You walk in a supermarket in the section of green products and often get intrigued why the prices are a wee higher from the equivalent” “brown” products. For some, this price hike is justified as these products have a “brand” so to say. Sporting an Organic T shirt in a party or serving an Organic Coffee post a celebrity lunch has that “distinguishing” feature that you are essentially paying for! But fundamentally, why should you pay more for green products?
Many believe, and rightly so, that the market size of green products is rather small today and economy of scale does not simply come in as an advantage to the manufacturer or retailer. Green products get produced in small lots, more like boutique items and hence tend to cost more. It is weird that manufacturers go out of their way to make green products that cost more money – consumer does not buy them and then the manufacturer says “See, no one wants them!
A green product should ideally be resource-lean and generating low wastes/residues. So it should provide an advantage of less cost of inputs (water, energy, materials) and that of processing outputs (wastes/residues). All this should improve competiveness and provide an incentive to make more volumes.
Again, Green product, if truly green, must cost less, if accounted in a life cycle perspective. The problem is that life cycle costs and benefits are not generally computed and demonstrated to convince the buyer or the consumer. Price is often the driver for the decision. Life cycle costs and benefits are unevenly shared and are often hidden.
Some argue that green products are bound to cost more if they use frontier technologies and materials that are yet to be commercialized. If green products use recycled materials then cost of recycling is sometimes more than cost of virgin materials because of disproportionate costs of reverse logistics and often due to perverse pricing of resources. Green products are expected to be compliant across the supply-chains that have informal segments. So you pay more for organic food ingredients as here manufacturer will ensure proper wage to the labor.
There are companies however who have set prices of their green products comparable to those conventional and in some cases kept the price of green product a wee lower! Examples of such companies are Sierra Nevada Brewing company, that uses fuel cells; Stonyfield Farm and Trader Joe’s yogurt, that have reduced packaging; General Mills, which reduced the shape of noodles in Hamburger Helper to reduce packaging volume by 20%, and Procter & Gamble and Unilever, in association with Wal-Mart, who changed liquid detergents to concentrated formulas to reduce consumption of water, plastic, and cardboard. So what works is the innovation in greening.
So when you next visit the Supermarket, look for companies, that maintain or lower the price of green product. These companies will represent hallmarks of innovation and long term interests in influencing the markets towards ensuring business with sustainability.
(Blog based on article I published in Green Prospects Asia. You may like visit report prepared by Green Purchasing Network of India on Consumer Perception of Green Products. Visit www.gpnindia.org)