Features

On the Road Toward Green, Part II

March 28, 2008

In the conclusion of his journey, the author provides details on the dynamic growth of the green segment and how companies are capitalizing on the trend.

On the Road Toward Green



Part II



In the conclusion of his journey, the author provides details on the dynamic growth of the green segment and how companies are capitalizing on the trend.



By Lambros Kromidas, M.S., Ph.D.
Vice President of Product Integrity
Coty, Inc.



Last month, I detailed some, but not all, of the elements that are necessary to develop greener cosmetic products. This month, I’d like to give you some statistics on this dynamic segment.
 
Organic Monitor1 projected that sales of natural and organic cosmetics would surpass the 1 billion euro mark in 2006. It also indicated that the German and French markets are the fastest growing in Europe. In Germany, natural cosmetics comprised 4% of total cosmetic sales and were projected to reach 10% by 2012. What was really amazing was that Organic Monitor estimated more than 400 European companies were involved in producing natural cosmetics albeit most are small producers with Weleda being the leading producer. A year ago, the Natural Marketing Institute stated that U.S. consumers spent $4.9 billion on natural and or organic personal care products in 2005—up 22% up from 2004. Furthermore, NMI predicted spending could increase to nearly $11 billion by 2009.
   
Last August, Packaged Facts reported that sales of natural and organic personal care products rose from $2 billion in 2002 to $6.1 billion in 2006.2 This represented a sales jump of 11% over the previous year. Packaged Facts also projected that sales growth will reach $10.2 billion by 2012.

Clorox’s own research recently found that 53% of consumers would buy more eco-friendly products in 2008. While 47% are willing to even pay up to 25% more for them.3

Who are these green consumers?  According to a WSL Strategic Retail report, the greenest consumers are also the oldest. Eighty five percent of those over 55 try to conserve energy or use natural products vs. 65% of those under 35. This is supported by a November 2007 Organic Monitor survey that showed that the typical UK consumer who purchases natural and/or organic cosmetic products is middle-aged and female.4
 

Green at Work



Now that I have clarified the meaning of green, let’s see how this global phenomenon is applied to just about all products and services. Nearly every industry is promoting its “green-ness” these days or trying to capitalize on it. Of course the reason why cosmetic suppliers are offering green ingredients is because the cosmetic industry is demanding them.
   
Origins has been at the forefront of the green movement.
I already mentioned Nature’s Gate and Origins but there are many other examples worldwide. Eco-Sensual Balm, a lip product made by Peacekeeper, is made of natural ingredients and is 73% organic. Moreover, all its profits after taxes fund human rights issues. If nothing else, addressing human rights issues makes this a green product because as detailed last month, it addresses respect for living things.
   
As a result of this green movement, we have green tracking or monitoring sites. For example, Organic Monitor is a business research and consulting company that specializes in the global organic and related product industries. It has been tracking the natural cosmetic market since 2004.
   
Fashion, too, is going green.5 Designers are using fabrics made from organic cotton or fabrics partly derived from coconuts and bamboo. Packaging may be from recycled paper. Shirts for example, may no longer be wrapped in tissue paper. Hangtags may be made from recycled paper. Footwear such as ecosneaks, are made from recycled car tires, recycled plastics, and organic cotton.

Media Promotes Green



Media companies are taking advantage of the green movement. There are magazines devoted to green such as TheGreenGuide available from National Geographic. Acquired in the last year, the guide is billed as a source for today’s conscious consumers who are striving for a healthy and greener lifestyle. Our industry may become intimately involved with this magazine as special interest groups unfriendly to our industry use it as a tool to reach our consumers. Last year, Alan Weisman published a book entitled The World Without Us.6 The movie industry is also capitalizing on green. Al Gore’s An Inconvenient Truth is just one example. Another green movie Sony Pictures’ Who Killed the Electric Car?
 
There are international and national organizations devoted to green issues. One of them is Green Cross International. Its purpose is to create a sustainable future by cultivating harmonious relationships between humans and the environment. Green Cross is linked to 21 national organizations. The U.S. group is Global Green USA.
   
Meanwhile, the building industry is profiting from green buildings. The U.S. Green Building Council is a non-profit organization that promotes buildings that are environmentally responsible, profitable and healthy places to live and work. Of course it goes without saying that the use of energy or the energy sector is on the road to green as well. The U.S. Environmental Protection Agency’s Green Power Partnership encourages organizations to buy green power as a way to reduce the environmental impact associated with conventional electricity use. It preaches the use of renewable energy resources such as solar, wind, geothermal, biogas, and low-impact hydro-generated energy. Aveda, a subsidiary of Estée Lauder, is a participating company. It has adopted wind energy in its Minnesota-based manufacturing facility.7
   
Last year, Limited Brands won the EPA’s Smart Way Transport Partnership, Environmental Excel- lence Award for conserving energy and thus lowering greenhouse gas emissions of its transportation and freight activities.8 Limited Brands relies primarily on rail rather than trucks.
   
Apropos, cars, car rentals, and car services are capitalizing on green. There’s been plenty of coverage for Toyota’s Prius Hybrid and Honda’s Civic Hybrid, but rental companies like Enterprise, Hertz and Avis have included hybrids in their fleet of cars. EV Rental Cars uses an all hybrid fleet.9 The car service OZOcar of New York City, uses all hybrid cars.9 Some airlines and travelers may offset carbon dioxide emissions by purchasing carbon credits.10
   
Resort destinations are going green too.11 For example both the Vila Sol Spa & Golf Resort in Portugal and the Amanthus Beach Hotel in Cyprus are known for their water management programs, while the Grecotel chain of hotels in Greece use water efficient organic farming. The Mosa Trajectum Resort in Murcia, Spain built its golf courses on biodegradable foam that is said to reduce water evaporation. The Proximity Hotel in Greenboro, NC, uses rooftop solar panels, captures rainwater to irrigate its gardens and grows vegetables on the restaurant roof and more. Finally, the URBN Hotel & Resort in Shanghai is a carbon neutral property—it tracks all energy consumed by the hotel and it offsets it by buying carbon credits.

The Big Green Apple?



Even neighborhoods are turning green. Union Square is considered New York City’s greenest neighborhood because it boasts eco-friendly dry cleaners, pubs that use recycled paper products, juice bars, greenmarkets loaded with local produce, and free yoga in the park.12
   
Even internet companies are doing their part—Google now offers green alternatives. Blackle and Darkoogle (www.blackle.com and www.darkoogle .com) are customized search engines with a black background instead of a white one. Each saves about 15 watts an hour.
   
The Dow Jones Sustainability Indexes were created in 1999 to track the financial performance of the leading sustainability-driven companies.13
   
Holidays are going green too. Last Christmas the Rockerfeller Center Christmas tree used carbon credits to help offset carbon dioxide generated during the tree-cutting process. It was lighted by 30,000 L.E.D. (light-emitting diodes) which need very little energy to operate. Furthermore, the L.E.D.s were powered by solar panels on top of 45 Rockefeller Plaza. After the holidays, the tree was made into lumber to be used by Habitats for Humanity.14 Department store Christmas window themes were also touting green. Barneys New York 2007 window theme was Rudolph the recycling reindeer.
    
Finally, even the health movement is going green as more consumers turn away from water bottles.15 This is just a small sample of how the green revolution is underway. Green products and services are everywhere. Green is a global trend—a global mega-trend to be more accurate.

On the Road to Green



Is your company capitalizing on green?” There are at least three major reasons for a company to turn green—growth/acquisitions, competition and customers/consumers.

In a competitive environment, companies must become more efficient at performing certain tasks. That improvement in efficiency is more often than not a movement toward green. If you perform a task more efficiently, directly or indirectly, you spend less energy—regardless of the task. Whether it is a marketing function like developing a concept for a product, an R&D function such as raw material sourcing or developing a formula, or a manufacturing function like packaging and distributing a product. Higher efficiency leads to less overall energy expenditure which together lead to an increase in overall economic returns.
   
Of course, as already noted, companies may become green by acquiring others. Last year, Estée Lauder acquired Ojon, a socially responsible company that markets hair care products formulated with ingredients collected by a hand-crafted process consistent with ancestral practices of an indigenous people—Tawira—living in the Central American rainforest. Then there’s L’Oréal, which was ranked as one of the world’s most ethical companies last year by Ethisphere magazine. The magazine offers insight on how to obtain sustainable competitive advantage through ethical business practices and corporate citizenship. In March, 2006, L’Oréal acquired The Body Shop, which is known for its ethically-sourced products. Six months later it acquired Laboratoire Sanoflore, a French manufacturer of natural cosmetics and essential oils. Less than a year ago, L’Oréal acquired Pureology, an earth-friendly, cruelty-free and vegan company that makes prestige products.
   
Companies that are not green should do so to keep up with their competitors. Many companies in our industry, including L’Oréal,  Estée Lauder, Kimberly Clark, Avon, Revlon and LVMH have extensive green programs in place which they advertise and tout every chance they get.
   
Finally, there are external, uncontrollable factors that are keeping your company on the road to green—customers and consumers. Customers like Wal-Mart, Carrefour and Boots. All of them are huge retailers with green initiatives of their own. Suppliers must meet these initiatives or lose their place on the store shelf. I discussed some of Wal-Mart’s green initiatives in an earlier issue of Happi.16
   
Now lets look at what Boots and many other European companies, mostly in the UK, expect from their partners. They expect carbon labels or carbon footprints on the products they sell. Figure 1 shows a typical carbon footprint. The carbon footprint logo shows the calculation of the amount of carbon dioxide expelled into the atmosphere as a result of the entire process that went into the production of the product. This figure indicates that 100 grams of carbon dioxide was expelled into the atmosphere as a result of putting this particular finished product on the shelf.17
   
Do consumers care? Well, more than 50% of UK consumers value information on a product’s carbon footprint when making a buying decision. However, less than 50% will use this information to switch to a product or service with a lower carbon footprint. What’s more, only 20% will inconvenience themselves to obtain such a product. Yet, Tesco pledges to have carbon footprints on every one of its 70,000 products on its shelves.17
   
Due to these external pressures, companies must become more green in order to stay competitive. As our customers and consumers become more green-conscious, they want to do business with partners who are also green. To sustain economic growth and remain competitive, our industry must meet the demands of the green consumers. These consumers will increase in numbers as green ideals are popularized—even if 60% of UK consumers do not believe a company’s green claim. But according to Perry Ellis Chairman George Feldenkreis, “investors seem to favor green companies these days” and “if Wall Street will pay for green, it means they think customers will pay for green.”18 


References


    1. Organic Consumers Association. Sept. 19, 2006. Natural cosmetics boom in EU, though debate continues over which brands are actually organic. Press Release, NPIcenter, Mississauga, ON, Canada.
    2. http://www.packagedfacts.com.
    3. Story, L. Jan. 6, 2008. Can Burt’s Bees Turn Clorox Green?  Sunday Business, The New York Times.
    4.  Bird, Katie. Nov. 13, 2007. Chemical Concerns Drive UK Naturals Market, www.cosmeticsdesign-europe.com/new, as retrieved.
    5. Deutsch C.H. Aug. 25, 2007. Green and fashionable. Business Day, Saturday Interview, The New York Times.
    6. http://www.worldwithoutus.com /about_ book.html.
    7. Nelson, R. March 26, 2007. Everybody wins: corporate responsibility programs that also “sell soap.” The Rose Sheet.
    8. Beauty Buzz. Dec. 2007. Limited Brands wins environmental award. Beauty Packaging, 12(8): 12.
    9. Rehfeld, B. Aug. 12, 2007. Now, even those temporary wheels can be greener. Spending, Business, Sunday Money, The New York Times.
    10. Howard, H. Decemb 30, 2007. The green squadron keeps growing. Comings & Goings, The New York Times.
    11. Kakissis, J. Aug. 19, 2007. Heads up, sustainable Mediterranean resorts. Trying to be green, with very little water. The New York Times.
    12. Ryzik, M. Aug. 19, 2007. A harmonic convergence in Union Square. Sunday Styles, The New York Times.
    13. http://www.sustainability-index.com/.
    14. Cortese, S. Dec. 2, 2007. I’m dreaming of an eco-Christmas. Suits, Openers, The New York Times.
    15. Williams, A. Aug. 12, 2007. Water, water everywhere, but guilt by the bottleful. Sunday Styles, The New York Times.
    16. Kromidas, L. and S. Eberhart. 2007. Retail Regulations. A tour of Wal-Mart’s new requirements for its legions of vendors. Household and Personal Products Industry (Happi), 44(9):56-60.
    17. Harvey, F. Aug. 13, 2007. A chance for shoppers to start counting the carbon. Financial Times.
    18. Deutsch, C.H. Aug. 25, 2007. Green and fashionable. Saturday Interview, Business Day, The New York Times.
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