GREENtrepreneurs: The Challenge & The Opportunity (Part 2)

11/15/10

[Editor's Note: the first part of this guest post ran on Friday.]

Governments, Law and Regulations, Oh My! One of the hallmarks of the growth of the Internet was a lack of government regulation or involvement. While not the case for all green businesses, many of the larger opportunities and business sectors look to government actors as partners in their growth and long term positioning. Today’s GREENtrepreneur that isn’t thinking about the role government plays in the startup is probably missing tax credits, a grant opportunity, a key regulation or a contracting partner. Weaving a small company into and through the tangled web of government involvement is often a necessity, but may limit the ability to be agile and lean when growing the business. As I noted in Green Entrepreneur Handbook:

“The influence of government on green business cannot be understated. From grants, environmental small business loan programs, loan guarantees, tax credits, government contracts, regulations and general purchasing patterns, the federal and state governments of the United States have made support of green businesses a key priority. Outside of the U.S., governments throughout Europe and Asia have made environmental support key components of their own regulatory and spending programs.

Unlike technology sectors such as software, computers, biotechnology and medical devices, green business is heavily reliant on the involvement of the government to continue the growth of green businesses. For example, the combination of production tax credits (PTC) and renewable portfolio standards has been responsible for much of the growth of the wind industry. The threat of the expiration of the PTC led to changes in investment and development behavior. And the wind industry is not alone. Sectors from biofuels, solar, hybrid and alternative fuel vehicles have each seen their growth hinge on various aspects of government involvement in these industries.

Economist Lord Nicholas Stern estimates that almost $400 billion of the approximately $2.6 trillion in economic stimulus allocations announced so far by G20 nations are earmarked for clean technologies such as renewable energy, improved electrical grids and cleaner cars, with investments of over $52 billion being made by China and over $80 billion by the United States. At the start of 2010, cleantech grant experts Skipso has identified at least $26 billion in grant and other programs currently available for green businesses, and billions more appear to be on the way. With the wealth of funding available and to be made available in the coming years, understanding government funding is a must for any green business.”

Consumers still don’t quite “get it.” Walk down the street and ask someone if they “buy green.” I’d be pretty confident the respondent would tell you they most certainly try to buy green. This has caused some GREENtrepreneurs to overestimate the market or the speed of adoption of the products (or at least have a difficult time getting a good read on the true market opportunity). Green businesses face a major long-term challenge: How to make consumer sentiment match consumer buying patterns. That challenge means green businesses must create a product that is not only functionally superior to the product it replaces, but ALSO has substantial environmental benefits. That’s no easy challenge. As mentioned in the book:

“Eighty-two percent of Americans said they are buying green, according to a 2009 study by Green Seal and EnvioMedia Social Marketing. 82%, that’s right! While the number itself sounds amazing for anyone thinking about a green business, unfortunately the realities don’t jive with those numbers. Green cleaning supplies make up a fraction of the overall cleaning supply market; organic food represents only three to four percent of the overall food market; and sales of hybrid vehicles represents less than 1% of global automobile sales in 2008. So unless consumers are mistaken, green buying patterns are being drastically overestimated. We may think we are buying green or say we are buying green, but green products continue to be a niche buying decision.

Joel Makower, author of Strategies for the Green Economy, dedicates an entire chapter in his book to a central question of this chapter “Do Consumers Really Care?” Seems to be a fairly important question, right? For many individuals new to the green field, the response may be ‘Of course they care – aren’t their dozens of studies out there where consumers have told us they think about the environment when they purchase things and are even willing to pay a little more for things to help out Mother Earth?’ The reality is that ‘caring’ about the environment may not be enough to change buying habits and make consumers take action.”

Just what determines whether or not individuals that value ecological concern actually spend their green on green? The following factors that were positively linked to buying green:

Perceived Consumer Effectiveness. The more a person believes that the efforts of an individual can make a difference in the solution to environmental problems, the greater their likelihood of buying green.

Perceived Knowledge. The more a person believes they know about a “green” attribute (such as benefits of organics, the impact of buying goods from recycled content or the impact on health of chemical-free cleaning supplies), the more likely that person is to buy green.

Environmental Concern. Perhaps not surprisingly, the more a consumer feels strongly about the environment influences their likelihood to purchase green products.

Feelings about Environmental Consumerism. The more a consumer tied the environment directly to purchasing decisions, the more likely a consumer was to buy green.”

So just what is special about being a GREENtrepreneur?

At the end of the day, GREENtrepreneurs are much like other entrepreneurs, but operate in a field with some very unique challenges. These are individuals that are usually driven by two focuses: building a profitable business and impacting the environment positively. They are individuals that may not share the same industry background or experience, but do have a common bond in the alignment of their incentives across the disparate green business ideas. And while governments have played a key role in promoting and advancing green businesses and technologies, these GREENtrepreneurs continue to face challenges to convince consumers to align their buying patterns with their public sentiments towards the environment.

It’s a host of challenges (and there are many, many others)… but in spite of these challenges a huge opportunity remains. In writing this book, the goal was to help offer some answers to those unique questions as well as share lessons that apply across the small business, startup and entrepreneurial community. Lots of passionate individuals are building green businesses and I’m confident new solutions are being launched daily.

GREENtrepreneurs represent an important part of the startup and entrepreneurial eco-system. As these passionate individuals tackle challenges we face from limited resources, environmental degradation and climate change, it is important that the startup/entrepreneurial community and the broader business community support these efforts. Through training, mentoring and collaboration, this new generation of GREENtrepreneurs may find successes that grow tomorrow’s green business success stories. As noted in the book:

“In the end, businesses that make business sense – be they green, blue, red or otherwise – will survive. Some may fade as hype wanes and others may finally be able to expand once reality replaces the noise. I’m betting on these challenges continuing to exist and smart, savvy individuals tackling those opportunities arising from an earth without committed stewards.”

Eric Koester is co-founder and COO of Zaarly and an attorney, formerly with Cooley LLP. Follow @

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