Natural Order

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?

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This article was originally published in the November 2001 print edition of Entrepreneur with the headline: Natural Order.

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