BLOGS

Greenwashing and Avoiding a Market for Green Lemons…(gulp)

A report recently came out that described the horrible state of “green products”. The bottom line: almost all products that claim to be green have serious problems around those claims. There was one (1) in 1,018 that made it through the green sort unscathed. Ouch.

Taking the report at face value, what the heck does it all really mean? Is it that nobody really knows what to do when it comes to green and sustainable, i.e. from a big picture of what sustainability and green really mean versus some simplistic notion of eco-friendly? Is it that the bar is too low for entry into the “green” market place and any product can claim to be green? Or, is the effort too high to make truly significant changes to products and business models? It seems like a combination of all the above with a healthy dose of “let’s get it while the getting is good” thrown in too.

It also looks like a typical stage in the development of a potential market—a stage that either moves along to some form of higher standards that people can trust or ends up becoming economically irrelevant. The latter is called a Market for Lemons and its discoverers won the Nobel Prize in economics a few years back.

To simplify, in a Market for Lemons consumers don’t believe the new claims being made for a class of products. As a result, they will not invest any extra money for those claims the product is making— in this case, paying more for greener-product claims. Why should somebody pay more for a product if they think it is all just a bunch of marketing? They won’t. The result is that only the cheapest products sell: AKA The Lemons. They’re called Lemons because while consumers ends up buying them by default, they don’t fill all the consumer needs or wants. The somewhat more expensive products that would have met consumers’ interests and needs —if consumers could only believe what the products touted— disappear from the market place as people buy the cheapest product available. The honestly greener products and businesses that would satisfy the “green needs” rather ironically end up going the way of the dodo. While this is not some economic argument to do nothing, the fact is that the larger market tends to be rather brutal on this point.

The answer to this conundrum is by building trust. Often that trust has been forged through a set of transparent standards that people can have faith in and are held by some trusted third party. In the green-products arena, organic food and organic-food labeling has worked fairly well to date from a consumer trust standpoint (albeit not without ongoing battles and some significant bumps and bruises as organic food has scaled up to super-market size). Trust and consumer confidence can also come via a trusted business or trusted brand, think Volvo and auto safety. In all cases words have to be backed up by authentic leadership that makes sense to the market, by expert knowledge and linked actions, by sharing with others, and by being open and transparent. In all cases, this is a never-ending effort.

If companies that want to sell green products (or, for that matter, any products in an increasingly green marketplace) know what is good for them they will rush to set high standards that are transparent and that actually meet the green needs they claim to address. Then, businesses will work like crazy to stay true to them. If they don’t the opposite of trust in business is not just mistrust. It is the risk of business failure when you find yourself the victim of a Market for Lemons.

George Basile, PhD

Sustainability: Going Beyond Energy Efficiency & Avoiding the Carbon Sink

I was speaking recently in the UK at Green Corp 2007, a meeting of businesses on climate change and sustainability. It was great to see businesses taking climate change and sustainability seriously. Yet, I was struck again that sustainability—the prize that we have to keep our eyes on—is in many cases slowly being morphed into a discussion on energy efficiency, renewable energy credits and carbon trading with a whole lot of confusion about today’s new anti-hero “carbon” thrown into the mix. There seems to be a real risk that as the easiest thing to tackle, energy efficiency becomes both the first and possibly last stop for sustainability in business efforts.

The logic goes something like this: Sustainability is the challenge for the 21^st century. Climate Change is today’s biggest and most urgent sustainability crisis. Climate Change is all about reducing “carbon” in the atmosphere. Carbon reduction is all about reducing CO2 (carbon dioxide) arising from burning fossil fuels for energy. And, finally, reducing fossil fuel use is all about energy efficiency. Thus, sustainability and Corporate Social Responsibility (CSR) get streamlined and transformed into an attack on carbon via energy efficiency efforts.

I am all for energy efficiency and energy conservation. Efficiency and conservation are the lowest hanging fruit and an absolute necessity. They are the things each of us is in the most control of. Heck, I wrote a stinger to VP Cheney years ago about his attack on energy conservation. So, yes, let’s all be hyper energy efficient! And, it’s not to say that carbon doesn’t have great value as a green and global metric. That said, sustainability is not just about energy efficiency and carbon is not a four letter word. We risk overly reducing sustainability at our own peril. If the climate crisis and other emerging sustainability issues are teaching us anything, it is that we need to develop our enterprises —and their actions— with a bigger picture of the planet and our global future in mind.

What does that mean? Let’s tackle carbon first. The secret life of carbon highlights that a successful climate program has to be about a lot more than just energy efficiency and that “energy efficiency” for sustainability means more than just using less energy. To start, increasing concentration of CO2 in the atmosphere is a problem for our climate, as in we are putting too much of it in. There are two big ways we make this happen: 1) by burning fossil fuels (yes, this is the biggest single human CO2 emitter) and 2) by wiping out the things that clean up carbon dioxide—namely plants and other photosynthetic organisms that eat up CO2 and spit out oxygen. The latter is a double whammy because one way we take out too many trees is by burning them as we develop land. The burning itself contributes about 20-25% of the atmospheric CO2 people are responsible for. So, we’re wiping out both capacity to store and cycle CO2 naturally in forests and sending it up the metaphorical smoke stack at the same time.

There is a third aspect to carbon in the atmosphere that is not CO2, but other carbon (and many non-carbon) containing gasses: 3) we are making chemicals that contain carbon but are much worse greenhouse gases than CO2 in some cases, much less in others. The greenhouse gases include CFCs, methane and others. Any given CFC for example, could have over 1,000 times the climate change impact as the same amount of CO2. When you hear about carbon-equivalents, it is just a way to compare these other gases to the effects a similar amount of CO2 would have on global warming. In many cases natural systems don’t have the capacity to easily break these chemicals down. As a result, they build up and cause various problems in addition to climate change like the hole in the ozone or impacts on ecosystems. Carbon equivalents do not take into account sustainability impacts beyond direct greenhouse effects. Yet, many of the systems impacted, like a stable ozone layer and healthy ecosystems, are central to a stable climate. Thus, energy efficiency programs alone will miss many of these gases when viewed from a wider lens of sustainability.

Finally, people do all of the things they do without thinking about sustainability because they feel they have to. It’s how our economy works. Or, if you live by slash-and-burn agriculture, as many do for example, then it is how you grow your food.

Here’s one more secret about carbon: it’s the most important building block in your body. Actually, it is the most important building block for all of life. If your body and all living things are a set of stories then carbon is the ink they are written with. While too much CO2 in the atmosphere is a bad thing, carbon is actually a good guy in the story of life. We have to be more sophisticated in how we take that reality into account.

For any climate program to have a good shot at success it should tackle all of the issues above. It can’t just be about energy efficiency or making carbon into a four-letter word. Energy efficiency can be first, but it has to be far from last. And, it has to be done right too.

Any climate change effort needs to address the big four issues: 1) fossil carbon (AKA “fossil fuels”—it is oft quoted that we burn up about a million years worth of fossil fuels each year), 2) living carbon, such as forests, wetlands and the algae in the seas (the ocean plankton gives us around 50% of the oxygen we all breathe and are incredibly important to the overall carbon and climate cycle), 3) persistent carbon, i.e. the carbon we have built into air polluting chemicals that just build up like CFCs, and 4) helping people avoid having to live in ways that impede tackling 1, 2 and 3.

This doesn’t mean that we can’t emphasize one over the other now or later, such as an early emphasis on energy efficiency as a way to directly reduce fossil CO2 pollution. But, it does mean that we have to consider all of these areas in our sustainability decisions and climate plans —including energy efficiency efforts— if we hope to succeed.

What should you look for when reading about a climate change effort or building one yourself? Any solid climate change mitigation effort should have something to say about fossil fuel use, energy reduction, and energy substitution to cleaner and renewable energy sources. It should speak to the use of renewable resources such as forests, wetlands and oceans which are some of the most productive photosynthetic ecosystems around the world. It should speak to the removal of chemicals that build up in the atmosphere, including those that trap heat but not ignoring the rest. It should speak to ways to help people work with each of these dimensions in mind.

(Hey, strange, but true: For example, businesses that use a lot of energy, have an energy efficiency program, and are interested in mitigating climate change would also do well to have a plan to help save the oceans’ ecosystems. Yes, it’s not just about reducing energy. It’s also about saving fish. Go figure.)

Only with all of these pieces can we move back from energy efficiency taking over and the possibility of missing the main point. Only with all of these pieces considered can a business claim to have a real handle on climate change. Luckily, this is also exactly what you need to do for sustainability. As is often the case with nature, getting something right in one area serves well in all the rest too.

George Basile, PhD