Welcome to Green 2.0

You remember Green 1.0. It was a reusable grocery bag, an ad campaign, a catchphrase. Then came the backlash, as consumers grew weary of sleuthing out the real eco-players from the rest - and paying for the privilege. Now a lot more is going on behind the shelves, as retailers embrace sustainability across all facets of their business, from carbon footprint reduction to ethical sourcing and product stewardship to employee training and development. We talked to a few who are leading change to find out what green looks like these days - and what's in it for them.

You remember Green 1.0. It was a reusable grocery bag, an ad campaign, a catchphrase. Then came the backlash, as consumers grew weary of sleuthing out the real eco-players from the rest – and paying for the privilege. Now a lot more is going on behind the shelves, as retailers embrace sustainability across all facets of their business, from carbon footprint reduction to ethical sourcing and product stewardship to employee training and development. We talked to a few who are leading change to find out what green looks like these days – and what’s in it for them.

Despite the recession, the demand for green products and processes isn’t subsiding: a November 2008 Nielsen survey on corporate social responsibility found that Canadian consumers were more concerned than their American or global counterparts that grocery manufacturers ‘implement programs to improve the environment’ (91%) than ‘support important social causes’ (57%).

As established brands get on board, many Canadian retailers are responding to growing consumer demand and moving green products up on shelves next to major national brands, and the mass acceptance that defines Green 2.0 is visible on the horizon.

The potential for growth at retail is considerable, but consumers won’t be fooled again. Gone is the greenwashing, as committed retailers roll out comprehensive sustainability programs, often ahead of government legislation and backed by rigorous, third-party certification. Many have invested time and money in holistic sustainability platforms which cover all stages of the product lifecycle and all areas of their business, from eco-audit to annual report. They’re working with suppliers to source bona fide ethical and sustainable products, which are then given pride of place on shelves.

‘Green 1.0 is that green is trendy, and trends die, cultures shift,’ says Ian Morton, CEO of Toronto-based environmental consultancy Summerhill Group. ‘Where you get to [consumer acceptance of] Green 2.0 is people are seeing added value.’

According to the LOHAS model (see sidebar p. 12), for over 50% of those consumers open to green products, price is a factor in mass acceptance, even in boom times. An Environics survey from summer 2008 found that only 19% of Canadian consumers were prepared to pay more for an environmentally friendly product. And the current sobering economy has put a damper on consumers’ willingness to shell out extra for green cachet. ‘Some companies have profited off people wanting to do the right thing, but at the same time a lot of companies are bringing [their green merchandise] into comparable price points,’ says Morton. ‘Retailers are offering those products side by side with conventional offerings and making the consumer decide. So price, while it used to be a tactic almost, has changed now because of the supply of alternatives, the fact that the consumers are much more savvy and increased competition.’

At Richmond, B.C.-based London Drugs, VP marketing Clint Mahlman has been tracking a slow, steady increase in consumer demand in tandem with more price parity.

‘Consumers will trial or buy green products if they meet their expectations of performance, and they’re not paying too much of a price premium,’ he says.

Last year, London Drugs launched Greendeal.ca, which outlines the company’s corporate sustainability initiatives, recycling programs and assortment of third-party endorsed brands, which are also flagged in stores with educational shelf-talkers.

‘The best thing we can do is provide them with information at the point of purchase,’ says Mahlman, who has led the sustainable development drive across the retailer’s 68 stores in B.C. and the Prairies, which currently stock around 100 green products, from Energy Star-rated printers to organic chocolate. ”What’s the Green Deal’ allows the customers to see a product, so if they’re buying a traditional shampoo and next to it is an all-natural ingredients or certified organic product, we’ll put that [information] there saying this product has these standards [including product features, packaging and product recycling and energy efficiency]. It’s a very powerful way of providing information to a customer that allows them to make those choices that are best for them.’

When the recession officially hit last fall, many retailers were holding their breath to see how consumers would react. That sales of what some call ‘better choice’ products have not dropped off suggests that green is no longer a trend, but rather a growing part of the mainstream consumer’s lifestyle. Peg Hunter, VP marketing at Toronto-based Home Depot Canada, confirms that the company is well positioned to weather the current economic storm and fight climate change at the same time. ‘It’s an investment we’ve made for a long time, and we’re seeing that investment pay off.’

Home Depot currently carries 1,600 products that qualify for its Eco Options (EO) program, which started in Canada in 2004, and which has since been adopted in the U.S. and China. To qualify for EO branding, products must have a smaller negative impact on the environment than conventional alternatives and/or provide a positive environmental change through their use – an assessment made by Home Depot’s advisory council of vendors, non-profit environmental organizations and media, in cooperation with third-party certifiers like Energy Star.

As consumer pressure for value increases, Hunter says products in the line are not only maintaining a steady sales base relative to the rest of the business, but are outperforming conventional products. ‘It appears that, properly marketed, [these products] can be recession proof,’ she says, adding that her goal is to have 10% of total Canadian sales attributed to Eco Options products by 2012. ‘The concern has become more of a fundamental Canadian value rather than just a trend.’

Sales of green products have also remained steady at Home Depot’s Boucherville, QC.-based competitor Rona, who launched its Rona Eco private label line of eight cleaning products last spring. The products are approved by a research unit of École Polytechnique’s Interuniversity Research Centre for the Life Cycle of Products, Processes and Services (CIRAIG), which assesses products at all five stages of the life cycle from manufacturing through to recycling, and accredits those which are the best choice available at each stage.

The Eco line complements the broader Eco Responsible line of vendor brands, which are the best choice in at least one if not all five stages of the life cycle. Currently 700 products in Rona stores bear the Eco Responsible seal of approval, with plans to increase that number to 2,000 by 2011.

This April, the retailer added another 50 products to the Eco line, which, crucially, is priced equivalent to the national brands in the same category. Claude Bernier, VP marketing, says this – along with the shelf-level information explaining green product attributes – has been a major factor in maintaining sales through the recession. ‘If a consumer has a choice between two products – one which is green and one which is not – for the same price, and if they are well educated [by the retailer] and they are conscious about the environment, they will choose the green one.’

To get consumers’ attention, Rona is supporting the line with a new brand positioning, ‘Doing it Right.’ It’s the first time the retailer has backed its green platform with serious greenbacks for a massive TV, radio, OOH and online media buy, which started in March. The spots highlight the Eco line and the paint recuperation program (which launched in Ontario last year) as well as new policies on pesticide sales (banning cosmetic pesticides as of July 1) and wood products procurement (currently 90% certified from sustainable sources).

Bernier feels the onus is on retailers to educate suppliers as well as consumers. ‘It’s not the consumer who’s stopping us, it’s more the reputation of the industry, and the industry has to adapt the products to respond to the consumer needs. And this is where it is taking companies a longer time,’ he says, adding that what started out as a slow process of educating suppliers about the life cycle has sped up exponentially. ‘The first year, to introduce the first eight products was a long process; this year, with 50 [products] it was a lot faster. Consumers are ready to buy those from us. We just need to show them that we have those products and continue to educate them.’

Rona’s green cred is well established in Quebec, where it introduced a paint-recycling program in 1999. Seeking to raise brand awareness in Ontario, the retailer found that the environment was both a rational driver and an emotional one, rooted in trust. ‘We know that the trend of sustainable development and green products – our approach is wider than just green products – is something that is important, not only in Quebec but across the country,’ says Bernier. ‘For us it was very important to use that as an emotional reason to give your loyalty to a brand.’

Moving from the home to the office, Toronto-based Grand & Toy also sees a holistic sustainability platform as a brand differentiator. ‘People want to do business with us because they trust us, because we deliver solutions to them,’ says VP marketing Kevin Edwards. ‘Our stance on sustainability, our efforts, our commitment, validates their decision and their association with our brand.’

The company began the process with an environmental audit with Deloitte in 2006, around the same time the 125-plus-year-old brand underwent a major repositioning, shifting from consumer retail to a B2B model. Edwards says he was surprised to find how much the company was already doing – although there was still room for improvement.

The company went public with their sustainability platform in 2007 – from recycling to green products – with a campaign that included not only employees but also vendor partners. For Earth Day 2008, the brand launched a ‘Green Office Hero’ campaign (Grandandtoy.com/greenoffice) to celebrate those people leading change in their workplaces, share tips and market green products such as Forest Stewardship Council of Canada (FSC)-certified paper (which now make up about 25% of the merchandise assortment).

This January, the brand tackled its major environmental issue – reducing the carbon footprint of its same-day delivery trucks, which visit 100,000 businesses every day – with a 48-hour-delivery option on its e-commerce site, which accounts for 60% of the company’s sales. At press time, over 40% of customers were opting for day-after-next delivery, and 45% of those customers had selected it as their default option. The change means fewer trucks on the road on a daily basis and greater logistical efficiencies, which translates into both carbon and dollar savings that Edwards says can be passed onto the customer. A national ad campaign will launch this month to publicize the success of the new model.

‘We may be, in some people’s minds, an older brand that is rather staid,’ says Edwards. ‘Having a really thoughtful, broad sustainability commitment really has people look at your brand in a different way. And you benefit from that.’

As retailers graduate into Green 2.0, many are eager to take on the role of teacher, claiming best-in-class honours in Canada and sharing their successes with others. Johanne Gélinas, partner, corporate responsibility and sustainability at Deloitte, has consulted with companies to develop sustainability platforms, and says this kind of healthy competition is key. ‘If you want to stay in this environment, you have to speed up and demonstrate your credentials as a green company,’ she says, adding that even two years ago, the amount of information on corporations’ green activities available in the public domain was nil. But now, ‘companies realize that they don’t have the choice, it has to become mainstream in the way that they are doing business now.’

And as one heavyweight in a given category influences suppliers to source ethical or non-toxic materials, or reduce packaging or water waste, everyone reaps the rewards. Gélinas credits Walmart for making the most noise in the industry in terms of championing sustainability as a profitable endeavour for retailers, announcing that its roadmap of waste reduction, energy reduction, sustainable products and packaging reduction will save the company $25 million in Canada over the next four years. The discount giant rolled out its packaging scorecard in the U.S. in June 2007, and plans to introduce it in Canada this spring. Currently, Walmart is working with Canadian suppliers and the Packaging Association of Canada to reduce packaging by 5% by 2013, and the effects of changes like P&G’s introduction of concentrated laundry liquid – the only kind Walmart stocks – are already being felt here.

‘The size of Walmart is an advantage,’ says Andrew Pelletier, VP corporate affairs for Walmart Canada. ‘We’ll dramatically reduce the amount of waste in the marketplace, and it will game-change the retail industry in Canada. If we’re requiring our suppliers to dramatically reduce their packaging and making our buying decisions on that, they’re not just going to do it for us, because they’re supplying the rest of the retail industry.’

Over the past year, Walmart has also more than doubled the number of sustainable products available in stores under the For the Greener Good program to around 1,000, with annual sales of approximately $160 million, and plans to evolve the umbrella into a private label by next year. ‘If we are going to incorporate organic cotton socks or yoga outfits, we owe it to the customer to make sure it is great quality, that it’s affordably priced, and guess what, it’s also sustainable,’ says Pelletier. ‘We want to make sustainability affordable.’

At Grand & Toy, Edwards says that two years ago, FSC products were not affordable for most of his clients. But as businesses bowed sustainability mandates of their own, the demand for green paper and remanufactured printer ink cartridges grew, driving the price down.

‘Like everything, you need critical mass to make it economical,’ he says. ‘We, like many companies, were identified as not promoting FSC to the degree that we could, which is absolutely true, but we’re all, to a certain degree, guilty when cost is a factor. The best thing that’s ever happened for the environment in the last three to four years is the mass of businesses that want a sustainability solution; it makes environmentally appropriate products an obvious and easy choice.’

Establishing the business case for sustainability has been crucial to the shift towards Green 2.0. ‘We’ve been talking to and working with people like Dr. David Suzuki,’ says Pelletier. ‘You’d think, ‘How could a Walmart and a David Suzuki come together?’ He’s been trying for decades to get the business community to understand the business case here, and people haven’t necessarily been listening, and now they’re starting to listen.’

Morton sees the downturn in the economy as an opportunity for smart companies to look at fundamentals: ‘One, the environment should be a core part of your strategy to drive your sales and profitability, and the introduction of better alternatives vs. conventional, ideally lower cost, higher margin product choices. Two, you should be looking at activities that are optimizing your operational performance, be it in logistics and transportation, energy management, waste reduction diversion – all those core elements. That’s just smart business. And three, you need to engage your people and your staff behind the mission.

‘Therefore right now we couldn’t be in a better time, because the smart companies will actually be more successful and the companies who have always been playing around the margins and have not figured this out will probably be in a very tough predicament in the next 12 to 18 months.’

In the meantime, those who took the leap of faith early are reaping the rewards. ‘We have to blaze a trail here,’ says Edwards. ‘So if we have to get a product that would normally cost more because of its sustainability value, you do it to create a market. There’s no greater margins in green prods and sometimes there’s less. But there will be an opportunity to enjoy margins as you build your credibility in the space.’