate marketing programs to pay to offset
the carbon from products purchased. In doing so, sites such as Cooler and Earth Moment
enable consumers to purchase products from traditional retailers while
offsetting the carbon impact of these purchase in the process.  Such
a model is compelling to consumers as, from their perspective, the cost
of the carbon offset is absorbed by the retailer and they can green
their purchases while using their existing credit cards.

 

While
numerous companies are involved in carbon offsetting, Cooler has
clearly been one of the most innovative players in the space.
Distributing 8 million products from 400 retailers, Cooler provides
consumers with the largest selection of products that can be purchased
with an embedded carbon offset.

 

Recently, I had the opportunity of sitting down with Michel Gelobter, Founder and Executive Vice-President at Cooler. We
discussed the recent launch of his company, its B2B and B2C offerings
and the challenges that we all face in greening consumption. Here are his words:

Marketing Green: By
offsetting the carbon impact of products purchased, Climate Cooler has
the potential to change the game in the online retail space. What was the impetus for starting the company?

Cooler:  We wanted to find ways to create the momentum in the consumer space for taking action on climate change. That exploration led to what has now become Cooler. Cooler
is distinguished by being the first site where you can purchase
practically anything you can buy on the Internet – except for maybe a
plane ticket – in a way that eliminates the global warming impact
through the point of sale. 

Our mission as a company is to connect every purchase with a solution for global warming. We do that with three offerings. The
first is that we use the country’s only product and service carbon
calculator that was developed jointly by Carnegie Mellon and Berkeley. 

MG: Does it calculate the entire impact of the product, that is, how it is manufactured, used and disposed of?

C: It is just to the point of sale: how it is manufactured and transported. But,
the innovative piece is that it adds the retail component which ranges
usually from 20-30% of a product’s carbon footprint.

MG: How about shipping?

C: Yeah, it includes that too. But [the environmental impact] tends to be much lower which can be a surprise to our customer base.

The second piece of this offering
is our basket of carbon offsets or pollution prevention and renewable
investments that have been unanimously approved by the world’s best
environmental organizations. And finally, we set out to create a basis on which consumers could take action in a way that was trusted and transparent. And that is what Cooler is about. 

We also give people a way to track their impact and start thinking about carbon budgeting. We already have the My Impact page which tells [consumers] what they are emitting. After all, 40% of the average American’s carbon footprint is in consumption of goods and services. 

MG: So do you view part of the value that you bring is educating consumers on their true environmental impact?

C: In the consumer space, absolutely. 

The bigger piece of the business is really the B2B offering. Companies
started coming to us and saying: “How can I put your works into my
gears so when people come to my website – or bricks and mortar store –
they can get a carbon neutral product.”

Our B2B offering is
called Cooler Compete which is basically a way for companies to know,
offset and reduce the global warming impact of the products that they
sell. And the difference is that those companies are going to make a choice about who pays for [the offset].  We think that most of our business customers are going to absorb the costs of carbon neutrality.

MG: What services are you providing in the B2B space?

C: First, we are providing the [carbon emission] calculation. Our calculator is really revolutionary. We are using a method that is, on average, more accurate [than existing calculators]. It
is based on an approach called economic input/output analysis, whereby
we calculate the footprint of a product directly through the economy. Instead
of looking at a shoe and saying “where did that leather come from?”, we
say “how much of the leather industry did this company use?”. 

Peer-reviewed studies show that
this method is, on average, more [inclusive] from an environmental
perspective because it includes more of the carbon footprint than
[other] analysis.

The second service is really a reduction service, that is, a list of the top contributors to your carbon impact. That is usually enough to motivate companies to bench mark against those numbers and reduce their impact. 

Finally, companies buy offsets with us. We don’t actually make any profit from our offsets – we pass the costs directly through. But our basket of offsets is very high quality. 

MG: You are ambitious in trying to serve two different audiences with very distinct offerings.

C: Yes, but the website in some sense can be seen as a technology showcase. The web site gives [companies] the sense like “Oh, this is what it could look like.”  So that is why the website is really critical. 

MG: In your B2C work, who is the typical customer that you are targeting?

C: We are partnering with
environmental organizations so our early go-to-market strategy is
[targeting] the members of our partner organizations. Now we are trying to move from the environmental group members to more of the LOHAS crowd. Over time, we will target a broader and broader swath of the American public as more people become conscious of this issue.

MG: How important is viral to your marketing strategy? 

C: Viral would be great. Right now, we are honing our technology platform to make that more potent. For example, when you tell a friend, we are able to report back to you how much your friends offset. We can also have people compete to see who is more carbon neutral. 

MG: How does the B2C business model work? Is it an affiliate model?

C: It is. On average, if we refer someone [to an online retailer that subsequently makes a purchase], we get 6% [of the total sale]. The cost of the [carbon] offset ranges from 0.7 to 1.5% and we keep the rest for the business.

MG: Are there plans to offset
carbon emissions from the use and disposal of the products that you
sell? CC: We do not have any plans to address that now. MG: How
receptive are consumers today to carbon offsets?

C: I think we are easily 10 to 20 years out from having a stable, trustworthy, well-defined commodity market for offsets. One
of the reasons we partnered with the environmental groups is to give
consumers assurances that at any moment in time, the best decisions are
being made. 

MG: Do you think offsets take on more meaning when the US market moves from a voluntary to a mandated cap and trade system?

C: No. I think personally that people need to take action now. Our offsets are additional so they are already above and beyond everything done today. We follow three criteria that are summarized as follows: real, additional and positive.

“Real” means that we are taking carbon out of the atmosphere when you buy something. We are not just meeting the next increment of energy demand with cleaner energy. We’re actually capturing or reducing an emission somewhere else in the world, hopefully in the United States. 

“Additional” means that this would not have happened where it not for your purchase. And “positive” means doing more for the world than just helping the climate. It means helping to create jobs or generate more environmental protection or biodiversity.

It is going to be a long time before governments are actually cutting emissions by 80%; by 2050, unfortunately. Until
that time and maybe well beyond it, we want to be the place where
consumers can know that by acting their doing their part above and
beyond what government is doing. 

MG: It is conceivable that your
success could provide incentive for others to enter the market and that
one day, offsets will simply be a threshold to compete?

C: Of course, we would love it as a company and a social event if this became a must have. And we are going to do our best to make sure that happens. That is one of the reasons why we started the company.

MG: Will this actually help solve global warming?  

C: I absolutely think it’s a huge part of the solution. We can not be paralyzed by the fact that shopping and consumption is part of the problem. We have to go in and fix it. People have been trading goods for money for a long time and the system’s broken. And
climate change is actually a huge archetype for a wide range of ways to
reknit the fabric of shopping with the fabric of community and earth
care.
 

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