Taking Stock of Your Green Stock

(Originally published in the January 2010 issue of Merchant Magazine.)

There’s an old bit of business wisdom that goes something like, “you can’t improve what you don’t measure.” It seems appropriate to spend a little time thinking about that. For one thing, it’s January, a natural time to assess where we are, resolve to make improvements and chart a course for the rest of the year. For another, it’s a fundamental principle underlying every serious sustainable business initiative. It’s a simple formula: identify the right things to measure, create benchmarks, set goals for improvement, monitor performance, and adjust as necessary. Whether the economy in 2010 comes roaring back or stays about the same, it’s clear that there are revenue-boosting and cost-saving benefits for companies that get serious about sustainability.

As merchants, the core business is all about the product mix with basic metrics tracking sales, velocity, inventory, etc. Assuming staff is trained and products are merchandised well, these metrics can be useful for identifying the poorest performing SKUs to eliminate and which categories to strengthen. But to address the needs and desires of the growing number of “green” customers, these metrics fall short. How many of your products would contribute to LEED credits? What percentage is Energy Star rated or would qualify for rebates? Which products are heavy energy consumers or contain the most toxic chemicals? And where are they manufactured – locally or the other side of the planet?

Some “big box” retailers and major mainstream product manufacturers have benchmarking programs in place and are mobilizing their marketing teams around them. For example, WalMart introduced its Supplier Scorecard a couple of years ago and last year announced its Sustainability Index Consortium, an effort to define standards for a variety of product categories. They’ve also announced goals to reduce packaging and increase the number of green products on the shelves. The Home Depot rolled out its EcoOptions program in 2007 with 3,000 products and announced a goal of increasing that number to 6,000 by 2009. Their website claims to have sold over one billion such products since the program’s inception. Proctor & Gamble also announced an initiative to benchmark chemicals used in their products with a goal of reducing toxics. All of these efforts have garnered positive press and “greened” their respective reputations.

The basis of those kinds of goals and marketing claims are the assessments, but these kinds of programs, and their benefits, are not exclusive to big companies. My firm recently helped a group of much smaller companies create green product criteria against which we characterized about 250,000 individual SKUs. The result is a starting point from which these companies can create meaningful business goals, merchandising programs, and marketing campaigns. More importantly, they now have a new set of metrics that will help them measure performance and progress toward their goals.

Imagine a dealer or distributor who wants to become the energy efficiency leader in their market, but they have no idea how many Energy Star, or other energy-saving, products they already sell. They’re literally in the dark with a meaningless, maybe even dubious, goal unless and until they know their starting point. Only after assessing their product mix, can this imaginary dealer resolve to double the number of Energy Star products, properly train and incentivize staff, and begin to make the marketing claims that would lead them to their goal. For real-world dealers and distributors, the benefits of such benchmarking could lead to greater sales, deeper organizational knowledge, and competitive advantages. By any measure, that’s not a bad way to approach the new year.