From the November 2001 issue of Entrepreneur

Within weeks of taking office, President George W. Bush sent out a message: Business growth will be a higher priority than the environment. Bush acted quickly in pronouncing the Kyoto Protocol dead in the United States, angering leaders of industrialized nations who, alongside the previous U.S. administration, had hammered out what was to become the foundation of a treaty among 178 nations promising to lower greenhouse gases. At the same time, he pushed energy production rather than conservation as the solution to the energy crises on the East and West Coasts. By the 30th anniversary of the first Earth Day this past April, the environmental movement seemed to be losing ground, with business growth coming possibly at the expense of the environment.

Playing With Rainbows

But entrepreneurs like 26-year-old Darren Patrick aren't headed in that direction. Patrick may not have been demonstrating in Genoa against globalization, free trade or corporate pollution, but he is acutely aware of businesses' impact on the environment as he runs his business in San Antonio.

Patrick founded Rainbow Play Systems when he was 20; three years later he was a millionaire. Rainbow sells redwood and red-cedar residential playground equipment in 14 Rainbow stores throughout south Texas and Mexico. The company will ring up approximately $6 million in sales this year, but it's that success that makes Rainbow one of the nation's largest consumers of redwood.

"Since the onset of our business, we have always been concerned about our lumber purchases and the mills that fulfill them," says Patrick, who purchases lumber only from mills participating in sustained-yield programs that protect the population of the nation's redwood trees. But Rainbow goes beyond simply making an effort to sustain its own natural resources. The company uses its marketing program to educate potential customers about the benefits offered by sustained-yield programs. "These programs have been successful environmentally and, for us, by creating a sustainable resource," says Patrick. "Today, we have more redwood trees than ever before."

Patrick has unintentionally embraced the concept environmentalist Amory Lovins calls "natural capitalism." In his book, aptly titled Natural Capitalism, Lovins notes companies that eliminate waste and become more environmentally efficient prosper while their competitors that are environmentally inefficient fail.

Patrick, along with hundreds of entrepreneurs like him, is forging the next industrial revolution by following-intentionally or not-the four principles of natural capitalism: increasing productivity of natural resources, modeling industrial processes after biological systems, selling service-based solutions for the environment, and reinvesting in natural capital.

Learn more about social responsibility and business:

Green Makes Green

In the past decade, more companies have discovered that as they become more environmentally friendly, they become more financially attractive-a corporate makeover of sorts. As their numbers have increased, so has the evidence supporting their claims.

For example, a study by professors Michael Russo of the University of Oregon and Paul Fouts of Golden State University revealed firms with the highest return on assets went beyond competitors in terms of pollution control and waste reduction. Also, the environmentally sensitive financial analysts at the Dow Jones Sustainability Group Index discovered stocks of companies that account for their social, financial and environmental impact outperform the stocks of companies that don't. That study was supported by one by Innovest Strategic Value Advisors finding companies with superior environmental performance generate superior financial performance. And Vanderbilt University found that 80 percent of environmentally sound companies financially outperform their higher-polluting counterparts.

As these studies shore up Lovins' claims, natural capitalism is pushing its way into the pantheon of strategic planning. Yet the concept remains young (read: relatively unknown); therefore, most entrepreneurs stumble onto it. What starts as a concern for the environment and for government regulation evolves into sound management strategy, as employees and franchisees of Brian Scudamore's $10 million 1-800-GOT-JUNK? discovered.

Each year, franchisees of the company pick up tons of junk, primarily from homeowners who want to throw things out-after spring cleaning, for example. They haul away old TVs, wood, appliances and furniture. If Scudamore didn't care, they could just take the junk to municipality transfer stations to get dumped. End of story.

So to protect the environment and earn more money, 1-800-GOT-JUNK? recycles cardboard, paper, concrete, sheet rock, metal, tires, furniture, garden refuse, and the list goes on. "Our target is to recycle a minimum of 40 percent of all loads," Scudamore, 31, says. But there's even more to it than that.

"We've turned our recycling system into a profit-share system," says Scudamore, noting that greed-once environmentalism's perceived nemesis-can potentially be its ally. "Our people get 20 percent of all the savings from what they recycle. Instead of paying $120 to dump a load, they may pay $70 as a result of recycling. It's win-win-win for the company, the franchisee and the environment."

GREEN GIANT
Effusive 28-year-old dotcommer Josh Knauer laughs easily, especially about his prospects of becoming a father. Not that the prospect is funny. There are issues about diapers, sleep and time. It's not lost on him that come the end of the year, he'll be balancing the demands of a new family member with those of the company he founded in 1998, GreenMarketplace.com, which is growing at 15 percent per month. By the time his child is born, revenues from sales of 650 or so environmentally friendly products such as organic cotton sweaters and biodegradable laundry products should hit $3 million.

At least he'll have one less new-father anxiety: GreenMarketplace is promoting a better environment for future generations. Its products are made in ways that don't hurt the environment, are free of hazardous chemicals, aren't tested on animals, don't contain ingredients obtained in ways that harm or kill animals and are made by companies that respect their workers and pay fair wages.

Knauer didn't set out to be an e-tailer. He started EnviroLink, a clearinghouse of environmental information, resources and issues, in 1991 because he couldn't find sources for environmental research in college. That company quickly became the Net environmental portal of choice. Over time, Knauer heard complaints from the site's users about how hard it was to find enviro-friendly products. Sensing opportunity, he started GreenMarketplace.

From that first day, Knauer rested the company's foundation on a tripod: All corporate decisions must be beneficial environmentally, socially and financially. It's a strategy that has attracted attention in the dotcom world. Last year, when GreenMarketplace wanted to buy competitor EthicalShopper.com and relieve the space crunch in its 800-square-foot Pittsburgh facility, the company's mission attracted the attention of Sandra Bernardi, co-founder of Infoseek. She purchased a stake in GreenMarketplace that enabled the company to go through with the deal.

Who said it isn't easy being green?

Struggling to Be Green

Stumbling into natural capitalism isn't always an easy fall. Just ask Eloise Gonzalez-Geller, founder of Miami-based interior finishing contractor Commercial Interior Contractors Corp. (CIC). Her $1.2 million company does everything it can to help the environment. Employees write notes on waste paper. Recycled glass is used as an aggregate in the company's terrazzo floors, and CIC donates leftover tiles to a local school's art department. Then Gonzalez-Geller decided to expand her effort and successfully bid on removing carpet from government renovation projects, usually at airports, where it frequently contains trace amounts of jet fuel. But the program is a frustration: "No private companies will pay to recycle their carpets. It's cheaper to throw them in landfills," Gonzalez-Geller, 39, laments. "At this point, I'm losing both money and energy with the carpet-recycling project." Even so, she believes that in the long term, she'll overcome those companies' hesitation and earn not just environmental benefits but financial ones as well.

A Crackdown Cometh

Just can't bring yourself to care enough about natural capitalism's financial and environmental advantages? Take note: As an entrepreneur, you're the new target of federal and state environmental agencies.

Regulators increasingly view aggregate small-business waste as a potentially large source of air and water pollution, which experts say may lead to a crackdown. Therefore, it makes sense for entrepreneurs who aren't already thinking green to start.

As the environmental practices of small companies are placed under the microscope of regulators, you need not go it alone. A growing number of government and private-sector programs have been developed for the small-business market. For example, the EPA has a Web site tailored to entrepreneurs, marking an end to the purely adversarial approach of days past. It's a dramatic change.

On that first Earth Day in 1971, a canyon of enmity and misunderstanding sat between business executives and environmentalists. Thirty years later, that canyon has narrowed to a crack, which environmentalists and entrepreneurs easily hop. Maybe it's because today's entrepreneurs have greater control of their companies. Maybe it's because many of them are from a more environmentally attuned generation. Maybe it's because being environmentally sensitive is just the right thing to do. In the end, the reason doesn't matter. What does matter is that more entrepreneurs are discovering the benefits of natural capitalism. More are working to do what they can to strike a balance between business and the environment. In doing so, they'll not only preserve the environment, but they'll also create more efficient companies, a concept even Adam Smith would applaud.

Natural Resources

Natural capitalism has fostered the growth of organizations dedicated to environmental strategies that don't sacrifice profit:

  • Co-Op America is a coalition of consumers and small companies with social and environmental missions. The site has hands-on tools and resources.
  • Environmental Entrepreneurs (E2) was started by entrepreneur Bob Epstein for business owners who are concerned about the environment but don't know how to focus their energies. Hundreds of entrepreneurs have made the $1,000 donation to the Natural Resource Defense Council required to join E2. Periodically, Epstein asks them to write letters or to call influential individuals about environmental issues.
  • Greenpages.com is an online listing of companies selling environmentally friendly products and services.
  • Sustainablebusiness.com gives entrepreneurs information about companies it calls "Early Movers"-those businesses that are involved in eco-efficient practices.
  • The EPA has a special site for small businesses: www.epa.gov/smallbusiness/geninfo.htm. It provides documents and guidelines to environmental regulations as well as opportunities to participate in EPA programs. At www.epa.gov/opptintr/acctg, the EPA helps small businesses determine their environmental costs through the Environmental Accounting Project.
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Joseph Conlin is a Fairfield, Connecticut, writer who specializes in marketing, management and the business side of the Web for several publications.

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