What is 'Green Marketing'

Green marketing consists of marketing products and services based on environmental factors or awareness. Companies involved in green marketing make decisions relating to the entire process of the company's products, such as methods of processing, packaging and distribution. These practices may fall under the broader umbrella of environmental, social and governance (ESG) criteria, which is a set of socially responsible steps that firms can undertake. Green marketing, here, means that producers use environmentally friendly processes in production, such as recycling water, using renewable energy or reducing carbon dioxide emissions.

Green marketing may also refer to the production and marketing of goods based on their pro-environmental factors. Such a product or service may be environmentally friendly in itself, in addition to being produced in a sustainable way. This may include avoiding toxic materials in the product, the use of recycled materials in the product, products made from renewable materials (such as bamboo or hemp), not using excessive packaging, or products designed to be repairable and not "throwaway."

BREAKING DOWN 'Green Marketing'

Green marketing is a practice whereby companies seek to go above and beyond traditional marketing by promoting environmental core values in the hope that consumers will associate these values with their company or brand. Engaging in these sustainable activities can lead to creating a new product line that caters to a new target market. This is also sometimes known as sustainable marketing, environmental marketing or ecological marketing.

Ben and Jerry's, Whole Foods, Starbucks, Johnson & Johnson, Method and Timberland are among the publicly traded companies that have employed green marketing strategies, stressing the sustainability of their products or the green methods employed in their packaging or retail stores.

Green marketing may refer to the production process, to the products or services themselves, or both. Companies that succeed in "going green" are able to attract the attention and investment dollars of those pursuing socially responsible investments (SRI), an investment strategy of owning shares of only those companies that have committed to sustainability, social responsibility and good corporate governance. Once a niche market, SRI investing has grown rapidly in the past few years, with several SRI mutual funds and ETFs offered that actively look for companies such as those with green marketing practices.

Are Consumers Willing to Pay More for Green Marketing?

Green marketing and ESG practices come with added costs that are often passed on to the consumer. This is because more expensive materials, such as recycled products, are used; because waste must be reduced; and because often these products must compete with non-green alternatives, to name a few. The 2014 Nielsen Global Survey on Corporate Social Responsibility asked 30,000 consumers from 60 countries to explain their preferences for green products. They found that a majority of consumers are indeed willing to pay for green marketing. Some 55% of consumers were willing to pay extra for products and services from companies committed to positive social and environmental impact (up from 45% in 2011), and 52% had made at least one purchase in the previous six months from at least one socially responsible company. More than half of respondents reported checking product packaging to make sure it was not wasteful or harmful to the environment. Consumers in the Asia-Pacific region, Latin America and the Middle East/Africa showed a higher preference (64%, 63%, 63%) to pay extra for green, while in North America and Europe preferences were a bit lower (42% and 40%).

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