Like most law-abiding citizens, Peggy Cross never expected to find herself in a penitentiary—let alone a prison riot. But there she was last May, looking on as inmates began taking hostages and guards moved in with shields, Tasers, and pepper spray.

Fortunately, the melee that Cross, an entrepreneur from Larkspur, California, witnessed was a role-playing exercise, part of a four-day training session sponsored by the U.S. Department of Justice and held each spring at the decommissioned West Virginia Penitentiary. The event is designed to let corrections professionals evaluate their skills and equipment in realistic training scenarios. Cross was one of about 100 business people—purveyors of things such as smoke bombs, protective gear, and high-tech surveillance systems—on hand to promote and demonstrate their wares.

Cross was something of an outlier. Her company, EcoTensil, makes environmentally friendly cutlery. But much to Cross's surprise, the prison system now accounts for a full 25 percent of her sales. In fact, the prison industry relies on all kinds of businesses to help address its long-standing needs for security and sanitation, as well as emerging challenges, including an increasing focus on sustainability and the health of inmates. Like the military, the corrections system is a big, well-capitalized customer: According to the latest figures from the Department of Justice, nearly 2.3 million Americans are in prisons or jails, with states and the federal government spending $74 billion annually to keep those facilities running.

When Cross launched EcoTensil, in 2010, her goal was to make the experience of eating yogurt and other single-serve food items a little greener. The company's first product, SpoonLidz, is what it sounds like—a container lid made of coated paperboard that, with a strategic fold, turns into an eco-friendly spoon. Cross was having a prototype made at a print shop in Sacramento when an employee of nearby Folsom State Prison came in and mentioned he was looking for utensils to be used by dangerous inmates. When the printer showed him Cross's product, he knew it was just what he needed. Paperboard, after all, is not just a green alternative to plastic; it's also a safer one, because it can't be turned into a weapon.

This was not exactly part of Cross's business plan. But she jumped at the opportunity and produced the EcoSecurity Utensil, or ESU, which she sells to Folsom and other prisons and mental-health facilities nationwide. She has been surprised at how easy such deals have been to close. "One of the nice things about this market is that people in prisons are looking to solve a problem," Cross says. "They Google safer utensils. They find us." Attending events like the mock prison riot and the annual convention of the American Correctional Association has also helped. (Among the lessons Cross has learned: "Don't wear high heels to a corrections industry convention; you will be the only one.")

What are prisons looking for? Whether they are buying clothing, bedding, toiletries, or food-service supplies and equipment, prisons want products that increase security—that can't be turned into weapons, for example, or used to hide contraband, says Mike Reed, director of marketing for the Bob Barker Company, a large supplier to the prison industry. (No relation to the famed game-show host.) Among the items in Barker's print and online catalogs: flexible foam toothbrushes, transparent toothpaste tubes, see-through electronics, clear-soled shoes—and, as of January, Cross's paperboard cutlery. The facilities, Reed adds, are also on the lookout for products that help minimize waste and keep facilities cleaner and prisoners healthier.

Indeed, the corrections industry is becoming an unlikely leader in sustainability, thanks in part to Executive Mandate 13514, which directs federal facilities, including prisons, to reduce energy use and waste. That has helped Excel Dryer, an East Longmeadow, Massachusetts–based manufacturer of electric hand dryers, whose customers include restaurant chains and schools as well as prisons. Not only are the dryers far cheaper than towels, says Excel's vice president of marketing, William Gagnon, they also eliminate paper waste, which is the largest single contributor to prison waste streams. Paper also can be used by prisoners to clog toilets or start fires. Prisons, says Gagnon, can be a key testing ground. "In a corrections facility, you're really putting things to the test," he says. "All our customers benefit from us finding and fixing problems in these facilities."

Cross, for her part, is now exploring ways to apply her expertise in sustainable packaging to address other prison pain points—such as combs and dustbins made of "nonweaponizable" rigid paperboard instead of plastic. "As a designer, I'm excited about the opportunity to see what I can do with paperboard," she says. "There's an incredible future in this."

For smaller companies in particular, the prison market can present some logistical challenges. Sales tend to spike when a new facility opens or there's a sudden influx of inmates. "We need suppliers that can react fairly quickly," Reed says. Prison purchasing policies run the gamut: Though many states and some private prison-management companies have centralized buying, most county facilities have their own purchasing departments. The procurement process varies from state to state—some require multiple bids on every product or disallow online orders and payment with credit cards.

Cross has heard it said that a socially responsible company has no business working with prisons—profiting from the fact that 1 percent of Americans live behind bars. But she has no qualms. "I'm very happy to offer a product that increases safety for guards and inmates," she says. "Corrections is an important and necessary industry, and a lot of people in it risk life and limb to keep the rest of us safe. I would venture to say that those who have awareness of the importance of environmental responsibility also have awareness that humane treatment and safety for all humans is of value, regardless of which side of a set of bars they are on."