Big retailers tend to be afraid of start-ups that make eco-friendly products.Here's a proposal on how to change that mindset.
I am an investor in an "eco start-up" based here in Austin. The company, Blue Avocado, creates green consumer products dubbed "hot products for a cool planet." They launched in 2008 with a set of stylish, responsibly produced, reusable bags for activities such as errands, grocery shopping and toting your lunch. So far, they've had pretty good success penetrating the mid-size retail market, gaining distribution through stores like Whole Foods, Sur La Table, and The Container Store.
But, the break they've been looking for is shelf space in big retail. To have any shot at reaching their goal of getting more than one million people to stop using plastic bags, they need scale—the kind of scale that comes at 20,000 square feet of retail space and thousands of customers per day.
Unfortunately, things are moving slowly. Why? Big retailers don't work well with early stage companies. They get nervous if you've been in business for less than three years or if your sales are lower than $10 million. They won't buy new products unless they're sure their customers want them, but often, ironically, customers don't know they want those products until they see them on the shelves. The net effect in this case is that eco start-ups are often shut out and big retailers don't carry the best, most innovative green merchandise. The consequences for our planet are millions more tons of carbon emitted, countless resources unnecessarily used, tons of excess waste dumped, and millions of people left outside of the green revolution.
This problem is intensified when it comes to consumer products, which make up both the bulk of household discretionary spending and as much as 20 percent of landfill waste. Most Americans purchase their consumer products in big retail but the green choices currently available to them are few. Some retailers are making strides in specific categories, such as food and personal care. For example, Walmart now carries most of the major green brands including Stonyfield, Tom's of Maine, Burt's Bees, and Seventh Generation. Several big grocery stores, like Kroger and Safeway, have launched their own line of organics. But, as a share of what goes into each customer's cart, the number of green products remains small.
In this quandary is the glimmer of an opportunity—an idea—that was shared with me by Amy George, Blue Avocado's founder and "Chief Ozone Officer," that could not only drastically accelerate our progress toward a sustainable future but would also support small and growing businesses such as theirs.
The idea is this: What if, instead of focusing their environmental sustainability programs internally on things like the energy footprint of stores or corporate recycling initiatives, big retailers instead leveraged their key asset—their relationship with millions of customers—and focused their environmental strategy externally on helping customers to reduce their own carbon footprints? This subtle change in philosophy would result in a radically different approach to both buying and merchandising of products. Imagine, for example, if at every checkout customers were told not just the total cost of what they purchased but also the total carbon footprint? Would you think twice about whether your dog really needs another rubber chicken toy?
If big retailers sourced, compared and selected products according to which had the lowest overall environmental impact, they would not likely find the winners among their usual suppliers. To be able to find and introduce dozens of new green products every quarter, they'd have to engage the eco start-ups. These companies, like Blue Avocado, are not just recasting the same old products now in a "recycled" version; instead, they are innovating from scratch, starting with the product's design, materials, and construction, and expanding into shipping, packaging, functionality and integration into the customer's lifestyle. The net result is not just an incremental improvement in carbon footprint, but a product that fosters environmental sustainability at every stage of its lifecycle.
At the same time, motivated by this new strategy, big retailers might start to harness the time and attention captured in their retail space to educate and engage their customers. Imagine, for example, if next to a product's price was a second number indicating its environmental impact score? Or Amy George imagines a simple icon, like a leaf, that would designate the sustainable products. As Whole Foods has shown with their new animal welfare ratings for meat products, large retail players have the power to create entirely new types of product ratings and labeling. Strategic product placement and merchandizing would also wield tremendous influence over the purchasing decisions of customers. Big retailers could actually create and accelerate the demand for more and better green consumer products
This type of transformation in thinking requires leadership. It requires big retailers to take on new risks and to develop a different type of thinking about environmental sustainability. Instead of driving green innovation through decrees to current suppliers like "reduce energy use by 20 percent" or "eliminate packaging by 10 percent," under this new approach, big retailers would foster innovation by setting a vision for top products and then engaging those companies that produce the best in class. The current approach yields little beyond incremental product improvements that are fundamentally driven by cost-cutting and supply-chain squeezing. A new model would yield both substantial—potentially transformational—product innovation, plus small business development and job creation in a value-driven approach.
For eco start-ups, the result would be an opportunity to get a foot (or at least a big toe) in the purchasing door where they would be judged not just on pricing but on the environmental impact of their products and how much they are able to improve the life and wellbeing of the customer. For the retailers, this is an opportunity to build a deeper relationship with customers—to focus not just on competitive pricing and brand loyalty but also on a sense of partnership and concern for long-term well-being. It is the opportunity to migrate toward a new type of value creation: one that focuses not on squeezing out costs but on creating higher utility. It's a mindset that will not only boost our economy but that will help us to protect our planet.
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SUZI SOSA is the associate director and senior fellow in social entrepreneurship at the RGK Center for Philanthropy and Community Service at the University of Texas at Austin. She is also the founder and president of the MPOWER Foundation through which she oversees RISE Global, an innovative international program that inspires and empowers thousands of entrepreneurs.