Environmental Issues in Business 201

1. Environmental Issues in Business 201 Environmental Issues in Business 201

3. Lecture 8 Green Marketing • At the end of this lecture you will be able to: • explain the role of green marketing in the sustainability context; • describe differences between green marketing and conventional marketing approaches; • describe the strengths and weaknesses of green marketing; and • identify key elements of effective green marketing. Environmental Issues in Business 201

4. Overview Environmental Issues in Business 201 • The marketing paradox • How do marketing and sustainability fit together? • Schism in the marketing discipline • Genuinely green vs greenwashing • Greener vs sustainable marketing • The problem of marketing “greenness” • How green can be too green • Consumers as green marketing obstacles • Designing a green marketing strategy • The dos and don’ts • Examples • The good, bad and ugly

5. How well does marketing align with the goals of sustainable development? Environmental Issues in Business 201

6. How Responsible is Marketing? The ‘more is better maxim’ of marketing seems to violate sustainability principles and arguably undermines efforts to mainstream more ethical and ecologically sensitive consumer behaviour The paradox of marketing: • Marketing is the driving force behind unsustainable, (un-)economic growth and individual lifestyles • Contributes to over-consumption • Complicit in the promotion of unsustainable/unethical values and behaviours Environmental Issues in Business 201

7. Marketing: A Tool for Change? Environmental Issues in Business 201 But can also be used as a tool for social change: • Altering consumption patterns for society’s long-term best interests • Educate and raise awareness • Change values, life-styles and consumer choice • Help challenge the status quo

8. Green Marketing Environmental Issues in Business 201 • Promotion of products or services by employing environmental claims either about their attributes or about the systems, policies and processes of the firms that manufacture or sell them (Prakash 2002: 285) • Channelling of consumer demand towards environmentally less problematic areas of consumption (Hockerts 2003)

9. Target Areas for Green Marketing Source: Prakash (2002) • Product attributes • Value-addition processes • Management systems • Associated Causes Environmental Issues in Business 201

10. How Sustainable is Green Marketing? Environmental Issues in Business 201 • Green marketing can help: • Aid reduction of impacts • Provide alternative product choices • Promote ‘better’ practices in industry • Raise awareness • Educate consumers

11. Limitations of Green Marketing Environmental Issues in Business 201 • Green marketing is being criticised for: • not reducing levels of consumption • being sales orientated • underpinning and being underpinned by profit motive • building façade of environmental improvement

12. Sustainable Marketing?(Social or critical marketing) Source: Peattie & Crane (2005) • Sustainability transition may require: • Promotion of ‘less being more’ • Reductions in aggregate levels of consumption • Acceptance of having to take a step back • Social transformation towards more sustainable values ¾ of the world population have not even started to consume the way we do though India, China and Brazil have begun to do so. Environmental Issues in Business 201

13. Is ‘Less’ Sexy and Does it Sell? Environmental Issues in Business 201 • Can we promote what will be perceived as: • deprivation • anti-development • moralistic • fatalistic • pessimistic • a step backwards? • Social and critical marketers believe that we have no option but to try (ultimate challenge)

14. What are the Chances for Sustainable Marketing? “The American lifestyle is not negotiable” Former US President George Bush (1992) Environmental Issues in Business 201

15. At the same time: Environmental Issues in Business 201 • In the UK, in 2012, £ 2.4 billion were spent on unwanted Christmas presents, while Australians spend $750 million annually on dud Christmas presents (SMH 29.12.2011) • Americans spend about $35 billion a year on weight-loss products (http://www.cbsnews.com) • We spent more money each year on professional de-cluttering services (Nelson et al. 2007) • There is a global rise in freecycling (Nelson et al. 2007)\ In other words, there is scope for consuming less

16. Key Issues in Green Marketing Environmental Issues in Business 201 • Being genuine • If companies don’t walk their talk, consumers won’t believe them • Companies need to verify and substantiate their claims to prevent scepticism and cynicism • Measuring & understanding the true extent of consumer demand for green products • Green arguments alone (moral suasion) are insufficient to sway consumer behaviour • Danger of over-emphasising greenness of products whilst ignoring consumer demands (marketing myopia) Sources: Levitt (1960), Ottman, Stafford and Hartman (2006)

17. Lack of Genuineness In 2007, 99% of environmental product claims committed at least one of the seven sins of greenwashing; by 2010, this percentage had fallen substantially and the number of genuinely green products on offer rose significantly Source: Terrachoice (2009, 2010) Environmental Issues in Business 201

18. 7 Sins of Greenwahsing Source: Terrachoice (2009) • Sin of the hidden trade-off • e.g. made from 100% paper • Sin of no proof • e.g. This product is ‘green’ • Sin of vagueness • e.g. environmentally friendly • Sin of irrelevance • e.g. CFC free hairspray • Sin of lesser of two evils • e.g. fair trade tobacco • Sin of worshipping false labels • e.g. inauthentic labelling • Sin of fibbing • E.g. Outright lying and deceit Environmental Issues in Business 201

19. Greenwash Safeguards Environmental Issues in Business 201 • Greenwashing Index • Public rating system for greenwashed advertising • CHOICE Australia • Reporting system which registers consumer complaints • NGO registers • E.g. Greenpeace, Sierra Club • Government regulation • UK government devised industry code for authentic green advertising

20. Understanding the Consumer Environmental Issues in Business 201 • Numbness • People are too busy and simply do not have (make) time or don’t want to know • Reluctance to change lifestyles • Green issues are too big to handle • What can I do about melting ice caps?? • Apathy • Green labels have a bad name because of perceptions of poor performance and ideological slant • Dislike of ‘green’ labels • Scepticism about industry's green claims

21. Understanding the Consumer Environmental Issues in Business 201 • Akrasia • Inconsistency in consumer demand. Consumption choices often do not reflect personal values. • Self-righteousness – self-deception • I recycle and therefore I am green • Financial constraints • We may like to buy organic but simply cannot afford to do so because of large price premiums • Reluctance to pay more – fear of price gauging

22. Do People Want to Buy Green? Environmental Issues in Business 201 KPMG (2000): • 75% of respondents had bought products on the basis of social or environmental issues during the previous year NSW Chamber of Commerce (2001): • 73% people would buy green ceteris paribus • 49% would switch to greener brands • 60% of all consumer purchases are made with some awareness of environmental impacts GreenPortfolio UK Survey (2006) • 50% of the companies surveyed believe that customers are prepared to pay more for environmentally friendly products Bonini & Oppenheim (2008) • 87% of consumers state that they are concerned about the environmental and social impacts of the products they buy • Yet, only 33% of consumers say they are ready to buy green products or have already done so Brooks et al (2009) • 69% of US consumers are likely to buy environmentally friendly products if priced within their budget

23. Only a Small Percentage of Consumers Responds to GreennessSource: Ginsberg & Bloom (2004) & Brooks et al. (2009) Environmental Issues in Business 201 • True blue greens (9%) • Strong values matched by action Green target group • Greenback greens (6%) • Strong values but politically inactive • Sprouts (31%) • Believe in environmental causes in theory but not in practice • Grousers (19%) • Uneducated about environmental issues and cynical about their ability to drive change • Basic browns (33%) • Caught up with day-to- day concerns and do not care about environmental and social issues.

24. Ingredients of Effective Marketing Source: Prakash (2002), Ottman (2008) • Adequate pricing • Customers must be willing and able to afford premiums • Adequate greenness • Price, image & performance may be more important • Product performance • Product must be/do more than being green • Credibility of claims • Customers need to believe your claim • Instilling a sense of wanting to make a difference • Demonstrate that using your product will make a difference • Encourage behavioural change Environmental Issues in Business 201

25. Philips: Marketing Flop & Success Source: Ottman Consulting (2003) • Flop – Earth Light • Clumsy, funny-looking bulb • Did not easily fit most lamps • Name confused consumers • $15 each versus 75¢ for incandescents Result: Earth Light could not climb out of a green niche. • Success - Marathon CFL • Super long life • Incandescent-looking shape appealed to the convenience-oriented mainstream • Promise of saving $26 in energy costs over its lifetime lured thrifty consumers • U.S. EPA's ENERGY STAR¨ label to add credibility • Result: Sales in 2001 were up 12% in a flat market. Environmental Issues in Business 201

26. Conclusion Environmental Issues in Business 201 • Green opportunities are emerging • Growing demand for green and ethical consumer products will continue to fuel green market growth and vice versa. • Green marketing can be both driver of, and response to, green market growth • Green marketing helps businesses with company and product differentiation and consumer education

27. Conclusion Environmental Issues in Business 201 • Green marketing can foster good social, environmental and economic outcomes • However, markets still continue to reward unethical behaviour (due to price advantages) in the absence of perfect information and safeguards. • Doors remain open for unethical ‘green’ marketing, attracting or silencing customers and critics respectively based on fraudulent claims. • More safeguards are needed to protect ethical players and to identify and punish wrong-doers. • Critical reflection needed whether sustainability can be achieved without reducing levels of consumption.

28. References Environmental Issues in Business 201 Associated Content (2008) Shell Oil Company Told to Stop Misleading Advertising. Available online at: http://www.associatedcontent.com/article/304531/shell_oil_company_told_to_stop_misleading.html?cat=17 Bonini, S. and J. Oppenheim (2008). Cultivating the Green Consumer. Stanford Social Innovation Review. (Fall), 56-61 Brooks, G., Marohn, D., Regelin, K., & Rincones, D. (2009). Cradle-to-cradle: A new approach for marketing green products to the mass consumer. Evanston: Kellogg Innovation Network. Centre for Environment Education. (2007). Gram-Nidhi - Eco-enterprises for sustainable livelihoods. 28th June, from www.ceeindia.org/cee/rural.html#GRAMNIDHI Ginsberg, J. M., and P. N. Bloom. 2004. Choosing the right green marketing strategy. MIT Sloan Management Review 46 (1): 79-84. GreenPortfolio. (2006). Green relations. The communication viewpoint. London:GP. KPMG and Resnik Communications (2000) Putting your money where your mouth is. Socially Responsible Investment Research. Levitt, T. (1960) Marketing Myopia. Harvard Business Review 48(July-August), 3-13 Lindsey, N. (2000, 11th August). Cleaning up in Asia. The Australian, p. 38. Ottman, Stafford, and Hartman (2006). How to avoid green marketing myopia: Ways to improve consumer appeal for Environmentally Preferable Products . Environment Magazine 48(5): 23-36 Ottman Consulting (2003). Lessons from the green graveyard. Available at: http://www.greenmarketing.com Nelson, M. R., Rademacher, M. A., & Paek, H.-J. (2007). Downshifting Consumer = Upshifting Citizen? An Examination of a Local Freecycle Community. The ANNALS of the American Academy of Political and Social Science, 611(1), 141-156. Peattie, K., & Crane, A. (2005). Green marketing: Legends, myth, farce or prophesy? Qualitative Market Research, 8(4), 357-371. Prakash, A. (2002). Green marketing, public policy and managerial strategies. Business Strategy and the Environment, 11(5), 285-297. Terrachoice Green Marketing (2009 and 2010). Sins of greenwashing. Available online: http://terrachoice.com/ Worldwatch Institute (2010). Vital signs 2010. Washington, DC: WWI.