DANA POINT, California (Reuters) - U.S. corporations looking to slash costs during the recession found some savings in environmentally conscious business practices, but a higher price tag on green products is a barrier to many consumers.
Many companies discovered in the past few years that doing things like lowering energy bills and reducing waste not only saved money, but was good for the planet and for their image, executives at a conference on green efforts said.
“Even as recently as a year or two ago, sustainability was seen as a cost-plus program,” said Matt Kistler, senior vice president of sustainability for Wal-Mart Stores Inc.
“Sustainability is actually very good for the business,” he told Reuters at the Fortune Brainstorm Green conference in Southern California.
The world’s biggest retailer earlier this year said it planned to eliminate 20 million metric tons of greenhouse gasses from its supply chain by the end of 2015 — an effort it equated with taking more than 3.8 million cars off the road for one year.
Because of its size and reach, Wal-Mart is a leader in the move toward more sustainable business practices, which range from selling smaller package sizes to phasing out harmful chemicals.
When asked to give an example of how the move has saved Wal-Mart money, Kistler said spending on fleet logistics is down about $200 million annually after the company asked suppliers to reduce packaging, reworked its delivery routes and adopted technology that boosts fuel-efficiency.
Suzanne Long, head of the retail practice at global operations consulting firm SSA & Co, agreed that being environmentally friendly has financial benefits for companies.
“Our approach is that waste is waste. If it’s bad for the environment, it’s probably bad for your bottom line.”
China and the United States are the largest emitters of greenhouse gases, which many scientists blame for global warming. U.S. carbon dioxide emissions from fossil fuels like coal and oil are expected to rise this year and next as the economy recovers, according to the Energy Information Administration.
While many consumers say they care about the environment, few put their money where their mouth is — largely because the benefits to them are not as clear as they are for business.
Survey data shows that people basically want change without changing, said Joel Makower, co-founder of Greener World Media: “They love the noun, hate the verb.”
Part of the problem is that many green products cost more but don’t work as well as the conventional version. A weak U.S. economic recovery and high unemployment also are keeping consumer spending in check.
“When you ask them to pay more for a green product, you’re also asking them to cut something else out of their life,” Wal-Mart Chairman Lee Scott said.
One exception is food for children. Scott said parents across the income spectrum are willing to pay a little bit more for things like organic apples, which also have become less expensive as more retailers offer organics.
Even so, the market for sustainable goods remains small, with just 10 percent of consumers saying they would pay more for sustainable products, said Adam Werbach, global chief executive of sustainability consultancy Saatchi & Saatchi S.
Just 1 to 2 percent of shoppers belong to what he calls the “green cult.” That group will buy items regardless of whether they work less well, cost more money or are hard to find.
That’s why Adam Lowry, co-founder of San Francisco-based household products maker Method, doesn’t focus solely on his products’ green attributes.
For example, Method is selling a new super-concentrated laundry detergent that comes in a water bottle-sized container and has enough product to wash 50 loads of clothes.
The company says its plant-based formula cleans in a new way and uses less water, oil, energy and plastic than typical concentrated detergents. But its advertising emphasizes convenience — the package weighs far less than big jugs of detergent and users squirt the product into the machine with a pump, which is less messy than measuring liquid detergent.
“I want people to buy my brand just because it’s awesome ... because then you’re bringing somebody into the fold who is part of that group that you need to reach,” Lowry said.
Reporting by Lisa Baertlein and Dana Ford; Editing by Phil Berlowitz