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HA Joo Hyun

Green Stress: Opportunity or Crisis?

HA Joo Hyun

June 29, 2011

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In this era of increasingly pervasive environmental awareness, companies are coming under fire from consumers who are applying stricter standards than even government regulators. The pressure is leading to higher operating costs, restrictions and confrontations, including lawsuits. Call it "green stress," the newest corporate risk.

Even if companies are not directly responsible, they can easily get caught up in the environment-related controversy. For example, Apple received criticism from around the world due to environmental violations committed by a Chinese subcontractor, and Starbucks was blasted for using too many take-out cups. And despite their efforts to use eco-friendly raw materials, Unilever and Kimberly-Clark were berated because their suppliers were linked to destruction of ancient forest resources. These two companies finally extricated themselves by announcing plans to replace all of their raw materials with sustainable ones.

It has become all too clear that it is not enough to "do well" on environmental concerns. A heightened sensitivity to environmental issues and social networking through the Internet has increased consumers' green power, creating space for those with stricter and more unforgiving views on corporate behavior to have a loud voice.

According to the US Environmental Protection Agency, the number of lawsuits demanding environmental reforms by companies continuously increased from 2006 to 2010. Also, according to a consumer survey by Cone, a US strategy and communications agency, 44% responded that they would "boycott a company's product," and 32% said that they would participate in "email, phone, or employee communications" activities in order to influence corporate social and environmental practices. Case in point is Nestle, which received 200,000 emails from outraged consumers after environmental advocacy group Greenpeace accused the food giant of using palm oil from suppliers who are destroying Indonesia's rain forests.

Another factor aggravating green stress is that the incentives for eco-friendly companies are decreasing as the promotion of a company's environmental performance becomes common practice. Advertisements emphasizing "eco-friendliness" broadcast on the world's major media outlets have increased from 2% in the late 1980s to over 10 % in 2008. And two-thirds of the baby products in the US claim to be toxic-free. On the other hand, declaring eco-friendliness can backfire if a company's claim cannot stand up to public scrutiny. For example, SC Johnson & Son, the US maker of household cleaning products, was hit with a consumer lawsuit claiming deceptive marketing after it put "Greenlist" on the labels of some of its products without proper testing.

While green stress is becoming a bigger issue for most companies, some have overcome the problem and are even using it as a growth opportunity. European apparel companies H&M and Zegna launched a collection using organic cotton and regenerated fiber made from waste, changing their brand image from "cheap-chic" to "eco-chic," and from "luxury" to "eco-luxury." Starbucks secured the image of an "environmentally and socially responsible" company via a partnership with a coffee bean farm, providing fair trade coffee and tips on organic farming. Through such methods these companies were successful in adding desirable eco-friendliness to their brand image.

There are also companies that offer products that reduce the impact on the environment during consumption and disposal, which aligns with green consumption. Energy efficient lighting, washing machines that reduce the need for water and detergent with the use of bubbles, printers that reuse paper, biodegradable IT devices and detergents that dissolve in cold water and easily wash off are just some examples. Unilever and Starbucks recently announced goals to improve their environmental performance through the sale of environmentally-improved products. The innovation of such products will help secure more customers as they reduce consumers' concerns that they are damaging the environment and also offer an opportunity to participate in activities to protect the environment.

Finally, there are companies that have commercialized their know-how and technology for environmental reform. SAP used its experience to develop and sell analysis software that helps companies monitor their carbon footprint and increase energy efficiency. Safechem, a subsidiary of Dow Chemical, not only sells chemicals but also is engaged in the chemicals service industry, which manages the whole process from use and storage to disposal. Both industries have high potential for growth and broader customer base as green stress becomes a bigger issue for corporate decision makers.

Obviously green stress can be a crisis for companies that have a negative view of environmental reforms. But even those who are too dependent on promoting their eco-friendliness may become too overconfident and not match deeds enough to words. However, for those able to find profitability and competitiveness in eco-friendliness, green stress presents a new growth opportunity. As green stress increases, the winners will be companies that recognize the growth potential they could harness if they embrace low carbon energy, clean technology, as well as the eco-friendly products and material industries.

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