Creative Capitalism: Market-Based Social Change

To be sustainable a business must also be profitable. Readers of The Green Market know that I am an earnest advocate of viable socially responsible business. This philosophy is put into practice in my firm's Green consulting projects with the small business community. Implicit in this philosophy is the marriage of market forces and social responsibility.

This is not a new idea. Almost half a century ago David Rockefeller, the president of Chase Manhattan Bank, said, "The old concept that the owner of a business had a right to use his property as a he pleased to maximize profits has evolved into the belief that ownership carries certain binding social obligations." In recent years Microsoft's Bill Gates has joined the ranks of a growing number of people who share this view. For the past 20 years, Microsoft has used corporate philanthropy as a way to bring technology to people who don't have access. They have donated more than $3 billion in cash and software and perhaps most importantly shown people how to use technology to create solutions. In a January 24, 2008 speech at the World Economic Forum, Gates outlined sensible solutions to the challenges we face.

Gates used to believe that technology could solve all the key problems and although this is true for billions of people, "breakthroughs change lives only where people can afford to buy them—only where there is economic demand. And economic demand is not the same as economic need." Technological innovations are important but insufficient to address the myriad challenges we face. To truly improve the fate of the planet and its inhabitants we require what Gates has called 'system innovation'.

We have reason for optimism, we have seen significant improvements on many fronts from the status of women and minorities, to radicaly increased life expectancy. And political, social and economic freedoms have never been enjoyed by more people around the world. However, like Gates, I am an impatient optimist who seeks expedient solutions to the problems we face.

A major problem with capitalism is that market incentives often cause people and the environment to benefit in inverse proportion to their need. Capitalism that serves large corporations and wealthier people must be made to serve poorer people and the environment as well. We need to refine the capitalist system so that it benefits the environment and all its inhabitants. "The great advances in the world have often aggravated the inequities in the world. The least needy see the most improvement, and the most needy see the least. Not only do these people miss the benefits of the global economy – they will suffer from the negative effects of economic growth they missed out on. Climate change will have the biggest effect on people who have done the least to cause it."

Capitalism may be flawed in some important respects but they are fixable problems which do not detract from its many positive attributes. "The genius of capitalism lies in its ability to make self-interest serve the wider interest. The potential of a big financial return for innovation unleashes a broad set of talented people in pursuit of many different discoveries. This system driven by self-interest is responsible for the great innovations that have improved the lives of billions."

Capitalism harnesses self-interest in helpful and sustainable ways, but only on behalf of those who can pay. And environmental, philanthropic and governmental organizations are inadequate to meet the needs of the earth and its poor. We need a system that is capable of providing rapid improvements, a system that integrates creative innovation and market driven business.

A social mission is compatible with profits. In Gate's own words "To make the system sustainable, we need to use profit incentives whenever we can." When profits are not possible, recognition is a powerful market-based incentive for socially responsible businesses. "Recognition enhances a company's reputation and appeals to customers; above all, it attracts good people to the organization. As such, recognition triggers a market-based reward for good behavior. In markets where profits are not possible, recognition is a proxy; where profits are possible, recognition is an added incentive. The challenge is to design a system where market incentives, including profits and recognition, drive the change." Consumers then reward companies who do good work by buying their products. To help us to recognize those who have made contributions to social causes like Green, we need to invest intellectual capital to find ways for businesses, governments, NGOs, and the media to develop tools to measure social responsibility. "[R]ecognition brings market-based rewards to businesses that do the most work."

According to Gates, "there are two great forces of human nature: self-interest, and caring for others. The system innovation proposed by Gates is nothing less than a paradigm shift. He calls this innovation creative capitalism. "This is an approach where governments, businesses, and nonprofits work together to stretch the reach of market forces so that more people can make a profit, or gain recognition, doing work that eases the world's inequities." Helping others and the environment is not as far removed from the core of capitalism as some might think. The father of capitalism Adam Smith opened his first book with the following lines: "How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it."

"Creative capitalism takes this interest in the fortunes of others and ties it to our interest in our own fortunes—in ways that help advance both. This hybrid engine of self-interest and concern for others serves a much wider circle of people than can be reached by self-interest or caring alone." We must give our most innovative thinkers the time and resources to come up with solutions to the challenges of environmental degradation, poverty and disease. "This kind of creative capitalism matches business expertise with needs in the developing world to find markets that are already there, but are untapped. Sometimes market forces fail to make an impact in developing countries not because there's no demand, or because money is lacking, but because we don’t spend enough time studying the needs and limits of that market."

There are numerous examples of creative capitalism in the world today. One of the most accessible approaches employs tiered pricing. When the World Health Organization wanted to expand vaccination for meningitis in Africa, it first ascertained what people could afford to pay. Then they challenged their partners to meet this price. Another is Bono's RED Campaign which has demonstrated that people will pay a premium for the chance to be associated with a cause they care about. One of my personal favorites is Muhammad Yunus' now worldwide movement in microfinance. And cap and trade systems of greenhouse gas management are yet another well known example of creative capitalism. The potential ways in which creative capitalism can serve socially responsible causes are limitless.

Creative capitalism includes a direct role for governments in funding research and setting policy (legislation). Governments should disburse funds in ways that create market incentives for sustainable business activity. "What unifies all forms of creative capitalism is that they are market-driven efforts to bring solutions...As we refine and improve this approach, there is every reason to believe these engines of change will become larger, stronger, and more efficient. There is a growing understanding around the world that when change is driven by market-based incentives, you have a sustainable plan for change—because profits and recognition are renewable resources. These are not a few isolated stories; this is a world-wide movement, and we all have the ability and the responsibility to accelerate it."

There is a place for business, government and the non-profit world. Creative capitalism stretches the reach of market forces to help push things forward. From foreign aid to charitable gifts, we must find ways to put the power of market forces behind the effort to reduce our environmental impact.

We are living at a pivotal moment in human history, the paradigm shift proposed will enable us to find approaches that address the environmental and social problems we face. We need to understand that sustainable solutions entail projects that generate profits and where profit is not possible, recognition that enables consumers to reward these companies by buying their products. We can change the world and creative capitalism is key to the growth of socially responsible movements like Green, because there is no Green future without profitable Green companies.

Mobile Marketing: A Green Opportunity

Mobile devices represent an important new marketing channel. Increasing mobile penetration worldwide has led many in the marketing industry to believe that 2008 is the year of the mobile. According to a Cisco study mobile devices are quickly joining physical stores, websites and catalogs as an important fourth channel for retail growth.

According to Don Knox, global vice president at ad:tech Expositions, “Mobile continues to pique the interest of marketers and advertisers as it matures and the devices mature in the U.S...marketers are seeing the benefits of relying on mobile to reach consumers...Everyone seems to sense that we’re on the verge of a big breakthrough in mobile, as consumers are stepping away from their PCs and relying on these mobile devices more and more, and in that sense, it’s a logical extension of today’s marketing plans...Marketing is no longer just traditional or interactive, but rather marketing is encompassing both worlds...And as we’re seeing more of the marketing spend become digital, we’re attracting more traditional marketers and traditional media...We’re seeing mobile rapidly advancing around the world...A lot of what can be done will be determined by the carriers, but many marketers see mobile as an opportunity to extend their messaging, branding and more and more advertising opportunities."

The vast number of mobile devices in the world today makes this an extraordinary marketing opportunity. Currently, there are three times as many mobile-phone subscribers (3.3 billion) as Internet users (1.3 billion) worldwide. India is a prime example of this large and growing audience. With 267 million mobile phones, India is growing at the rate of 8.3 million phones per month, Chaitanya Nallan, CEO, Gingersoft Media adds, "As a medium, compared to the Internet, mobile is much more powerful. I can reach you wherever you are because mobile is with you all the time." And a mobile marketing dollar appears to get better results when compared to the Internet. According to Rajiv Hiranandani, CEO of Mobile2Win, "Clicks in this medium are around 5-8% and outperform the clicks in the Internet medium."

Social networking has significantly impacted the use of mobile devices. Sites like Facebook, MySpace and LinkedIn have changed consumer expectations and buying behavior. Social networking is increasingly mainstream and no longer the exlusive domain of the young. Facebook reported 286 percent growth in members aged 35 and over from May 2006 to November 2007. Social networking has grown on a global level, with the number of European log-ons (127 million) surpassing that of the United States (124 million).

The ongoing proliferation of e-commerce will also help drive usage of mobile devices. Forrester Research estimates that online sales will reach $204 billion this year and $335 billion by 2012. With e-commerce accounting for only 6 percent of all retail sales in the United States, there is considerable room for growth.

According to the Cisco IBSG survey, at present, mobile marketing is done primarily using SMS (Short Message Service). SMS is being used to communicate promotions, provide a two-way service for customers' questions, and offer item availability and delivery updates. Peer-based reviews and interaction are becoming a baseline expectation. Some mobile marketing includes advanced visualization, video capabilities, and mobile commerce technologies. Companies are also using mobile devices to generate leads, provide loyalty rewards and offer free downloadable content.

The Cisco IBSG survey found that:
42 percent of retailers provide the ability to view product information on a mobile device through reformatted web pages or specific mobile pages
15 percent offer the ability to conduct transactions (make purchases, complete inventory queries, etc.)
10 percent are using SMS to provide information or answers to customers' questions
6 percent have webpages and a URL specifically designed for mobile use
The Cisco IBSG survey of e-commerce sites found:
17 percent provide the capability to connect to communities of interest
52 percent provide customer reviews for products
50 percent have advanced visualization tools
50 percent provide multimedia such as video
50 percent offer customer support through multiple channels, such as click-to-chat

There are several factors that contribute to successful mobile marketing. Steen Anderson, VP of marketing for 5th Finger suggests a simple formula for his clients. R=V+E (Response = Value + Exposure). “By maximizing the value and relevance of the offer to the target audience and maximizing the exposure of the call to action across as much media as possible, the response rate will be maximized.” According to Anderson, “More than any other medium, in the mobile realm, marketers must strike a good balance between a creative idea and the technical execution of that idea in order to ensure ROI.”

Perhaps most importantly, successful mobile marketing involves a targeting strategy that is focused on the mobile devices used by the demographic you are seeking to reach. The call to action must be easy, clear and discernable at a glance. And as Anderson cautions “In the cases when you are offering prizes as part of the call to action, a large volume of lower value prizes can be much more effective in encouraging participation in promotions than having just one high value prize on offer.”

As reported in AdAge a recent New York Media Information Exchange Group breakfast panel was discussing mobile marketing strategy. They questioned whether the mobile category will continue to exist on its own or "simply merged into overall consumer environment of digital connectivity." According to Dick Cantwell, vice president of IBSG's Retail / CPG Practice mobile devices are part of the “new era of multichannel retail” The main threat according to Nallan is from spammers, "Spam messages have a low price band and take away our business."

Although unlikely to replace traditional mass media, mobile marketing offers a unique marketing proposition and a strong value proposition. Mobile marketing has a wide audience base and has the capability to effectively target specific demographics. Mobile marketing is less expensive than traditional marketing mediums and it is also more cost effective because the message reaches the audience directly. There is also added flexibility when marketing through mobile devices. As explained by Brand Analyst Harish Bijoor, “the advertiser can decide how much to market, to whom to market and with what intensity to market. The control lever is with the marketer. More he uses, more he pays."

Mobile marketing is easy to track. Shishir Sharma, Director of Business and operations at Active Media Technology says, "Since all downloads and SMS replies are trackable, evaluating effectiveness is much better in mobile marketing compared to other conventional marketing methods."Hiranandani calls mobile marketing “the most effective marketing channel for the years to come." And Sharma adds, "With the mobile phone being in virtually every hand, mobile marketing is the future of advertising.

Mobile marketing is still a relatively new concept and accounts for a relatively small portion of most companies marketing mix. (Only 15% of leading retailers provide mobile commerce). Marketers and business owners should understand that when is comes to mobile marketing, every sector is in the trial stage. Those that appear to be putting mobile marketing to the greatest use are the financial, auto, travel and retail sectors. By monitoring innovative companies SMEs can adapt successful mobile marketing practices to their own circumstances and strategies.

Mobiles value as a marketing medium comes from the widespread penetration of mobile devices and the fact that mobile device users are a captive audience even when they are roaming. As a relatively inexpensive marketing option, mobile marketing is an effective and accessible way for SMEs to communicate a targeted message.

Mobile marketing communicates with many thousands of users instantly. Companies and organizations leveraging the extraordinary reach of mobile marketing are also connecting with potential customers without paper, ink, transporation or the energy expenditure associated with traditional advertising mediums. Because of its smaller footprint, targeted message, wider reach, and cost effectiveness, mobile marketing is an ideal marketing medium for emerging Green themed businesses.

Success often follows those who anticipate the trends. And an effective mobile marketing strategy considers the desired capabilities long before they are worked into future platforms. In mobile marketing, as with sustainable business practices, those who are proactive in developing and implementing strategies will be in a more competitive position than those who do not.

Green Science

Green science is very important to anyone who seeks to employ sustainable business practices. Although rarely explicitly communicated in an effective marketing message, scientific evidence must implicitly support Green marketing claims. By definition scientific investigation means that conclusions will always be subject to review. Therefore it is incumbent upon sustainable businesses owners to continually reevaluate their Green promises.

Atmospheric sciences, environmental chemistry, ecology, and geosciences have all contributed to the large and growing body of evidence. Taken as a whole the results confirm climate change, reductions in biodiversity, diminished water quality, soil contamination, resource depletion, and air pollution.

Those who try to dismiss the plethora of data ignore the facts. There are those who have funded environmental research as a stall tactic. Others argue that such things as climate change are part of a normal process citing the fact that we have experienced periods of global warming (and cooling) in the past. However it is a fact that our climate is warming faster as a consequence of human habitation. This should be obvious to even the most cynical scientist, taken as a whole the weight of the evidence is irrefutable. There is no simple panacea, but there is scientific consensus: Threats to our environment are real.

Marketing messages that pander to doubters may lose the attention of their core audience. There is adequate exposure to scientific evidence to discard the views of the politically motivated or intellectually questionable luddites who feel climate change is some kind of hoax. Effective Green marketing is often best when it implicitly incorporates sustainable attributes. Knowledge does not infer wisdom, but it is an important step on the road to intelligent stewardship. Scientific observation is an invaluable tool, what we do with it, is up to us.

The Religious Psychology of Green

Green is no longer the exclusive domain of liberal intellectuals or the politically correct. Where other brands need to create an experience, the essence of a Green brand is already widely engrained in the popular imagination.

Green’s mass appeal has caused more than a few observers to make religious comparisons. This comparison is not without merit. Green’s popularity is at least partially attributable to the fact that it is seamlessly compatible with the teachings of most religions. In the east, religious traditions like Taoism emphasize harmony and balance. Veneration of the natural world is at the heart of Shinto. Traditional Aboriginal cultures are emphatic about the importance of their relationship to the earth and its creatures. As one Australian Aboriginal writer explained, “Our spirituality is a oneness and an interconnectedness with all that lives and breathes, even with all that does not live or breathe.”

Buddhism offers an inherently Green philosophy. “Caring for the environment is a natural part of the Buddhist path. The Buddha encouraged us to understand more deeply the underlying unity and interconnectedness of life. Values such as simplicity of lifestyle, sharing with others, taking responsibility for one’s actions, and compassion for all living things have always been at the heart of the tradition.”

As explained in the Big Green Jewish Web Site, "[The] moral imperative sublimely reflected in Isaiah, the Psalms, the Ten Commandments, impels us to be engaged on a perpetual process of repair of the world (Tikkun Olam)."

In the Islamic tradition, Green is more than a sacred color. In Malaysia environmentalism has spread throughout the intellectual and activist communities. And in the UK a group of Muslims have declared June 3rd "Green Islam Day." A conference scheduled for the same day will review Muslim environmental efforts in the UK and around the World.

Even the Christian right, traditionally Green reticent, is showing signs of change. As reported by Bill Moyers of PBS, a group of 86 respected evangelical Christian leaders from across America initiated a campaign for environmental reform. And as reported on MSNBC, Southern Baptists are now fully committed to Green.

In the western world, the similarities between the dominant religion and Green run deep. Like historical Christianity, the new Green religion grants dispensation, sells indulgences, and mitigates guilt. Buying into the Green movement is psychologically similar to receiving the rites of communion or confession. Through the symbolic medium of a host or penance, we are cleansed of our sins. Similarly, when we make a Green purchase, we are paying to assuage our guilt. Carbon credits are like the selling of indulgences by the pre-Lutheran Catholic Church. And our efforts to restore order can be traced to the rites of sacrifice which lead back into the primeval mists of man's beginning.

Many of the mythological motifs of Christianity have parallels with Green. The Garden of Eden is like the earth before the rise of man. Heaven is envisioned as a place where we live in harmony. And our environmental footprints bear similarities to original sin. The language of redemption and salvation can be transposed with words like sustainability and responsibility. And the apocalyptic end times can be construed as a toxic environment within a hostile climate.

Despite widespread acceptance, some religious conservatives seem to perceive Green as a threat. It is as though they fear that Green may replace God, and they may be right. Perhaps it is more accurate to say that religious notions of a compassionate, interdependent universe espouse an inherent ecological sensitivity.

Green responds to some of the same deeply embedded psychological needs as religion. In our secular world, it is easy to see why Green captivates widespread attention. Green’s appeal transcends cultures and demographics. The Green movement is now a universal belief system. This explains why companies are clamoring to be identified with Green. For marketers and business owners Green psychology is like the Rosetta Stone. If understood correctly, it can help decipher buying behaviors and even provide keys to one of the largest markets the world has ever known.

Profiting from Green

Green’s coming of age is the overriding theme of our times. Green is huge and growing. This is illustrated by the fact that Green received $5.18 billion in venture capital funding in 2007. With $41 billion in assets, collaborations like the Investor Environmental Health Network (IEHN) demonstrate that investors are serious about Green.

In her book Green Marketing: Opportunity for Innovation, Jacquelyn A. Ottman says “Marketers that take the time now to court the deepest green consumers with truly innovative solutions to environmental concerns will be the ones who reap the biggest future opportunities… Look at those businesses at the forefront of the green trend and see a deeper characteristic than just greened-up products or ads that makes them at once environmental and societal leaders as well as profitable: green leaders are driven by more than short-term financial goals. They are motivated by a double bottom line, a bottom line that recognizes the potential for business to affect societal change as well as create economic wealth. A business that at the end of the day is measured by profits as much as its contribution to human potential and the harmony of the company's objectives with other living beings.”

Green is more than just an innovative business concept; a Green business considers the implications of its actions in the wider context. Green is not only about the environment it is about beliefs and values. Burgeoning environmental awareness is feeding a cultural identity based on integrity, idealism and compassion. Profiting from Green implies fidelity to Green ethics. Soaring commodities prices may earn returns for commodity speculators, but they have also helped to drive up the price of food, thereby contributing to world hunger. Profit is only one of the goals of a Green business. As part of a cohesive strategy they must strive to reduce their ecological footprint and function in a socially responsible fashion.

According to an Indie Breakfast Club report on talks given at Lohas Forum 11 by Chris Van Dyke (CEO of Nau) and Joel Makower (founder and author of Greenbiz) , Makower was quoted as saying successful Green businesses have “a comprehensive understanding, a bold vision, benchmarks for success and a desire to collaborate." And Van Dyke said successful Green companies seamlessly weave “a triple bottom line (people, planet, profit) into their DNA”

There are many ways to deliver on a Green promise and communicate Green Value, from eco-labeling to a product offering that employs carbon offsets. Each business needs to scrutinize it's own activities and customer base to develop the most effective and appropriate Green strategies. Successful Green businesses must have vision to see the wider implications of their operations. Green marketing takes the long view and requires patience to realize long term strategies. Green companies do not wait for Green legislation, they have the foresight to proactively address issues.

Jacquelyn A. Ottman’s conception of a successful Green business projects the core values inherent in the Green ethic. She envisions a Green future created by visionaries who marry their competitive spirit to social activism. She sees new products and services creating new industries and more inclusive work and management styles. This new generation of Green visionaries will augment quality and profits through increasingly efficient processes, design and marketing.

Ottman's book Green Marketing: Opportunity for Innovation describes it this way: "The most successful green companies operate holistically...they don't risk disappointing their customers or shaking their confidence.”

How do you profit from Green? You profit by having a quality product with a solid demand that has the added advantage of being Green. Green must be sewn into the fabric of your business culture. Green branding adds value and taps into a revolutionary surge, but it should not stand on its own. Profiting from Green entails not only strategies and tactics but beliefs and values. Going Green means going deep, Green business is good for people, planet and profits.

Green Marketing Legislation

Companies are being held accountable by an increasingly well informed public. In response, governments are enacting laws to protect the environment. Under these laws corporations are being successfully prosecuted.

In Canada, the Competition Bureau and Canadian Standards Association are planning to release new guidelines on the use of environmental terms. In the wake of a plethora of consumer complaints, eco-friendly statements will have to be supported by data. In the U.S., the Federal Trade Commission is reviewing its guidelines for environmental marketing (Green Guides). And the E.U. has adopted a substantial and diverse range of environmental measures aimed at improving the quality of the environment.

In response to these changes and to add value and protect the integrity of their brands, corporations are increasingly implementing Green protocols that meet or exceed the requirements of environmental legislation. However, this can be an involved undertaking, particularly for small business. The complexity of compliance issues related to the U.S. Clean Water Act effectively illustrates this point. Adhering to environmental legislation can prove daunting, and the costs of compliance can be burdensome.

In the U.S., Canada and the E.U., present and forthcoming environmental and marketing legislation provides basic operating guidelines and product standards. These legal guidelines and standards protect and reinforce the integrity of Green brands. But there is a cost associated with compliance. In the U.S., it is estimated that the cost of clean air compliance is between $25 and $50 billion each year. However, compliant corporations can leverage a sustainable marketing position with a broad consumer appeal.

For more detailed information and specific legislation see the COMPLIANCE section in the newly expanded GREEN LINK LIBRARY.