Adam Smith and Green Capitalism

(This was originally published in the May 2011 issues of Merchant Manager and Building Products Digest.)

In this column, we’ve talked quite a lot about the implications of green building and the wider sustainability movement for LBM dealers and distributors.  For the most part, the conversation has focused on evolving market opportunities, merchandising appropriate products, and creating operational eco-efficiencies.  But are the pursuits of “green” market opportunities and cost-saving efficiencies sufficient to make a business “green” or its leaders green capitalists? 

Devotees of Adam Smith might answer, “yes”, as long as such activity maximises profit. It’s the result that counts and if “the invisible hand” does its job, then what’s best for society will emerge naturally through the activities of masses of economic decision makers, each pursuing their own self interest. 

Of course, the economic world Smith inhabited was quite different from today’s global corporate economy.  But in at least one respect, the reality for a merchant capitalist two hundred years ago is very nearly the same as for many dealers in today’s LBM supply chain.  In Smith’s day, the merchant was intimately woven into the fabric of local society and “the invisible hand” operated within an ethical framework that assumed as given the interests of a wide range of stakeholders within the community. 

So, was Adam Smith the first “green” economist?  No.  But notions of green capitalism are becoming just as mainstream, being taught in leading business schools and adopted by leading corporations and green building companies.  For locally-focused members of the LBM supply chain, these new articulations of capitalism may already seem familiar.  But delving deeper and adopting new approaches to business leadership may hold long term strategic value.

For many, the term “triple bottom line” (TBL) has become the short-hand definition of what a green business is all about.  It was coined by John Elkington in the 1990s as a way of joining the concepts of “sustainable development” and “corporate social responsibility”.  The idea is that if businesses tracked their performance in the realms of social and environmental impacts, as well as profits, they might then be accounting for their full cost of doing business.  And in so doing, would seek to improve where performance lagged, ameliorating social and environmental problems along the way. 

Though this sort of formal accounting may be problematic at the moment, there are advantages for LBM dealers who adopt TBL principles or a similar approach.  Perhaps the best place to start is with a book that’s required reading for every Green MBA.  “Natural Capitalism”, by Paul Hawken (co-founder of Smith & Hawken), Amory Lovins, and L. Hunter Lovins, identifies the four principles of “capitalism as if living systems mattered”: radical resource productivity, biomimicry, service and flow economy, investing in natural capital.  In short, by reducing resource use, eliminating waste, rethinking the provision of goods in terms of services, and by treating sources of natural capital (such as local wetlands that naturally purify water, for example) as real sources of wealth to be restored, nurtured and grown, businesses can lower costs, maximise profit, and solve many of the world’s problems. 

This alternative vision of capitalism, and others like it, offers a useful strategic framework, especially in light of economic and social challenges we’re sure to face in coming decades.  This kind of thinking has already helped companies like Interface in the carpet industry and Steelcase in office furniture, lead their respective industries.  In any case, adopting a “natural capitalist” framework will lead a business toward best green and most economic practices as a matter of course.  For dealers seeking to win in the green building arena, becoming a green capitalist seems like an important and natural next step.

Oil Dependency and the LBM Supply Chain

(This originally appeared in the August '10 edition of Merchant Magazine and Building Products Digest.)

The oil spill in the Gulf of Mexico is a huge environmental calamity, but it should serve as a wake up call for the LBM supply chain for another reason. Why? The spill will certainly have an impact on local economies and local LBM dealers. But the spill is emblematic of a much bigger issue, the end of cheap oil. And that will shape the future of this industry, bringing tough challenges and green opportunities.

Many analysts are pointing out that most, or all, of the world’s easy oil has been extracted and what’s left is vastly more challenging, energy intensive, and expensive to get – pumping oil from 5,000 feet deep on the floor of the Gulf is but one example. Meanwhile, according to a US Department of Energy report, new oil discoveries are lagging consumption. And some analysts have pointed out that the point of peak oil production may have been reached, or may be reached soon.

Peak oil, as the phenomenon is known, is based on the work of a Shell Oil geologist, M. King Hubbert, who showed that just as an oil well reaches a peak in production long before the oil deposit runs dry, so too, does an oil producing region have a peak in its production curve. Once the peak is reached, production volumes flatten out, then decline. Add the fact that worldwide demand for oil is growing, (car sales in China and India are going through the roof!), and if we are at or near a peak oil situation, then oil prices will surely rise and perhaps very rapidly.

The LBM supply chain is predicated on cheap transportation costs. When fuel prices rose dramatically during the summer of 2008, many distributors and dealers took hits to their already thin margins. While that price spike was due, at least in part, to Wall Street speculators, it provided a taste of what an expensive oil future will bring – higher transport and commodity costs, and marginal businesses going bust.

So, how can you prepare and create resiliency within your organization? First, start shifting your own product mix. Identify those products most vulnerable to rising oil prices and find better alternatives such as local and green products. This will also help you meet the rising demand for such products as the green building movement continues apace. Look especially at those solutions that help your customers, (or their customers,) become more sustainable or self reliant. Also, find opportunities to supply a greater range of need within your community or operating area. If gas prices rise dramatically, your customers will be looking for one-stop shopping.

Dealers and distributors should also be actively seeking ways to reduce gasoline or diesel use within their own operations. Electric vehicles or diesel trucks that run on locally-sourced waste cooking oil might be viable options. Increasing drop ships, from manufacturer to dealer, or from distributor to end-user, will help, too, but only marginally.

Finally, get involved in community efforts to create local resiliency to oil energy shocks. Transition US, (www.transitionus.org,) is a new and growing network of groups throughout the country – 69 at last count – aiming to find ways within their own communities to reduce their dependence on oil. Groups like these are gaining influence with local policy makers, and their efforts naturally support green building and like-minded local businesses. Your involvement will help you identify emerging opportunities, make important connections within your community, and get support for reducing your own oil dependency.

Community Insulation

Community Insulation
(Originally published in the November '09 issues of Merchant Magazine and Building Products Digest.)


With the economy still in doldrums and the cold winter months around the corner, I continue to be fascinated with insulation. Not the rebate-earning, energy-efficient, recycled-denim kind your customers will love you for, but the economic kind that will sustain your business through the lean times and propel the inevitable upturn to come. There’s little doubt that energy efficiency and green building will define the shape of this industry for decades to come, so it makes sense for every LBM dealer to bone up on these issues, stock and promote the products, train the staff, etc. But creating sustainable “economic insulation” requires deep community collaboration.

There are good examples of multi-generational, family-owned dealers that are well-placed in their communities, have staved off the “big boxes” and done well, even in hard times. These are good models, but the reality is that these examples are getting harder to find and even harder to replicate. Two organizations, BALLE, the Business Alliance for Local Living Economies, and AMIBA, the American Independent Business Alliance, are focused on helping local businesses thrive, creating new models.


In the Rockies just outside of Denver, sits Big Horn Building Materials, a big local supplier for the surrounding mountain towns and resorts. Founder, Don Sather, has been a big proponent of energy efficiency and green building, walking his talk – the store is fitted with solar panels and is involved with a local non profit studying the feasibility of wind power in the community. He was also one of the founding member of Summit Independent Business Alliance, (SIBA), an AMIBA affiliate. “A few years ago, our community successfully fought off a new 'big box' chain and that really opening my eyes,” Don told me. “One of the most important things about being involved in a local network is getting closer to local officials and educating them about the economic benefits of supporting locally-owned business versus national chains.” Strong relationships with other local businesses and SIBA’s shop local campaigns have kept his business doing well, even though the economy overall has been weak, he added.

Woodland Building Supply, a 9 year-old dealer in Philadelphia, is another interesting model. Larry Reese, president and co-founder, was determined to make Woodland a destination for green building, stocking a wide selection of products, and recently opening a green showroom. “We’ve always focused on the triple bottom line and building relationships with local green builders,” Reese said. They joined Greater Philadelphia Sustainable Business Network, a BALLE affiliate, about a year ago. “It seemed like the natural thing to do. We’ve developed many more strong relationships with local builders, developers, and vendors and, to be honest, they’ve kept our business really busy over the last year.”

Paula Burke of Burke’s Hardware, a family-owned dealer with a 72 year history in Raleigh, North Carolina, told me a similar story. They recently joined their local network, Shop Local Raleigh, and were immediately impressed with the results. “We participated in a Shop Local TV ad, and even though we’ve been in the community for a long time, it was amazing how many people came into the store who’d never heard of us before!,” she said. They were motivated to join the network in part by the down economy, but mostly, she said, “because it was just the right thing to do, to support your community.”

Going Local

(Originally published in the October '09 issues of Merchant Magazine and Building Products Digest.)

For most of us independent business owners, the idea of buying local is pretty familiar – at least with respect to our own businesses.  We know that money spent in our stores, from folks in our own community, tends to stay in the community.  A good chunk of our salaries and those of our employees will likely be spent and invested locally, for other goods and services, as well as for local taxes that pay for fire, police and other municipal services.  Awareness of these benefits is spreading and giving rise to hundreds of buy-local campaigns which could be an important component of your green strategy.

Recently, the media has covered the growing interest in buying locally produced food as “locavores” seek to reduce the “food miles” and carbon footprint of their daily meals.  Right alongside, the shop local movement has been quietly picking up steam.  Organizations like BALLE, the Business Alliance for Local Living Economies, (www.livingeconomies.org) and AMIBA, the American Independent Business Alliance, (www.amiba.net), and a few others, are experiencing rapid growth.  Combined they represent over 30,000 independent businesses and over 130 local networks, with the bulk of those forming over the last two years.  Not surprisingly, a growing number of these businesses are LBM dealers, such as Kenyon Noble Lumber in Montana and Burke Brother's Hardware in North Carolina.

“Joining an Independent Business Alliance, or starting one in your local community, is not unlike joining a co-op, where members can benefit from group buying on advertising, supplies, etc.,” says Jeff Milchen, co-founder of AMIBA.  Milchen, counts the recession and growing interest in reducing environmental impacts as two of the main drivers lifting the number of independent business alliances they work with from 30 before the recession to an anticipated 75 by year’s end. 

Both organizations provide support to locally-focused business networks to educate the community about the benefits of buying and “thinking local.” Alissa Barron, of BALLE, points out that there’s a strong economic case for local businesses to form collaborative networks that promote buying locally.  “Dollars spent at locally-owned businesses circulate in the community 2-4 times longer, and do 2-4 times more good, than those spent with chains,” says Barron.  “We’re also finding that businesses end up collaborating on broader issues, too, like pooling resources for buying renewable energy.“ 

Seeking to tap this trend with some innovative twists is San Francisco start-up, Viv, (www.doyouviv.com). It’s a forward-thinking rewards program that helps green customers entice participating retailers to continuously green their operations with a simple card scan. The businesses take green steps based on the number of customer visits, while the Viv team offers consulting, free energy audits, and discounts from affiliated wholesalers.  Meanwhile, your customers share pride in your accomplishments and become more loyal.

For most independent LBM dealers, this trend plays to your natural advantage, but you can’t sit on your hands.  Join your local network, put signs in your windows, buy your supplies locally, and start educating your customers – both contractors and home owners - about the community benefits of buying local.   There may be opportunities to pool resources with fellow local businesses, too.  If you’re sourcing local materials, make sure to point them out - they can also contribute to LEED regional credits.  All in all, by fully embracing your local selves, your business will benefit and your community will, too.

 

Green Collar Jobs

(This article appeared in the November '08 issues of Merchant Magazine and Building Products Digest.)

While the scramble is on to bail out our nation’s banks and financial institutions, most of the rest of us are wondering what’s next. The economy may well be headed for a nasty recession with rising unemployment and sinking consumer confidence. Is this the beginning of a structural economic adjustment analogous to the industrial restructuring of the 1980s that shipped thousands of manufacturing jobs overseas, what we call “Globalization”? Many longer term economic trends point in that direction: rising shipping costs, higher manufacturing costs in China, greater emphasis on green house gas reduction and local sourcing, huge venture capital investments in “green tech,” and government policy promoting green building and clean energy, to name but a few.

But what about the short term? Will the bank bailout keep people in their homes, bring mortgage rates down and provide a small boost for our industry? Will another stimulus package from Congress do the trick? It just may be that the eventual economic recovery will be based, at least in part, on a grass-roots movement that is gaining traction with both local and national policymakers: “green collar” jobs.

From Oakland to Los Angeles, from the South Bronx to Chicago, New Orleans to Newark, local green collar jobs programs are revitalizing neighborhoods and giving people a chance to participate in the still growing green economy. A national organization, Green For All, (www.greenforall.org), founded by Van Jones and Majora Carter serves as a clearinghouse and resource center for local nonprofit-led programs, as well as municipalities seeking to develop their own program. These programs train workers for the clean energy economy and many include weatherization and retrofitting programs for existing homes and commercial buildings.

This is where it gets interesting for home improvement retailers. Getting involved in your local program could provide some immediate tangible benefits – you could be supplying the necessary products for these programs: weather stripping, insulation, lighting, roof coatings, and more. There are also opportunities to provide local leadership and expertise, gain community recognition, free publicity, find trained and motivated new workers, forge links with potential new customers, and more. And with federal green collar jobs programs coming soon, there may even be more opportunity.

On the national stage, it appears that plans to stimulate the growth of green collar jobs are already underway. Thanks in part to the efforts of Green For All and other grass roots organizations, Congress passed the Green Jobs Act as part of the 2007 Energy Bill, calling for $125 million to create the Energy Efficiency and Renewable Energy Worker Training Program. It’s a pilot program that would, (if funded in the next appropriations bill), jumpstart green collar job programs across the country. The House is currently discussing another stimulus package that would include investment in green collar jobs. In addition, both presidential candidates have expressed their support for growing green collar jobs. In any case, it appears that the green collar job issue is here to stay and that should be good news for hardware and home improvement retailers.

Get Connected: building community around your store

(This appeared in the July '08 issues of Merchant Magazine and Building Products Digest.)

For generations, the hardware store was a focal point in the community, where folks could get great advice, discuss the issues of the day, or catch up on the latest gossip. Obviously, things have changed as “big box” retailers have muscled in and literally changed the landscape. And it seems the bigger “the box”, the less community connectedness. In contrast to that disturbing trend, a recent report from Conscientious Innovation, a sustainability think tank, found that consumers ranked feeling connected to family and community as their most important sustainability issue. Also ranking high was the desire to support locally-owned businesses. These results lead to an important insight - forging deep connections within your local community just may be one of the greenest ways you can grow your business.

Last month we talked about things you can do to “green up” your store’s operations, suggesting that offering CFL, battery and paint recycling provides a valuable community service. Recycling programs provide convenience to your customers, but deliver something more important to your community. By diverting toxic waste, such as mercury that accumulates in the food chain, from the local landfill where it can leach into the ground water, you demonstrate a concern about the health and well being of your patrons.

But to get really connected with your community, you’ve got to get involved. Contact your local green building organization - it might be a city agency or a local non-profit – call them on the phone as soon as you’ve finished this article, go to their meetings, and let them know you want to be involved. This will get you access to valuable know how and help you connect with local green building leaders. Most cities with green building programs embrace interested retailers and will even include them in promotions. In San Francisco recently, the city took out ads in the local paper promoting the local hardware stores stocking green building products.

But don’t stop with green building, connect with other non-profit organizations. If your store is locally owned, join the Business Alliance for Local Living Economies, or BALLE, (www.livingeconomies.com). BALLE’s mission is about building community through local business networks. They can help you build the “buy local” advantage in your market. Don’t forget to support your local schools and parent groups. Making a small donation of organic compost for the school garden, participating in their fundraisers, sharing information about non-toxic alternatives – those small ways of showing your support will help to build long-lasting relationships. There are probably other organizations in your area that are focused on protecting local watersheds and bays, wilderness areas or providing job opportunities for young people. Find out what your staff members are interested in and encourage them to get involved, too.

You should also consider participating in local green events where you can educate your local community members about what your store is doing to make less-toxic, environmentally friendly, and resource conserving choices available. Better yet, host a green event at your store. If you’ve gone out and developed relationships with local green building and other sustainability organizations, you should find no shortage of enthusiastic help. Enlist the aid of your local green product manufacture and distributors, as well. After all, they are an important part of your community, too.

Getting connected with concerned community groups will make you feel good about offering eco-safe and non-toxic alternatives. It will also build your reputation and generate excellent word-of-mouth referrals, bringing new appreciative customers into your store. You can do good and do well and that’s what getting connected is all about.