The Editor's Blog

The Greed of Green

NOTE: Originally published in the print edition of The Greener Home Magazine back in 2006, but the question asked in this article
has still not been answered.

The Greed of Green —

will we blow it… again?

Due to the return of our old nemesis — those sharply rising gasoline prices — in 2006 we find ourselves at the beginning of a whole new cycle of public interest in ‘green’ products and services. We were also given a extra nudge in the motivation department from a new nemesis — global warming (excuse me, I mean “climate change”) . But let’s be honest, for most it was the pain at the gas pump that did the trick. Suddenly a whole lot of people around the world who never seriously thought about trying to live their daily lives in a more sustainable fashion are now eager and willing to consider new ideas and spend some money to make a change.

But wait… did your ears perk up when I mentioned they were ready to spend some money to “go Green”? I thought so. We need to talk about that before this goes much further, because this isn’t the first time public interest has suddenly turned green.

I can recall at least two other times in the past 30 years when public and media focus shifted in a major way to thinking and talking about doing things differently — at least for a few years. Those spurts of interest did result in some change, but nothing like enough to seriously alter the status quo towards a sustainable society. And all too quickly the public interest faded and people went back to living as usual, often falling into more even wasteful lifestyles than ever before (can you spell Sports Utility Vehicle?). Sure, you can blame unthinking, lazy people and the ever-popular status quo built on Big Oil and Corporate Consumerism for smothering those earlier periods of interest — and you’d be right as far as it goes. But that’s kind of like blaming the weather — it doesn’t really get you anywhere. There was another reason those previous waves of interest failed to achieve real change — and that was the actions and attitudes of the people who made and sold the alternative products and services.

I’m just going to right come out and say it. We’ve all been thinking it anyway: Almost every single one of today’s ‘green’ products and service offerings costs too much money. Way too much.

I can’t help but notice that in addition to their stated desire to change the world with green products, the people making and selling them also seem to have a desire to get rich doing so. I don’t object to anyone making a decent living, but going for 200% to 400% profit margins is simply excessive. Now some will say “but that’s just business… that’s human nature.” Right. But then I have to ask: Isn’t human nature what got us into this mess in the first place?

Instead of business as usual, shouldn’t we be trying to find ways to sell green products and services for prices which are truly *competitive* with the dangerous and unsustainable things they are intended to replace?

Isn’t that approach the only one which stands any chance of *quickly* changing the way the world does things? Perhaps this time around we should question that old excuse of “human nature” and take a pass on applyingthe old business school wisdom of maximizing profit above all else and think a bit more about simply doing the right thing at this critical point in human history?

Let’s consider the last thing that changed the world in a very big way very quickly. When Henry Ford invented the assembly line and began cranking out automobiles in large numbers he priced them very low, so that lots of ‘average’ people could afford to buy them. He could have charged more — the competitors who imitated him certainly did. But he was wanted to make his product available to as many people as possible as quickly as possible.

Now, to be sure, over the last 100 years this kind of mass-production got us into serious environmental environmental trouble — but there’s no denying the huge impact Ford made on the world with his idea of selling a lot of cars quickly by selling them cheaply and being content to make just a small profit on each one. His competition thought him foolish and instead focused on making a lot of money off of each car, selling only a few at high prices. We know which approach proved most successful. And isn’t that what we want to do? Make a very big impact on the way the world works and do it quickly? But so far the ‘green industry’ has priced its products and services more like the way Ford’s competitors sold their cars, trying to squeeze the most profit out of each unit, catering only to well-heeled customers.

In the past this approach resulted in a green product market place where the average person simply couldn’t afford to follow up on their new-found interest in sustainable living.

The green industry turned itself into a boutique market, interested only in selling to those few with plenty of spare cash. The result? After a year or two the large-scale public interest in sustainability and alternative products lost momentum and faded away. Things didn’t change. The status quo prevailed. And so here we are today, in bigger trouble than ever before.

Widescale public interest in sustainability is back again, stronger than ever. But because it is so hard to get new products into retail stores, most green products and services today are being marketed and sold on the internet. That’s cool… it doesn’t cost much to run an internet store and in theory an internet store can sell things more cheaply because they don’t have all the expenses of a bricks and mortar building, plus the customer pays the shipping cost. It sounds ideal for green products, but it doesn’t seem to be working that way, does it? Instead, the internet is flooded with web sites selling all kinds of impressive, environmentally-friendly, sustainable products and services — but almost all of them are priced much *higher* than the bad products and services they are intended to replace, usually 200% to 400% higher.

Ouch.

In a few cases the big price difference may be necessary because the alternative product really does cost a lot more to produce, but far too often the green product costs the same or even less to produce. So why are they all priced so high? Of course we’re talking about human nature again… too many people in the industry have decided that it is easier to make money by taking one green product which costs $20 to make and selling it for $100 (making $80 bucks profit) rather than sell 8 of the same product for only $30 each and make the same $80 bucks profit.

Well, sure, that *is* easier. But look, if you use the volume business model instead, you make the same amount of money, but you end up getting 8 green items out into the world instead of just the one. You have a much greater impact on the status quo and do far more to actually change the way the world lives and works. How much real change do you think is going to be made by selling one or two over-priced products every once in a while?

I have seen the previous waves of public interest in “going green” quickly fizzle and fade away. And it was always the outrageously high prices of the alternative products that was ultimately to blame. Most people just can’t afford them, so they decide to forget about pursing the whole sustainability thing.

When asked about the high prices, green merchants love to say things like, “Oh, but if you compare it to what you’re getting… how much longer it will last… what you will save in the long run… and how much better it is for the environment… the extra cost is worth it, don’t you see?”

It’s a nice rationale. It sounds good. It soothes the conscience and may even have a certain kind of truth to it — but it doesn’t put lots of green products into the hands of lots of people. Failing to become competitive with the prices of the bad products we are trying to replace has left the status quo unchanged and the world marching onward towards oblivion.

As an example, take a look at something small scale and low-tech: Drum Composters — those simple devices that allow you to convert kitchen garbage, lawn clippings and dead leaves into a rich fertilizer without the hard work, pest problems and visual issues of a traditional compost pile. They are basically not much more than a big plastic barrel on a rotating base. Check the web at a place like http://www.composters.com and you’ll find dozens of different manufacturers. You’ll also find that the cheapest models which produce any sizable amount of compost start at $250, plus shipping, and rapidly go up to $500 or more.

C’mon, folks… the harmful chemical fertilizers which the compost replaces costs only a few dollars to buy — so why would most people, who do not have hundreds of extra dollars to throw around, purchase an overpriced barrel on a stick? They simply can’t justify paying what the industry wants to charge. So instead, most people just keep on doing what they’ve always done: Buy a bag of synthetic chemical fertilizer for a few bucks and continue the negative cycle of pollution and soil depletion. But are they really to blame for not being willing to cough up $250 to $500 they can’t afford for a simple plastic barrel? I don’t think so. If decent-size composters started at $99 you would see a whole lot more people buying and using them. You might even see some big mass-merchandising stores carry them so you didn’t have to pay shipping (they don’t carry them now because there’s not enough sales volume at those high prices to make it worthwhile).

The same thing happens if we look at a high-tech example: When the residential solar power industry first got started there was a brief period where the manufacturers actively worked to get the cost of their solar panels down. But about 25 years ago the cost-per-watt leveled off and pretty much stayed there, even though the manufacturing costs have continued to decline. Why? Because solar panels became a boutique product, a status item sold to wealthy individuals and corporations — usually because there was a hefty tax incentive or rebate provided by state and federal governments to those who could afford to pony up for the big price tag.

As a result, for 25 years the ‘solar revolution’ has been stalled out. For crying out loud, it’s 2006 — by now the roofs of most houses across America, Europe and the rest of the world should be sprouting at least a couple of solar panels!

And that would have happened if only those who manufactured and sold solar had not decided to focus exclusively on selling to the high end of the market — choosing to make a lot of money on a few thousand systems instead of making a few hundred dollars each on millions of systems. Sadly, there has been no Henry Ford in the solar power industry and so, even today, the closest the average person gets to generating electricity with solar power is sticking a couple of those dinky little yard lights on their lawn. What a tragic waste of an opportunity to truly change the world over the past 25 years.

There is a long list of similar stories. Don’t even get me started on what they are planning to charge for the electric cars that will finally be coming on the market over the next few years.

This has been the tragic history of the green industry to date. Because of non-competitive high prices, most ‘green’ products remain specialty items, sold in small quantities. Quantities which will never change the world.

But today the new wave of interest in “going green” is providing us with another chance… probably our last chance. We have an opportunity to do things differently this time around.

So, are we going to blow it again and stick with the boutique approach? Do we continue to slap 200% to 400% mark-ups on our products? Do we continue to ask $10,000 to $20,000 in absurdly inflated ‘labor costs’ to install a residential solar power system when it only takes a few days and a couple of workers to do the job? Or are we going to do the right thing and strive for truly affordable pricing and thus generating world-changing volume?

Are we going to make a heroic effort to say “no” to the greedy side of human nature, transform the old business models and do whatever it takes to get a whole lot of green products and services into the hands of a whole lot of people as quickly as possible?

Or will it just be business as usual?

– Jim Beacon

Filed Under: Green Hype, The Green Mindset, The Politics of Green