The Big Green Opportunity for Small Business in the U.S.
Executive Summary
Green market opportunities and operating practices should matter to owners of the smallest businesses. As this report makes clear, that’s not just for ethical reasons. Our work – including a national survey of more than 1,300 business owners – reveals a compelling business case for green.
This report is the first major study to look at the green economy from the perspective of small business owners, including owners of “microbusinesses” – those businesses with 5 or fewer employees that represent 88% of businesses in the United States. It’s also the first report to consolidate market data on the growth of green segments across a range of industries – trends that reveal both immense opportunities and some significant challenges for these small businesses.
Here’s what we found:
Green market segments in the United States are growing fast. Growth rates of “green” segments are outpacing conventional segments in every industry where we collected data – for example, over the decade ending in 2011, the U.S. organic food category grew at a rate of 238% compared to 33% growth for the overall food market, and most forecasts indicate that the shift to green will only accelerate across industries. (See “The Growing Green Economy,” page 22-31.)
Green “operational efficiency” practices are increasingly mainstream for companies, including the smallest businesses. While some businesses in our survey had adopted only the more common green practices, like double-sided printing, a surprising number were retrofitting their lighting systems, redesigning products to reduce energy and water requirements, and installing solar photovoltaic panels. (See Environmentally-Beneficial Savings,” pg. 35.)
The small businesses in our survey reported growing demand for green products and services and greater competition for green-oriented customers. At the same time, business owners reported that their green offerings tend to be profitable, often more profitable, than their less environmentally beneficial offerings. (See “Green Demand” and other survey results, pages 12-17.)
Some small businesses at the frontier of capitalizing these green opportunities are capturing significant market and operational advantages. We segmented our 1,305 survey respondents into 3 groups based on the green attributes of their products and services and their level of adoption of specific actions intended to make more efficient use of water, energy and/or waste. The “deep green” segment in our survey (those business owners whose answers reflected the most intense embrace of “green”) reported stronger performance compared to their “light green” peers on nearly every dimension we tested. (See “The Green(er) Edge” pages 18-21.)
A nascent “green” support network has sprung up almost overnight. We identified more than 160 green certification programs and more than 35 specialty industry trade associations dedicated entirely to green, most of which have appeared since 2001. The explosive growth of this support infrastructure is a clear sign of a rapidly expanding green economy. (See “The Organizations that are Growing Green,” pages 32-34.)
Yet, in spite of the clear economic and competitive benefits of green and this emerging green support system, many small businesses are poorly positioned to capitalize on the opportunities in this new economy. Many “light green” business owners lack the market insight, customer and peer relationships,
And overall, unlike large companies, which tend to have full-time sustainability staff and are far more likely to have aggressive sustainability strategies, few small businesses have dedicated capacity around green. By their nature, small businesses – especially the very smallest – lack the resources to hire dedicated, knowledgeable staff to harness the value in green. Only the most green-committed small businesses (primarily those who understood green markets and practices from day one) are truly integrating green into their strategies and operations. (See “The Green(er) Edge” pages 18-21.)
Small businesses risk ceding the “Big Green Opportunity” to larger companies that embrace green and have more resources to invest, but they have real opportunities for capturing value. In categories where consumer demand is driving green growth, small businesses can succeed through laser-like focus on meeting needs of existing customers and attracting new customers willing to pay “Green Premiums.” In areas where green market growth is a response to regulation or the barriers to entry are higher, small business owners often need additional support and guidance along the way. Sometimes that comes in the form of interpretation of new environmental rules and their implications – other times it comes in the form of financing that recognizes the value in green markets and efficiency practices. (See “Big Green Challenges,” pages 40-43.)
So what does all of this mean?
There IS a Big Green Opportunity for small businesses. But if small businesses do not move to take advantage of the growing market potential, they will fall behind in the emerging green economy. Moreoever, if small businesses are not able (or willing) to take advantage of costs savings from efficiency opportunities, they risk being further disadvantaged relative to their larger peers in the emerging resource-constrained environment.
If that is the case, we could end up with a top-heavy green economy, one that’s better for the planet but economically exclusive. The benefits won’t trickle down and small business will suffer. That’s not in anyone’s best interest.
We think it is a risk, but it’s by no means inevitable. While there is no “silver bullet” solution to helping small businesses succeed in the green economy, there are many opportunities for small business owners and the robust network of stakeholders that care about the growth of Main Street businesses to foster their success in this new economy. Our hope is that this report contributes to engaging business owners and other stakeholders in a dialogue.
This is truly a Big Green Opportunity.
Let’s make sure that it’s an opportunity for all.
