3 ways entrepreneurs can influence the adoption of environmental standards
In late 2009, a group of small business owners — a heating contractor, an architect, an interior designer, a landscape architect and a general contractor — have gathered around a table. The group has been charged by their client with making a new hotel in Atlanta compliant with the Leadership in Energy and Environmental Design (LEED) green building construction standard. Despite strides, they still fell short of the necessary points to achieve the certification. Someone had the idea to install solar heating for the swimming pool, which should have been relatively easy in sunny, warm Georgia. But the nearest solar contractor they could find was in Portland, Oregon, explained the HVAC contractor. "Flying them out to bid on the project would bust the budget."
The fact is, a vast network of suppliers and partners often are needed in business. When established partners fail to deliver on green products and services, it often falls to "environmental" entrepreneurs to fill the gap. While entrepreneurs often lack access to these established networks, they can attempt to differentiate themselves and certify their practices to voluntary environmental standards such as LEED, the USDA Organic Standard, among others. In turn, a whole new cadre of businesses are needed to help support their efforts — and catalyze more traditional businesses.
In our research, we found at least three ways for these entrepreneurial firms to help influence the adoption of environmental standards:
First, entrepreneurs can provide products and services that enable existing firms to adopt environmental standards. We have found over the past 10 years that more entrepreneurs, particularly our millennial students, are motivated to not only create profitable, but impactful companies. However, they struggle to understand and demonstrate that customers will care enough to pay a premium for environmentally friendly products and services. Successful entrepreneurs increasingly focus on B2B models, due to existing firms’ eagerness to adopt new standards, but until the right opportunity arises, are not clear on the "how" to do so.
For example, Mark Retzloff, founder of Horizon Organic Dairy and multiple other environmentally responsible ventures, helped to organize organic producers and lobby for a national organic standard. Retzloff realized that by creating a credible standard, and private label organic products, as well as the Horizon brand, he could increase market penetration. Offering private label, what we see as "store brands" milk, helped existing retailers such as Target and Wal-Mart adopt the USDA Organic Standard. It also helped Horizon become what Michael Pollan called "the Microsoft of organic milk."
Second, by entering early into new markets, entrepreneurs can demonstrate the viability of meeting a given standard. In our research on the emergence of wind energy in Colorado, we found new wind farm developers demonstrated there was a potential market for renewable energy in the state. This early entry helped environmental activists justify their demands for a state-wide renewable portfolio standard (RPS).
But perhaps more important, these early entrants helped large-scale utilities understand how to manage renewable energy on the grid, moving Colorado to the point where bids to provide solar energy proved more cost competitive to those providing coal-based energy.
Third, entrepreneurs can focus on a universal, but minor, need. Entrepreneurs are well-positioned to the smaller, yet still essential, parts of the value chain that help with the adoption of voluntary standards. In our most recent research, we found that small businesses played a very important role in driving the adoption of LEED building practices in U.S. cities. By creating niche B2B businesses that provided the materials necessary to create a LEED-certified building (reclaimed wood, energy efficient window panes, water efficient low-flow toilets and faucets), these smaller firms unlocked an economically profitable opportunity for themselves while driving greater ecological responsibility for the industry.
We also found that these entrepreneurs were effective in promoting environmental certification adoption both in politically liberal and conservative regions, unlike other efforts such as policies by local governments, which could not cut across the political divide. Our findings indicate that the creation of new economically viable businesses that in turn promote the adoption of voluntary standards could provide us with a way to escape the current political gridlock on climate change. It’s tough for politicians of any stripe to argue against creating new, successful businesses that also help to reduce environmental problems while growing our economy. As the next generation of the workforce — and voters — chooses to work in impactful fields, the forces are already in motion.
As more companies strive to meet environmental standards, there is great opportunity for environmental entrepreneurs to play a critical role in helping them reach their goals and achieve a more sustainable economy.