The Green Half-Truth

Well, truth be told... it's not as pink (or in this case green) as it seems. And today I'd like to tell you something about the state of green in consumer technology (CE) and why actions such as Apple performs them, won't help but touch the surface of an industry wide problem. But let's start from scratch!

The Concept of Green

Green, alike other social responsibility ideas has come and gone in the past and so companies often did well in waiting to sit out the storm. This time however early signs show that things might be different. Long-term research results now proof with little doubt that exhausts or used materials from manufacturing operations have negative effects on our environment causing the like of melting polar caps, global warming etc. and companies would face a tough fight if they tried to neglect this. Proactively facing the big question therefore seems a more reasonable approach for companies.

Recent years have therefore seen a rise in Green initiatives of companies in the consumer electronics industry. Companies such as Apple announce ambitious plans to reduce their carbon footprints or use better recyclable materials (e.g. Source) - clearly communicating the message to consumers that companies have realized how responsible behavior of an industry, which like no other is shaping our generation, has become.

In itself there is not much to argue here and that is why every be it yet so little initiative of companies is reeted with much enthusiasm. Since we at The Lens however like to take an academical approach, it should not be neglected that a Green image might according to theory even bear certain benefits to profit seeking companies (Maignan et al., 1999 or Elkington, 1994):

A) Better company reputation through a positive consumer perception

B) Some customer segments are willing to charge a premium price for Green

C) Higher company employee motivation through greater identification with the company’s values

D) Tax benefits dependent on government stipulations

Seeing these benefits, it becomes clear that going Green is a lot like giving to charity. It's not like you gain an immediate RoI on the money you give, but tax reductions, appreciations or increased corporate image will one way or another allow for favorable results. It is therefor understandable why especially companies in direct contact with consumers are often not shy of advertising a new Green image.

While arguably this still laudable, unfortunately it is little more than the tip of an iceberg. A farce if one was to put it bluntly. The problem is that behind the companies selling us the gadgets we all love lies a sleeping giant - a wide array of related industries, companies and players that have little incentive to go green.

Why not?

To answer this question one should have another look at the benefits. The most prominent benefits all involve the consumer. A positive consumer perception is often the starting point allowing for differentiation. In a densely populated and very competitive market as CE, such differentiation could eventually decide over winners or losers in the market. But imagine the following:

An average consumer going to a big electronics store about to buy a new computer. Today the average consumer has a vague idea of what brand they want - so let’s say they have narrowed down their choice to either a Samsung or Acer laptop. A more computer affluent friend has also told them that technology moves fast and they will probably have to buy a new computer every 3 years! The same friend also told them to make sure it has an “Intel Inside” and maybe a “NVidia” graphics chip, since those stand for high performance and good quality. Oh and please add minimum 2GB RAM!

My best guess is that more than 70% of potential buyers have about this set of information. So what does that tell us? They know of the company behind the end product and to a certain degree of major component manufacturers that have managed to brand their way into the consumers' mind.

Now assume that our purchaser is concerned with the environmental footprint of his computer as well (which at this point is still rare though). Since Samsung has realized that consumers are starting to get interested in this aspect they have improved the material of the laptop’s shell to be built of environmental friendly magnesium and advertise this with a big logo on the cover. The consumer happily notices this and is now convinced that this computer fits his needs perfectly even having a good conscience about its environmental friendliness.

But that is just a mere hypocrisy! Companies, which consumers aren’t even aware of, will still manufacture major parts of the computer. Now you tell me, what incentives they might have to go Green. Since average consumers don’t appreciate them equally, branding is of minor importance to them and therefore the benefits of going Green are drastically reduced. Of course other benefits like tax reductions would potentially still be interesting, but let’s face reality. The industry of CE is very competitive and what seems to be replaceable to consumers is facing tough competition leading to price wars as bloody as they can get. If western companies have not given up on producing such parts altogether, they most certainly produce in low cost labor markets where regulations/tax systems work differently anyways.

I am sure you can see where I am getting at and rest assure that the example I picked is just one out of many possible. Think: “What percent of cellphone buyers know which company is manufacturing their phone’s antenna” or “Who is manufacturing the radio chip in their new TV’s remote control?”

An uninformed consumer, lack of branding and high price pressure from companies in the later stages of a product’s value chain therefore are just three reasons why many B2B companies aren’t on the same train yet and therefore claims of that a CE product is “Green” can only be considered half-truth.

Do we actually want these companies to go Green?

Another issue, so far left entirely untouched is the question whether we actually want those companies in the early stages of a value chain to go Green. And while every single person has to decide for himself, I want to try and paint a picture as managers might see it.

While about 90% of customers are stating to appreciate Green, only 10% of them actually would be willing to pay a price premium for it (BBMG's New COnsumer Report). Winston et al (Source) therefore pronounce Green the third button after price and quality, implying that it is still far from deciding. Especially considering continuously shortening product life cycles in CE this seems understandable since consumers face repurchase decision every 2-3 years. A company will therefore put most effort in selling to the price sensitive and medium price sensitive segments that make up the majority of the market and have little interest in paying an extra for Green products.

With numbers as they are, it seems that the majority of consumers don’t want those companies to go Green just yet. Even though for many it might be more on a subconscious level as they don’t know the consequences.  And I am pretty sure that many of us wouldn’t appreciate the rise in prices in times that celebrate products, which are manufactured and sold at cost level like the Galaxy Nexus 7 Tablet or the Kindle Fire. It is hard to see a Green company selling a product at such levels. After all caring for the environment needs investments and those have to be financed somehow.

Final Words:

Before anything, it is important for me that people know I am not an environmentally unaware person hating everything that is Green. Rather the contrary, but it was important to me to explain some issues that in fact many industries and businesses are facing today. I am aware that my article is therefore very pointy and uses a drastic picture and am also aware that for example China has started to give incentives for greener manufacturing (Source).Thus I am not blaming China in any way, however in my opinion current actions by governments, companies and consumers are just insufficient. Real change will only occur if the gross of consumers becomes less superficial about the environmental footprint of products they buy, component manufacturers embrace a stronger branding approach and consumer companies will enforce a Green policy backwards into their value chain. Meaning that their suppliers have to maintain certain green standards.

I am sure there are many people sharing or opposing my views so I am more than happy to discuss them with you.