Report: Green Business Leads to a Greener Bottom Line
Providing eco-friendly and sustainable products and services appears to give small businesses a competitive advantage, according to a new report by Green America, EcoVentures International and the Association for Enterprise Opportunity (AEO).
Nearly four out of five (79 percent) of the small businesses they surveyed say offering green products and services gives them a leg up on their rivals. Meanwhile, three out of four say sales for green products and services increased over the past few years, despite the economic downturn, and plan to add more to their portfolio. What's more, the greener the business, the greener its bottom line. Businesses that show a stronger commitment to green services and practices report higher sales, the report finds.
The report is based on a survey of 1,305 small businesses that identify as selling green products or services, as well as follow-up interviews, conducted from June to August of 2012.
Respondents are broken down into three categories based on their level of green commitment. "Deep green" businesses (27% of respondents) heavily market their products and services as green while also implementing sustainable practices in their own operations. In contrast, "light green" businesses (38%) present their goods as "environmentally friendly" and generally don't follow sustainable practices. "Mid-greens" (35%) are somewhere in between.
"Deep green businesses outperform less green businesses on nearly every dimension we tested, including revenue growth, product profitability and as a real source of competitive advantage," says Tammy Halevy, senior vice president of new initiatives at AEO.
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These deep green operations are able to charge a premium on their goods and services, and are more likely than the light greens and mid-greens to say they plan to expand their green offerings.
While the report finds that the green segment has grown strongly across all industries over the past 10 years, some have performed better than others. "Across industries, the difference in growth rates was material," says Halevy. For example, the green construction industry, which includes new and retrofitted LEED-certified structures as well as green-certified building materials, has grown by an incredible 1,700%. Renewable energy and hybrid vehicles have also seen strong growth, while socially responsible investing has seen the least.
Although offering green products and services might seem more costly for your business, the report finds no measurable difference in profit margins between green and non-green businesses. This is likely due to the fact that businesses can charge more for green offerings.
"Eighty-nine percent of the respondents indicated that their green products and services were at least as profitable as their non-green [ones], and almost a third reported that their green products and services were more profitable," says Halevy.
Overall, the authors of the report feel there are big opportunities for small businesses that are willing to work to achieve the deep-green level.
"We believe that the market preference reported by the small businesses in this study is just the tipping point," says Russ Gaskin, chief business officer of Green America. "Sustainability is fast becoming a competitive imperative in business."
Liz Webber is the insights editor at Enterpreneur.com, where she manages the contributor network.