10 Long Range Planning, Vol. 23, No. 6, pp. 10 to 16, 1990 00246301/90 $3.00 + .

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Printed in Great Britain Pergamon Press plc

Customers Drive Corporations

Green
Sandra Vandermerwe and Michael D. OllJf

This article discusses the dramatic growth of the ‘green’ the corporation itself and from stakeholders gener-
movement and some of the inevitable effects on business as it
ally.
becomes an integral element of consumer demand. Consumer
pressure forces legislation and manufacturers need to foresee
and prepare themselves for regulation. Companies need to The responses which form the basis of this article
establish a benchmark for future plans; identify the immediate were obtained from a survey of executives operat-
opportunities andrisks and plan for a broadrange of long- term ing in Europe, the U.S.A. and Canada, South
development.
America, East Pacific, Australia and South Africa.
About half the sample was European, while the
remaining 50 per cent was spread fairly evenly
among the other geographic areas. The survey set
‘We want to ease the strain of the car on the environment. We out to establish what multinational companies are
have requested our suppliers that they be capable of using
doing, particularly in the marketing, manufacturing
recycled material. That is a yardstick for us whether we will
and R & D sectors, to keep pace with the accelerat-
continue to use them in the future.’
ing demand from consumers for ‘green’.
Guntram Huber, Head of Engineering Mercedes Benz, Times
ofLondon, 4 June 1990. Analysis of the questionnaires and personal inter-
views revealed that firms now firmly acknowledge
Although a well worn theme, green has suddenly a connection between their ability to become more
and dramatically moved beyond the political, ‘green’ and to attract and keep customers, share-
regulatory, special group and fringe-niche market holders and employees. They are making ‘green’ an
domains to become a day-to-day concern and integral part of their immediate and long-term
influence on the decisions of growing numbers of strategies, actively seeking opportunities to outshine
ordinary consumers. Have corporations reacted to their competitors on a new ‘green’ industrial
this fundamental change in consumer attitude and, if landscape.
so, in which ways?
Several executives referred to economic implica-
In the past, managerial attitudes to anything green tions and trade-offs, particularly in industries in
tended to be defensive and reactive, a response to, which cost pressures are the basic drivers. They,
and compromise with, rigid regulatory dicta. nonetheless, accept the long-term benefits to be
Increasingly, however, corporate response to en- gained by replacing old notions of short-term
vironmental issues has been pro-active, preceding profits and efficiency for longer-term eco-friendly
and even pre-empting legislative action. goals.

The results of a recent research project involving 100 ‘Green’ is of course shorthand for a whole array of
executives in international consumer and industrial issues, which respondents described in several ways,
situations adds further confirmation that the entire around four central themes:
green phenomenon has, indeed, impacted upon
corporations’ strategic planning and operational depletion of natural and scarce resources through
procedures. The pressure to do so is now pervasive, bad and excessive production and consumption
coming not only from consumers but from within activities.

waste accumulation and emissions because of

Sandra Vandermerwe is Professor of Marketing and Services and production processes, the use of hazardous
Michael D. Oliff is Professor of Manufacturing Management and
materials, fast replacement consumption pat-
Director of Research at the International institute for Management
Development at Lausanne. terns, and usage, reusage and disposal habits.
 Customers Drive Corporations Green 11

Q unhealthy products and side-effects arising from customers now demand to know about the
unhealthy environments, materials used, and ‘green’ aspects of the companies in which their
improper choice and use due to uninformed funds are invested.
consumer decisions.
increased acceptance by customers of recycled
* unsafe, unpleasing work environments, due to goods and packaging. MacDonalds’s is develop-
inadequate safety management, and lack of ing a replacement for their well known ham-
appropriate aesthetics. burger packaging in Europe and in the U.S.A.
using recycled plastics and paper for trays and
kiddies’ promotions. A California firm, Encorel,
has killed the belief that new wine can not come
in old vessels. It grosses $3m a year by collecting
Shifts in Consumer Demands and sterilizing cases of empty wine bottles and
Pressure from political and consumer groups, media selling them back to wineries.
coverage plus what can simplistically be described as
the range of demand for green products, which
‘new age’ social values about the well-being and
now encompasses unbleached coffee filters,
inter-relationship of the individual and the environ-
green diapers, biodegradable paints, and upscale
ment, have led to mounting consumer support for
furniture from renewable tropical hardwoods.
‘green’. Some ‘green’ products have been around
The London based Body Shop, which sells
for years, but only in countries where legislation
toiletries, historically an unsuccessful ‘green’
requires their use. It is only recently that many
product area, offers cruelty-free, minimally
consumers actually prefer to buy these products.
packaged natural ingredient products to cus-
While specifics and pace, of course, differ depending
tomers in over 500 stores in 35 countries. Some
on products, market, and country, consumer re-
of these products are more expensive than
sponse has been more positive, rapid, and dramatic
alternatives. Sales for the year ended February
than expected. Here are some observable trends:
1990 grew by 52 per cent to L84*5m, with
the rapid diffusion of ‘green’ products from small pretax profits up 29 per cent.
specific niches to the mass market. For example,
the growing numbers of ‘green’ consumers who
the first non-phosphate detergents appeared on
cut across age and income groups. Even the over
the German market in 1986. By 1989, their
55 year olds are starting to change their habits.
market share had risen to 80 per cent.
For instance, in the U.K. people in this age
larger numbers of customers showing preference bracket are starting to favour unbleached lava-
for pro-green firms, discarding stores, brands tory paper. The young market is equally enthu-
and corporations not regarded as ‘green’ siastic and the baby-boom generation who now
friendly, with larger numbers prepared to pay have families are said to have become ever-more
for a better environment. In the U.K. it is ‘green’.
estimated that almost a third of all adults are
paying premiums of between 15 per cent and 50 All respondents agreed that their customers have a
per cent for organically sourced foodstuffs. The new set of ‘green’ demands. They described these
same principle applies to investors. One respon- around some well known issues which can be
dent remarked that in financial services, unit grouped into either the input (process) or output
trusts which contain 100 per cent environ- (product/services) dimensions of the business system
friendly companies are being promoted and that (see Figure 1).

INPUT OUTPUT
(Process) (Product/Services)

How Things are Made and Product and New Market

What Materials are Used Offerings and Managed
Post-production/
Post-purchase Activities

Figure 1. Changes in customer green demands

12 Long Range Planning Vol. 23 December 1990

Changes in How Things are Made and What date a more general generic market need across the
Materials are Used board.
Customers now demand ‘clean’ and energy saving
production processes from their suppliers. They The major adjustments reported by respondents are
want potentially dangerous materials used in the illustrated in Table 1.
production process replaced by those which mini-
mize harm to users, and are more in line with
Table 1. Main green adjustments to marketing
present-day ‘eco-compatible’ values. Increasingly,
they want assurance that processes and materials % of respondents
used by suppliers guarantee worker and user safety, replying to question
minimize waste and emissions, and maximize (90 in all)
potential to dispose, re-use, and recycle the waste
Changes to existing products or 92
and final products. Printed circuit boards in com- new product offerings
puters, for example, were once cleaned by using
Public relations, advertising and 78
lethal solvents. The industry has now moved to a
information campaigns refocused
totally non-toxic yet equally efficient process.
Packaging, labelling, point of 50
Leading wood furniture manufacturers are begin-
sale and techno-information
ning to advocate that timber bc purchased only changes
from those countries which support and practice
New support services and 38
responsible reforestation techniques. Finished pro-
consulting
ducts are subsequently labelled as such.
Price adjustments 19

Changes to Existing Products, New Market Ofirings

and Managed Post-production and Post-purchase
Activities Product and new products. The main issue in market-
Customers expect products offered for sale to be free ing is clearly related to the product itself and not to
of harmful ingredients and materials that cause the process. Ninety-two per cent of the respondents
environmental pollution or that endanger the well- say some change is being made to their existing
being of users. There is a swing to natural and portfolio, new lines, concepts and additional pro-
renewable ingredients and materials that not only duct features. It is obvious from their responses that
prevent damage, but enhance well-being. In every product changes go beyond legislation, for over 40
field, at both industrial and end user level, con- per cent of the respondents refer to new oppor-
sumers are asking for more ‘green-friendly’ pro- tunities for their products and services. Equally
ducts, product attributes, and marketing concepts, revealing, is that these changes, they claimed, are
with services to facilitate longer life, e.g. re-use, re- now an integral part ofproduct planning rather than
conditioning, recycling and end-of-life waste and a peripheral activity.
disposal management. Recycling of a variety of
materials has proven to be not only environmentally ‘Green-friendly’ as a product concept is a clear
sound but economically worthwhile. Amongst priority. It manifests itself in discussions in several
materials now typically recycled, and marketed as different ways, depending on the industry. Some
such, are glass, yard waste, plastics, paper and examples mentioned were: biodegradable (paper,
aluminum. Since turning bauxite into aluminum is chemicals, packaging), renewable (wood), mini-
10 times more expensive than simply reprocessing mize side effects (pharmaceuticals), natural/natural-
used aluminum cans, it is no wonder that more than based (clothing, carpets, paint), nutritious (food),
50 per cent of all soda cans are now recycled. smaller, (domestic electronic and home appliance),
energy saving (elevators), emission reducing
(videos), capacity increasing (trains), ergonomic
(computers).
Major Adjustments to Strategy
Many executives are adjusting their overall corpor- Two changes were widely reported: first, the
ate strategies to meet these ever-increasing ‘green’ elimination of hazardous materials and ingredients
customer demands. Below are the main adjustments in their core products; and, second, longer life, easy
to marketing, manufacturing and R & D that to use durables containing eco-friendly materials
respondents said are underway within their com- designed to be returned, reconditioned, reused,
panics. recycled, and removed, either in whole or in part, at
one time or over time.
Marketing
Firms are working on two distinct fronts. First to Public relations, advertising, sponsorships and inform-
capture the now substantive groups of consumers ation campaigns. Approximately 78 per cent of the
who want specific ‘green’ products and innovations. respondents refer to changes to advertising and
Volvo, for example, will launch the first ‘green car public relations strategy (PR) and increased inform-
in 1993. Simultaneously, corporations are adapting ation campaigns to improve the ‘green’ image of the
strategies in all product/market areas to accommo- company. About 30 per cent mentioned that they
 Customers Drive Corporations Green 13

are now sponsoring ‘green’ causes. The main change producis and processes, how to use them, avoid
in PR, advertising and information to stakeholders waste and emissions, recycle and safely dispose. At
is that it now focuses on the ‘green’ aspects of the both industrial and end-user levels, services are
company and its products. One example is BMW being offered to prolong life of products, improve
who currently promises in its advertising that all of installations and return products for disposal, refill-
its cars, irrespective of price, will run equally well on ing, reconditioning and recycling.
unleaded or leaded fuel.

Price. Price adjustments were mentioned by 19 per

Some firms are correcting misconceptions about
cent of the respondents. Clearly, these price adjust-
their products, while others are actively positioning
ments are upward to customers who are willing to
themselves as ‘green’ friendly. Varta, the battery
pay more. A major concern is whether costs can be
manufacturer, used a skillful combination of adver-
recovered in the short-term or if, in fact, these
tising and public relations to successfully establish a
adjustments can be justified based upon inreased
‘green’ image in Europe and launched a mercury-
marketshare or longer-term strategic objectives.
free battery in Germany, Sweden, Norway and the
U.K.
Manufacturing
A general point expressed by respondents was this:
Whereas in the past the major focus for manufactur-
going ‘green’ means little to corporations unless ing was safety, liability or clean-up, the switch now
stakeholders know about it through powerful
is to new techniques and processes that facilitate the
communication and information campaigns. On rising ‘green’ wave. Executives stated that while the
the other hand, no amount of PR or advertising will projects with potential ‘green’ benefits are being
help firms if genuine adjustments to strategy are not speeded up in their firms, others which don’t fit
in place. ‘green’ strategies are being dropped. The main
adjustments to manufacturing are shown in Table 2.
Packaging, labelling, point of sale and technical manuals.
A change in packaging, labelling, point-of-sale
material and manuals was mentioned by 50 per cent
of the executives. Traditional wrapping and protec- Table 2. Main green adjustments to
manufacturing
tive containers are being revamped or minimalized.
Firms are actually on the lookout for ‘packaging- % of respondents
free’ solutions and more efficient use of paper and replying to question
space for both retailers and end users. A Danish toy (89 in all)
manufacturer reports that they are avoiding ‘one
Changes to existing production 85
use, one way’ point-of-sale material, while Migros,
systems
the Swiss retailer, has eliminated superfluous layers
of packaging on everything from yogurt to tooth- New production processes, 81
plants and materials
paste boxes.
Waste recycling and disposal 78
management
One executive in the computer industry mentioned
that his firm is in the process of eliminating full
trailer loads of paper documentation and manuals
traditionally shipped to each new installation site.
Existing production systems. Eighty-five per cent of
Currently, the weight of user and technical docu-
the executives said their firms are modifying their
mentation far exceeds the actual weight of the
existing production systems. For some this involves
mainframe and peripheral products themselves.
abandoning past practices which, driven by ‘least-
cost’ strategies, have resulted in hazardous transfor-
Packaging changes include safe materials, lighter
mation processes. These executives cite the drive
packaging, reusable and recyclable packaging, and if
toward cleaner production systems and processes.
not recyclable, packaging which contains materials
Some aim to have zero emissions, others refer to
that are environmentally disposable. Adaptability
investments in emission reduction programmes,
and multiple use for packaging is also on the priority
tighter controls, and information systems to moni-
list. Changes to labelling and point-of-sale inform-
tor and prevent discharge and pollution problems.
ation have become equally important. Better in-
Chemical processing plants are increasingly being
formation on content of products and packages,
forced to install sophisticated and complete early
how to use products, warnings on dangers of use
warning systems to avert potential environmental
and information on side effects and disposal were
repercussions.
mentioned most often.

Support services and consulting. About 38 per cent of New production processes, plants and materials. The
the executives referred to new consulting services redesign and purchasing of new plant, and equip-
and central ‘support centres’. These sites have been ment in line with ‘green’ programmes was cited,
introduced to train customers on new ‘green’ with several comments about worker safety and
14 Long Range Planning Vol. 23 December 1990

welfare as being an important part of these plastics for used cars, household appliances, constru-
equipment and plant decisions. Factories are being tion wastes and chemical by-products. These were
built with minimum environmental visual impact. the adjustments executives mentioned most often, as
Old plants no longer suitable are being closed, shown in Table 3.
renewed, or replaced by more suitable facilities.
Safety and protection programmes include funda-
mental changes in materials used, new worker
protective measures, the automation of dangerous Table 3. Main green adjustments to research and
processes and intensive training. development

% of respondents
Investment is taking place in ‘milder’ production
replying to question
processes, eliminating dangerous production phases,
(82 in all)
delivery and storage activities. Energy conservation
has become a priority in production, including New products and product 79
using less energy consuming equipment, materials concepts
and better insulation of buildings. Minimizing raw Alternative production methods 63
material wastage is also being given priority. and processes
Dangerous, and potentially dangerous, materials are Raw material replacement 59
being phased out of the production process. programmes

Waste and recovery technologies 33

Chloroflurocarbons, used in refrigerators, air condi-
tioners, insulating foam and packaging materials,
aerosol sprays and cleaning agents for materials
from computer chips to dirty clothes and which are
known to be destroying the ozone layer, are the New products and product concepts. Just under 80 per
most well-known examples of such ingredients. cent of the executives talked about research and
Despite the fact that greater natural content tends to development efforts in new products and product
result in quality control problems due to greater concepts. Mentioned most often by 75 per cent of
price fluctuations, firms are still using more natural, them was end-user products which are recyclable or
mild ingredients and pollution-free, recyclable bio-friendly. Fifty per cent mentioned new designs
materials in their manufacturing process and in their which, in addition to being improved and stronger,
output. are low on noise, low on packaging content, easy to
use and transport, smaller, low on power, labour
Waste recycling and disposal management. Waste, saving and light weight. Some executives referred
recycling and disposal management was mentioned to new product concepts. For instance, as energy
by 78 per cent of the executives. It involves efficient alternatives to cars and jets, the develop-
identifying waste for removal, processing waste, ment and promotion of high capacity and high
finding secondary waste markets, transporting it, speed designs in the rail transportation industry.
and clean disposal. Firms are automating recycling
processes and integrating waste management into Alternative production methods and processes. As one
their training programmes. German industrialist put it, ‘products using old
technologies are out’: they must be ‘environ-
A classic case study is McDonalds in Europe. They friendly’. This kind of remark was not limited to
are implementing the entire waste system for quick executives from eco-advanced countries. One
service restaurant waste from the raw material to the executive working in Poland was equally adamant
disposal. The objective is to reduce their input to the that the race is on to find alternative safer, cleaner
waste stream to zero by standardizing packaging production technologies, a point made generally by
material, reducing weight and volume, performing 63 per cent of the respondents. The focus is on
manual and chemical separation, recycling, reusing, developing processes with less harmful material and
finding waste markets and cornposting. toxic ingredients, for instance using biologically
rather than chemically derived ingredients.
Research and Development (R G D)
R & D is producing the technologies to drive and Raw material replacement programmes. ‘Green’ mater-
support current ‘green’ strategies. Seed and ‘green- ials for utilization and manufacture are being
house’ programmes are under way to generate researched and developed according to 65 per cent
future projects. The real challenge is to find of the respondents. Firms have also embarked on
technologies that make marketing and manufactur- long-term ongoing materials development pro-
ing efforts economically viable. grams to identify the ‘green’ materials of the future.

Several executives remarked that they were Waste and recovery technologies. Thirty-three per cent
involved in joint R & D programmes and alliances. specifically mentioned waste and recovery techno-
West Germany’s three biggest chemical companies logies. These include waste handling and control
have now joined forces to research the recycling of processes for customers and internal use.
 Customers Drive Corporations Green 15

Framework for Making Green cycle of the product. Technologies may be found in-
house or from outside. In each case, R & D will be
Decisions fundamental to long-term strategy as ‘green’ con-
Although ‘green’ adjustments to marketing, manu- cepts are incorporated at the outset into basic designs
facturing and R & D strategies have been discussed to minimize costs and maximize effectiveness.
separately, they are becoming part of one integrated
system within firms (see Figure 2). What ‘green’ strategies call for is total lifelong
product involvement and liability from corpor-
Each part of the business has its own task to perform. ations, as one executive put it, ‘from cradle to
However, the challenge will be to design one grave’. This ‘cradle to grave’ concept raises some
integrated business system and get the once distinct interesting questions. For example, who takes
functions to converge and work closely together on responsibility for each part of the chain from
prioritized projects with dedicated resources. Per- development to disposal? Will this be the lead
formance measurements and rewards will have to manufacturer or a collaborative effort across firms
match new goals while internal marketing and and industries? How will new roles and relation-
training will need to ensure that ‘green’ is under- ships be integrated into corporate and industry
stood by personnel and becomes part of the structures on a worldwide basis?
corporate creed. Pursuant to these goals, many
executives mentioned that specific, new positions
were being created amongst board and senior
management to prioritize and co-ordinate ‘green’
issues on global and local levels.
Conclusion
In this article we discuss the rising ‘green’ tide and
Marketing’s key responsibility will be to establish some of the impacts on business. This ‘tide’, once
what customers want today, how they are likely to limited to a few niche groups in certain countries,
respond to alternatives and what to put on the exaggerated by media hype and restrained by
agenda for the coming decades. The signals suggest corporate hesitation, has now become a generic
that the demand for ‘green’ is widespread. How- factor in consumer demand.
ever, markets will respond at a different pace and
careful creative marketing efforts will be critical to Even if it is difficult to see where the legislative
success. For manufacturing, the task is to find the pressure ends and the consumer pressure begins,
processes and systems that deliver effective products manufacturers can no longer afford to ignore the
that are cost-competitive and that facilitate the long-term market share and regulatory ramifica-
consumer relationship throughout the whole life- tions of the ‘green’ movement. In fact, individual

Marketing What do/will Customers

Want us to Make7
How will they Use/Reuse/
Dispose of and When?

What Product/Process/M
Technology is Needed to
Support/Drive This?

Manufacturing

What/How do we Make, Store,

Deliver, Maintain, Recycle,
Dispose of Our/Customer’s
Products/Components/Materials?

Figure 2. Framework for green decisions

16 Long Range Planning Vol. 23 December 1990

companies should explicitly address the following Consumers Go Green, Advertising Age, p. 3, 25 September (1989).
questions and set the related goals: Decent, Clean and True, Management Today, pp. 5660, February
(1989).
(1) Have you audited your company’s performance
Economic Instruments for Environmental Protection, OECD, Paris
on both input and output related green issues? (1989).
Have you assessed your competitors’ green
The Environment: A Corporate Challenge, Newsweek, Special Adver-
performance? tising Section, 21 May (1990).
Goal: Establish clear benchmarks for desired
The Environment: Politics of Posterity, The Economist, pp. 624,
performance. 2 September (1989).

(2) What leverage points in your business could The Environmental Business Handbook, edited by Euromonitor,
provide strategic advantage by investing in London.
greenness, both in products and processes. What Environmental Regulations: Green, Greener, Greenest, The Eco-
are the pressure points in your business that are nomist, p. 67, 6 May (1989).

most vulnerable to green trends? Environmentalism: The New Crusade, For&me, pp. 24-30, 12 Febru-
Goal : Identify immediate opportunities and ary (1990).
risks of the green wave. Generating Profits from Waste: Economic Incentives for Waste
Management. Economist Intelligence Unit (1989).
(3) From each perspective-marketing, manufac-
Good to be Green, Management Today, pp. 46-50, February (1989).
turing, R & D-what spectrum of scenarios
could occur over the next decade? Could Green Economics, The Economist, p. 48, 24 June (1989).
significant portions of your market base go How Green is My Portfolio, The Banker, pp. 131-I 32, November
green? (1989).
Goal: Extend strategic and organizational con- How Green is Your Company? International Management, pp. 24,27
tingency planning to encompass a broad January (1989).
range of possible long-term green deve- Industry and the Environment: A Financial Times Survey, The
lopments. Financial Times, 16 March 1990, 21 April (1989).

Managing the Environment: The Greening of European Business,

(4) Have green investments been included in your Business International, pp. 3-209 (1990).
capital budgeting criteria?
Ozone Savers, International Management, pp. 4445, April (1990).
Goal: Evaluate the pros and cons of going
green, and examine the tradeoff between The Perils of Greening Business, The Economist, 14 October (1989).

current investment and long-term price Regulations: Surviving in the Green Decade, Pulp &Paper, pp. 80-81,
recovery. Assume that the ‘cost of green’ January (1990).

in the late 1990s will parallel the cost of Renewable Natural Resources-Economic Incentives for Improved
quality in the 1980s. You and your Management, OECD, Paris (1989).

competition will be forced to quantify it Seal of Green Planned: Environmental Group to Give Product
Approval. Advertising Age, p. 3, 20 November (1989).
explicitly.
Simon, Julian, The Ultimate Resource, Princeton University Press,
Princeton, New Jersey (1981).

Supermarkets Find Green is the Colour of Shoppers’ Money, The

Guardian, 24 June (1989).

There’s No Biz Like ‘Eco-Biz’, InternationalBusiness Week, pp. 1665,

References
18 June (1990).
Recent books and articles which have dealt with various aspects of the
Trashing a 150 Billion Dollar Business, Fortune, pp. 64_68,28August
green movement include:
(1989).
Being Green Pays Off, industry Week, pp. 62-64, 7 August (1989).
What the Greens Mean for Business, Fortune, p. 159, 23 October
Buried Alive, Newsweek, pp. 48-54,27 November (1989). (1989).