Green business practices could help your marketing plan

Recent study finds that businesses benefit from disclosing greenhouse gas emissions and discussing ways to reduce them. Benefits seen in higher stock prices, especially for smaller companies.

February 20, 2012 - Author: William Carpenter, Michigan State University Extension

“So, what is this ‘greening’ all about, anyway?” the man asked from the small audience. “It sounds like just another fad or overused catchphrase. What can being green do to help businesses, besides some long-term effect like a cleaner planet?” The presenter, a green practices advocate, thought to herself, “Where do I begin?”

This fictitious scene could occur anywhere as people grapple with what has become shorthand for environmentally friendly or sustainable practices. If we use the “triple bottom line” idea, then we’re looking for practices that have positive impacts (or at least not negative ones) on our communities, environment and financial sustainability. And our fantasy questioner has a point — what good does it do me or my employees if my business practices are environmentally and socially helpful but my business doesn’t survive?

Hopefully, no one will take “going green” to that limit, but the practicality of greenness remains a question in the minds of many. Cost savings from green practices need to be examined for specific practices. But there is another positive to green practices— an impact on a business’s marketability. Researchers at the University of California (UC) Davis and UC Berkely have compared stock price movements of companies before and after the companies’ voluntary disclosure of their carbon emission information. Paul Griffin (UC Davis) and Yuan Sun (UC Berkeley) found that prices rose slightly in the days after firms disclosed greenhouse gas emissions and carbon-reduction strategies. For small firms, the effects were greater—an average of 2.3 percent increase in share values following disclosure. ( Douglas Fischer, covering the study in The Daily Climate, notes that the Securities and Exchange Commission does not require greenhouse gas emission disclosure.

Griffin and Sun covered 172 companies and a wide range of industries in the study – information technology, health care, telecommunications and financial services. The results showed no price uptick during the period for companies not disclosing the information. According to Griffin, “Investors are saying they would prefer to invest in an environmentally responsible firm.”

Apparently, potential investors care about the greenness, so to speak, of businesses. Most businesses we deal with are not likely to be publicly traded. But if investors care, maybe customers do, too. Perhaps your company’s environmental footprint and your conscious attempts to limit that impact will create public goodwill which just might translate into sales. Some examples would be—a Chamber of Commerce or Downtown Development Authority develops a recycling program with its members; a business owner and his/her employees take a two-mile section of roadway for cleanup under the Michigan Department of Transportation.

Tags: business, business development, energy, msu extension

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