CRADLE-TO-CRADLE: A NEW APPROACH FOR MARKETING GREEN PRODUCTS TO THE MASS CONSUMER

Geoffrey Brooks

Dana Marohn

Kiersten Regelin

Daianna Rincones

June 3, 2009

AGENDA

Executive Summary

Green Mass Marketing – Why Now?

Key Questions for Mass-Consumer Marketing

Case Study: Earth-Friendly Products

Findings and Recommendations

Some Questions to Consider

EXECUTIVE SUMMARY

Mass-market green products are increasingly important to companies Consumer “pull”: the market for green products is growing Government “push”: greater regulatory/legal pressure to become more

green

To penetrate mass market, firms must address key consumer questions: What is a green product? What are the benefits of green products? Can green products be affordable?

Leading firms are in a position to meet this demand Companies need to clearly articulate green benefits important to their

own mass-market consumers  Cradle-to-cradle can be a tool to enable mass marketing of green

products

Green Mass Marketing – Why Now?

GROWTH IN GREEN CONSUMERISMDespite the global recession, the green consumer base is growing…

1/3 of Americans claim they are more likely to buy green products today than they were one year ago

1/3 of European consumers actively seek out green products (up 2%)

1/4 of global consumers claim they will pay a higher price (up 4%)

Source: BCG, January 2009

GROWTH IN GREEN CONSUMERISM…but even mass-market consumers are increasingly demanding sustainable performance

More than 33% of American consumers believe it is more important than ever for companies to be environmentally responsible

66% of consumers think companies should offer green products

69% will purchase green products if it is within their budget and 70% will pay attention even if they are not in a position to buy

Source: Cone, January 2009

POLICY IS ALSO DRIVING CHANGEGreen product producers can achieve long-term cost benefits by jumping ahead of policy and can also leverage progressiveness for marketing efforts

Cap-and-trade system Representative Chicago Climate Exchange (CCX) member

companies:

California Cradle-to-Cradle Product Bill Would require California Integrated Waste Management Board to

adopt regulations by July 1, 2011

Some forms of product stewardship legislation exist in the E.U., Japan, South Korea, and Canada

Source: http://sloanreview.mit.edu/beyond-green/2009/03/03/california-proposes-cradle-to-cradle-product-bill

A FAMILIAR MARKETING CHALLENGE

Companies are unsure how to communicate Which green attributes to highlight How to manage tradeoffs Exposing weaknesses

Most consumers lack knowledge or interest in the details Most need clear, simple messaging Too much detail causes confusion

There is a thin line between providing relevant, useful information and overloading the consumer with details

CRADLE-TO-CRADLE

Covers the entire life-cycle, and “reincarnation”, of a product Attempts to create essentially waste-free products

Non-biological inputs be recycled/reused Biological inputs can be composted/consumed

C2C can be used to guide the design, production, distribution and take-back of green products – it is an ideal to strive toward

Source: California Product Stewardship Council

A JOURNEY TOWARD CRADLE-TO-CRADLEGreen products should offer incremental environmental benefits using cradle-to-cradle as a guide and ultimate goal

One possible journey

Key Question: What is a green product?

WHAT IS A GREEN PRODUCT?GREEN PRODUCT ATTRIBUTES

Many competing and imprecise terms in marketplace “Organic,” “local,” etc. have no (or many) uniform definition(s) Many trade-offs exist between definitions – consumers cannot synthesize

Unclear definitions inhibit purchase behavior Few customers willing or able to research definitions and may walk away True benefits are unclear, reducing purchases

Lack of clarity limits adoption by mass-market consumers

2009 GMA/Deloitte Green Shopper Study

WHAT IS A GREEN PRODUCT?ATTRIBUTES AND CREDIBILITY

Consumer view of question has two key sub-components What are attributes of green products – “What does it mean for a

product to be sustainable?” What is credibility of my purchase – “How can I tell a green product

when I go to buy it?”

Green Product

Consumer marketing must provide a definition of green and identify it to consumers prior to purchase

Product Attributes Credibility

WHAT IS A GREEN PRODUCT?ATTRIBUTE FRAMEWORKA definition of green products must encompass a variety of attribute areas

Development

Manufacture

Distribution

Purchase / Use

End of Life

Cradle-to-Cradle Product Lifecycle

Material Sourcing/Consumption

Energy Consumption

…Externalities

Social Responsibility

Product…

Attribute areas represent a collection of green characteristics Characteristics are relevant at various phases in the product lifecycle

Difficult for consumers to conceptualize trade-offs between areas Consumers lack time to understand details and relative costs/benefits Similar to nutritional labeling on food products

WHAT IS A GREEN PRODUCT?CREDIBILITY OF GREEN CLAIMS

Greenwashing makes it difficult to compare similar products Destroys perceived value of green products

Perceived greenwashing can limit adoption by mass-market consumers

Hidden trade-offs

Examples of Greenwashing

Lack of proof

Vague claims

Misleading labelsIrrelevant benefitsFalse advertising

E.g., locally produced, but more carbon intensive

No evidence to support claims

Ambiguous language or lack of clear definitions

Suggestive but unsubstantiated images or messagesEmphasizing minor impacts or legally required action

Erroneously claiming benefits or certification

Adapted from "The Seven Sins of Greenwashing", Terra Choice, May 2009

WHAT IS A GREEN PRODUCT?CREDIBILITY OF GREEN CLAIMSMistrust of corporations and lack of credible third-party certification causes confusion and limits adoption by mass-market consumers

Consumers have little trust in companies’ green claims

81 certifications for consumer goods, but Many global Many unique to region/company Often unique only to one “step” in lifecycle

Key Question: What are the benefits of a green product?

WHAT ARE THE BENEFITS OF A GREEN PRODUCT?BUYER VALUE AND ENVIRONMENTAL IMPACTConsumers must obtain value and/or understand the environmental benefit from green product purchase

Green Product Benefits

Buyer ValueEnvironmental

Impact

Consumer Benefits

Health concernsAltruistic motivationsPerception (status

related)Efficacy (i.e., on par

with/ better than competitors

Reduced carbon footprintCarbon created by

production/distribution of a product or service

Reduced water footprintTotal water volume used,

recycled, or disposed of as waste water to produce a good/service

Carbon Footprint Challenges Costly to quantify (requires

both pre- and post-studies) Multiple methods available Difficult to use data

Hard for consumers to interpret and compare

Illustrates (again!) the importance of education

Carbon Footprint of Tropicana Pure Premium Orange Juice

Quantifying/labeling environmental impact, such as carbon footprinting, is highly complex

WHAT ARE THE BENEFITS OF A GREEN PRODUCT?ENVIRONMENTAL IMPACT

At least two methods exist to measure carbon footprint Carbon Trust

Found original Tropicana estimate off by > 20% Greenhouse Gas Management Institute

U.S.-based non-profit providing GHG accounting, auditing and training

How do you calculate carbon metrics? And what do they mean? Companies must make metrics relevant, not just identify them

WHAT ARE THE BENEFITS OF A GREEN PRODUCT?ENVIRONMENTAL IMPACT (CON’T.)

3.75 lbs. CO2

19.4 lbs. CO2

6.3–6.8 lbs. CO2 9 lbs. CO2

1 L of Tropicana

1 gal. of Gasoline

1 Cheeseburg

er

1 day in studio Apartment

Sources: http://www.epa.gov/OMS/climate/420f05001.htm; http://openthefuture.com/cheeseburger_CF.html; http://www.epa.gov/climatechange/wycd/calculator/ind_assumptions.html

And we thought measuring carbon was challenging - quantifying the impact of water is less established, but feasible

WHAT ARE THE BENEFITS OF A GREEN PRODUCT?ENVIRONMENTAL IMPACT (CON’T.)

Sources: http://www.waterfootprint.org/?page=files/home; http://www.waterfootprint.org/?page=files/CoffeeTea

Perception is that water is cheap and unlimited View distorted due to lack of global pricing mechanism

16,000 L H2O

1 KG Beef 1 L Rice 1 L Milk1 KG

Maize1 KG

Wheat

3,000 L H2O 1,000 L H2O 900 L H2O 1,350 L H2O

Case Study – water used in Netherlands coffee consumption 140 liters H2O/cup = 2.6 billion cubic meters H2O per year Dutch account for only 2.4% of world coffee consumption

Key Question: Can green products be affordable?

CAN GREEN PRODUCTS BE AFFORDABLE?VALUE AND PRICINGTo enable mass market adoption, companies must leverage internal and external capabilities to align pricing/value with mass market expectations

Consumers76-87%

Perceived Benefits

Premium Mass-Market

Price premiums are acceptable only for some segments BCG study says 24% of consumers will pay more, but….

• Additional studies reveal most consumers don’t follow through at register• Green-focused CPG companies say 13% is more accurate estimate of

“niche” market

Sources: Cone Consumer Survey, Jan 2009; Capturing Green Advantage, BCG, Jan 2009; Interview, Earth Friendly Products   

Consumers13-24%

Case Study: Earth Friendly Products

CASE STUDY: EARTH FRIENDLY PRODUCTSEarth Friendly Products is successfully mass-marketing green products by educating consumers and pricing in line with competitors

Clearly articulates green benefits and impact Provides detailed info on packaging, but too much confuses mass consumer Detailed information available on new website with interactive blog “Key element is to prove efficacy on a consistent basis”

Leveraged to drive pricing down to mass market 1 Costco/Sam’s Club SKU provides 50% of revenues Prices below P&G’s and equal to store brand in wholesale club stores Vertically integrated and efficiently produced compared to competitors

Reven

ue (

$M

)

$54M

$35M

$100M

Findings and Recommendations

FINDINGS AND RECOMMENDATIONS

Every product has environmental impact, but goal is to mitigate impact as much as possible Tradeoffs exist in each stage of the product lifecycle - green needs to

be an on-going ideal towards continuous improvement

Companies need to clearly articulate green benefits important to their own mass-market consumers  Must quantify and contextualize environmental benefits Need to distill varied aspects of green to a concise consumer

message

Cradle-to-cradle can be used as a tool to enable mass marketing Provides framework to consider aspects of sustainable products

Aligning green products with mainstream prices opens doors for mass-market adoption and economies of scale

SUMMARY AND NEXT STEPS

Companies will be forced to mass-market green products eventually Pulled by consumers Pushed by governments

Firms can answer key marketing questions now to prepare What is a green product?

Green is an on-going ideal that encompasses specific attributes and credibility issues

What are the benefits of green products? Benefits must be quantified and concisely communicated

Can green products be affordable? Cradle-to-cradle can be a tool to drive down costs and enable mass-market

pricing

SOME QUESTIONS TO CONSIDER…

How green should a product be before it can be marketed as such?

SOME QUESTIONS TO CONSIDER…

What green aspects should be communicated to consumers?

SOME QUESTIONS TO CONSIDER…

What would the perfect green label look like?

SOME QUESTIONS TO CONSIDER…

What is the role of civil society in green product marketing?

SOME QUESTIONS TO CONSIDER…

How can companies gain more control over their C2C impact?

SOME QUESTIONS TO CONSIDER…

What are implications of taking green products to the mass market?

APPENDIX: SUPPLEMENTARY MATERIALS

KEY QUESTION 1: DETAILED ATTRIBUTE FRAMEWORKA definition of green products must encompass a variety of attribute areas

Material Sourcing/

Consumption

Energy Consumption

Product Externalities

Social Responsibility

“Minimalist” product designAvoidance of environmentally-unfriendly

materialsProduction process efficiencyPackaging efficiencyReusable or recyclable contentResponsible resource allocationLow unified carbon footprint (at all life-cycle

stages)Type of energy (clean alternatives vs. traditional

sources)RecyclabilityProduct return/usageElimination of by-products (chemicals, fertilizers,

etc.)Elimination of harmful externalities (e.g.,

antibiotics)Treatment of employees (including health/safety)Humane treatment of animalsInteraction with unsavory governments/policiesCommunity investment and philanthropy

KEY QUESTION 1: DETAILED CREDIBILITY FRAMEWORKCredibility can be earned and reinforced through education, engagement, and third-party endorsements

Consumer Education

Clear, simple messagingBe transparent about trade-offsHelp consumers change behavior as well as

attitude

Consumer Engagement

Labeling

Certification

Partnerships

Involve consumers in stakeholder discussionsCollect consumer feedback, understand their

valuesLeverage social media for word of mouth

advertisingChoose product labeling over brochures or web info

Emphasize most significant environmental impacts

Beware overwhelming with too much information

Effectiveness depends on credibility of the partner

Standardize across industry or impact areaCredibility at the expense of cost and

differentiationCan be transformational for a companyMost credible with the most vocal activist NGOsPresents risks for both the company and the

partner

FINDINGS AND RECOMMENDATIONS DETAIL: #1

Every product has environmental impact, but goal is to mitigate impact as much as possible Tradeoffs exist in each stage of the product lifecycle - green needs

to be an on-going ideal towards continuous improvement Companies need to understand tradeoffs internally and articulate them

externally to maintain credibility with consumers Environmental benefits must be significant relative to alternatives

FINDINGS AND RECOMMENDATIONS DETAIL: #2

Companies need to clearly articulate green benefits important to their own mass-market consumers  Must quantify and contextualize environmental benefits to help

consumers understand reduced product impact Need to distill varied aspects of green to a concise consumer

message (e.g., labeling efforts currently underway, etc.) Ultimately, consumers must obtain value from purchase whether through

environmental benefits or other product attributes

FINDINGS AND RECOMMENDATIONS DETAIL: #3

Cradle-to-cradle can be used as a tool to enable mass marketing of green products Provides framework to consider aspects of sustainable products Provides levers for organizations to reduce their cost structures in line with mass-market needs

Aligning green products with mainstream prices opens doors for mass-market adoption and economies of scale Price point is important for mass-market appeal Green benefits and efficacy will differentiate product and lead to growth through word-of-mouth Small wins in mass-market can double revenues of niche market and is often more efficient

TIMBERLAND’S GREEN INDEX

CARBON TRUST’S CARBON FOOTPRINT

CARBON TRUST’S CARBON FOOTPRINT