Corporate Social Responsibility and Green Marketing

CSR and Green Marketing

Green Marketing and Corporate Social Responsibility

This essay examines green marketing and corporate social responsibility practices. In particular, the paper examines the practice of greenwashing, and discusses companies' willingness to exploit green marketing for competitive advantage. The essay also reviews the legitimate use of green marketing as a means of promoting responsible environmental stewardship.

Green marketing involves the promotion of products that are marketed as being environmentally safe or beneficial. The practice had its beginnings in Europe in the early 1980s when certain products were found to be harmful to the earth's atmosphere. As a result, new types of products were created, called green products, which were less damaging to the environment. The green product movement grew quickly in the United States and has continued growing steadily ever since (Green Marketing, 2011).

Also known as sustainable marketing, environmental marketing, and ecological marketing, green marketing consists of activities intended to take advantage of changes in consumer attitudes. More and more often, such changes are influenced by a company's policies or practices that impact the environment or show concern for the community. As a result of the breadth of opportunities, green marketing is applied to multiple product life-cycle stages. The development of ecologically safer products, biodegradable and recyclable packaging, energy-efficient operations, and better pollution controls are all aspects of product development subject to green marketing. For companies that look at all phases of their product life-cycle, the practice of green marketing introduces improvements to the entire process of the company's products, including processing, packaging and distribution methods (Ibid).

Green marketing may be an expression of a business' commitment to corporate social responsibility, or it may be little more than a marketing ploy. Eco-innovation and green marketing can lead to top line sales, differentiation, and improved brand equity. Green marketing is based on the assumption that potential consumers will view a product or service's greenness as a benefit, and base their buying decision accordingly. Along with the rise of green consumers, there is also an increase in ecolabeling, green advertising, and environmental reporting. This trend in turn creates an opportunity for just about anything to be marketed as green, from simple packaging changes to products and services that radically reduce materials and waste. (Montague, 2009).

Environmentally responsible marketing takes into consideration consumer concerns about promoting, preserving, and conserving the natural environment. Green marketing campaigns in turn highlight the characteristics of a company's products and services that provide superior environmental protection. Benefits of superior protection can be reduced waste in packaging, increased energy efficiency in the use of the product, or decreased emissions of toxins or pollutants during production. The Encyclopedia of the Environment notes that marketers are responding to growing consumer demand for eco- friendly products in the following ways:

By promoting the environmental attributes of their products

By introducing new products

By redesigning existing products

Marketing campaigns that highlight the ethical and environmental superiority of products have grown in recent years (Green Marketing, 2011).

While some businesses engage in green marketing only to enable their ability to make a profit, others operate in an environmentally sensitive manner because they feel responsible for preserving the integrity of the natural environment at the same time that they satisfy consumer needs and desires. True green marketing then practices environmental stewardship (Ibid).

Several factors account for businesses incorporating an environmental ethic into their operations. The single biggest factor is growing public understanding of the environmental degradation resulting from population growth and global natural resource consumption over the last 50 years. The issue is especially concerning in America, which is responsible for consuming one quarter of the world's resources while having only a small fraction of the world's population. Growing public sensitivity to environmental issues has been accompanied by a corresponding change of many American consumers' buying decisions (Ibid).

Businesses took note of the growth in green consumerism and developed new marketing campaigns to appeal to the new environmentally sensitive consumer. Those companies having product lines created in an environmentally friendly manner, such as using recycled products or emitting comparatively low pollutant levels, changed their marketing message to highlight their efforts and appeal to those customers who are most likely to appreciate their efforts (Ibid).

Many consumers are aware that companies make self-serving, even inaccurate green claims, and studies show that these consumers are more likely to view these claims with skepticism. Because of green consumer distrust, a company's reputation is becoming increasingly important for green consumers. Companies that engage in green marketing while at the same time engaging in practices that harm the environment are unlikely to gain a significant share of the green consumer market (Ibid).

The Gale Encyclopedia discusses the Federal Trade Commission (FTC) role in regulating green advertising claims. The FTC issued guidelines to help reduce consumer confusion, and prevent the false or misleading use of terms such as "recyclable," "degradable," and "environmentally friendly" in environmental advertising. The FTC provides the following guidelines for companies that wish to make environmental claims as part of their marketing promotions:

Qualifications and disclosures should be sufficiently clear and prominent so as to avoid deception.

Environmental claims should be clear whether they apply to the product, the package, or a component of either one. Claims should be clarified with regard to minor, incidental components of the product or package.

Environmental claims should not overstate the environmental benefit or attribute. Marketers are cautioned to avoid implying a significant environmental benefit where the benefit is actually negligible.

When a claim compares the environmental attributes of one product with those of another product, the basis for comparison should be sufficiently clear and should be substantiated.

FTC regulations give green consumers a basis for being able to believe green marketing claims. The regulations apply to all aspects and forms of marketing, including labeling, advertising, and promotional materials. The intent of the regulations is to insure that when a business makes an environmental claim, the business must be able to support the claim with reliable scientific evidence. Otherwise, a company claiming an environmental benefit that is unable to substantiate it leaves itself open to substantial penalties if a lawsuit is brought against the company (Ibid).

In addition to providing a basis by which marketing claims can be judged as false or misleading, the FTC provides guidelines to businesses on how to make specific claims about environmentally friendly aspects of their operations. One way the FTC does this is by clarifying the definitions of commonly used terms such as recyclable, biodegradable, and compostable. These guidelines serve to curb businesses engaged in misleading advertising practices, but they also clarify regulations that companies must adhere to (Ibid).

There is little doubt that green marketing abuses occur. SourceWatch defines green washing as the unjustified appropriation of environmental virtue by a company, an industry, a government, a politician or even a non-government organization to create a pro-environmental image, sell a product or policy. SourceWatch quotes another watchdog group, CorpWatch, as defining greenwash as "the phenomena of socially and environmentally destructive corporations attempting to preserve and expand their markets or power by posing as friends of the environment." Their definition was influenced by the group's focus on corporate behavior and the rise of corporate green advertising, but it is worth noting that governments, political candidates, trade associations, and non-government organizations have also been accused of greenwashing (Greenwashing 2011). TerraChoice, an environmental marketing company, conducted a study which revealed that almost all of the environmental claims made for consumer products are false or misleading. Organizations engage in greenwashing for a number of reasons including seeking to expand market share at the expense of rivals not involved in greenwashing. This tactic is particularly attractive when little or no additional expenditure is required to change the company's performance. Similarly, a company may engage in greenwashing in an attempt to narrow the perceived green advantage of a competitor (Ibid).

In an effort to minimize the effects of greenwashing, SourceWatch offers rules of thumb for detecting greenwash and testing whether the claims made by a company are credible. One such rule they advise is to follow the money trail, pointing out that many companies are donors to political parties, think tanks, and other groups in the community. Given that few companies disclose in their annual reports exactly whom they donate to, one has to ask about all their donations, not just the ones they boast about in documents such as the corporate social responsibility report (Ibid).

Another rule of thumb which SourceWatch advises is to test a company for access to information. Many companies which engage in greenwashing make claims about their commitment to transparency and providing information to stakeholders. Their reports typically refer to environmental impact statements, reviews, audits, monitoring data and other types of information. SourceWatch advised consumers and interested parties to ask to see this information, and understand that claims by the company that the information is commercially confidential is probably corporate speak for "no" (Ibid).

Based on its study, TerraChoice found that greenwashing is pervasive, and that its consequences are significant. They argue that well-intentioned consumers may be misled into purchases that do not deliver on their environmental promise. As a result, not only has the individual consumer been misled, but the potential environmental benefit of his or her purchase has been squandered. Also, competitive pressure that illegitimate environmental claims generate takes market share away from products that offer legitimate benefits, thereby slowing the penetration of real environmental innovation in the marketplace. Another consequence of greenwashing is its tendency to create cynicism and doubt about all environmental claims. Consumers, especially those who care most about real environmental progress, may be discouraged from believing any marketers or manufacturers; they may give up on the hope that their spending can be put to good use. Their withdrawal from the marketplace may eliminate a significant market-based financial incentive for green product innovation (Terrachoice 2007).

Still, there are legitimate instances of green marketing. TerraChoice explains the mechanism by which green marketing can accomplish the goals of competitive distinction and social responsibility. Green marketing is a convergence between green buyers and sellers, and more and more consumers expect to use their spending as a means of expressing their environmental commitment. When genuine environmental leadership is rewarded in the marketplace with market share, price premiums, public respect and increased visibility, it motivates all products to improve. Genuine environmental leadership uses competition and free enterprise to pull the economy toward sustainability (Ibid).

Yet another study found that many Americans believe products to be better for the environment than they are, based on research by strategy and communications agency Cone. Consumers continue to misunderstand phrases commonly used in environmental marketing and advertising, phrases such as "green" or "environmentally friendly." This misunderstanding results in giving products a greater halo than they may deserve. While 97% of Americans believe that they know what the terms mean, their interpretations are often inaccurate. According to Cone, more than two in five Americans (41%) erroneously believe that these terms mean that a product has a positive impact on the environment. Only 29% understand that the terms more correctly describe products with less environmental impact than previous versions or competing products. Survey results such as these highlight the potential effectiveness of green marketing, even while they point up the downsides (Environmental Leader, 2011).

While some companies may be guilty of attempting to exploit green differentiation from their competitors, others are refreshingly candid about their motives. They acknowledge that such initiatives as their having focused in recent years on global warming is driven by the opportunity for profit. GE Chairman Jeffrey Immelt acknowledged "We believe we can help improve the environment and make money doing it . . . We see that green is green" (Economist's View, 2005).

While many remain skeptical of companies' green marketing as an ethical commitment, green advertising agency owner Park Howell points to Wal-Mart's announcement of their green product labeling program as evidence of some companies' sincerity. In his article, Howell quotes the New York Times as reporting that Wal-Mart is on a mission to determine the social and environmental impact of every item it puts on its shelves. Furthermore, the Times reported that Wal-Mart recruited scholars, suppliers, and environmental groups to help it create an electronic indexing system to help it create its green product labels. Lending credibility to its initiative, Wal-Mart enlisted the aid of the Environmental Defense Fund to work with the giant retailer over the next five years to develop its sustainability index (Howell, 2009).

Howell poses the question what does Wal-Mart's green labeling program mean to the advertiser with product differentiation? He suggests that there could come a time when green and sustainable products will become the status quo. Howell also ponders whether Wal-Mart is the only entity capable of making sustainable consumption a retailing reality. He concludes that the outside scholars and environmental groups helping develop the Wal-Mart initiative think so. He also quotes Harvard Business, which argues that Wal-Mart's unilateral decision to put its purchasing and communication power behind going green shows that "a single company using its unique clout can accelerate public action to reduce greenhouse gases and reverse climate change" (Ibid).