What Is Green Marketing?

Green marketing refers to the practice of developing and advertising products based on their real or perceived environmental sustainability. 

Examples of green marketing include advertising the reduced emissions associated with a product’s manufacturing process, or the use of post-consumer recycled materials for a product's packaging. Some companies also may market themselves as being environmentally-conscious companies by donating a portion of their sales proceeds to environmental initiatives, such as tree planting.

When a company’s green marketing activities are not substantiated by significant investments or operational changes, they may be criticized for false or misleading advertising. This practice is also sometimes referred to as greenwashing.

Key Takeaways

  • Green marketing describes a company's efforts to advertise the environmental sustainability of its business practices.
  • The emergence of a consumer population that is becoming increasingly concerned with environmental and social factors has led to green marketing becoming an important component of corporate public relations.
  • One criticism of green marketing practices is that they tend to favor large corporations that can absorb the additional costs entailed by these programs.

How Green Marketing Works

Green marketing is one component of a broader movement toward socially and environmentally conscious business practices. Increasingly, consumers have come to expect companies to demonstrate their commitment to improving their operations alongside various environmental, social, and governance (ESG) criteria. To that end, many companies will distribute social impact statements on an ongoing basis, in which they periodically self-report on their progress toward these goals.

Typical examples of ESG-related improvements include the reduction of carbon emissions involved in a company’s operations, the maintenance of high labor standards both domestically and throughout international supply chains, and philanthropic programs designed to support the communities in which the company operates. Although green marketing refers specifically to environmental initiatives, these efforts are increasingly presented alongside social and corporate governance policies as well. 

There are many incentives for companies that choose to engage in green marketing. To begin with, a companies’ perceived commitment to environmental causes is an increasingly important factor influencing many consumers' spending habits. The 2014 Nielsen Global Survey on Corporate Responsibility, for example, found that roughly 55% of consumers were willing to accept higher prices from companies deemed to have a positive social and environmental impact—a 10% increase from the previous survey in 2011. In some regions, such as Asia, Latin America, and the Middle East, this attitude was even more common, shared by roughly 65% of respondents in 2014.

Real-World Example

Starbucks (SBUX) is often cited as a leader in green marketing practices. The company has invested heavily in various social and environmental initiatives in recent years. For example, in its 2019 Global Social Impact Report, Starbucks reported that it had committed over one hundred million dollars to the development of renewable energy sources. The company now purchases enough renewable energy to power all of its company-operated stores throughout North America and the U.K.

Similarly, the company has made investments in social impact projects through initiatives such as the Starbucks College Achievement Plan. Through this project, many U.S.-based Starbucks employees who work more than 20 hours a week on average are eligible to receive fully-paid tuition to the online undergraduate degree program offered by Arizona State University. This project, as well as similar commitments in areas related to the employment of veterans, have formed an important part of Starbucks’ green marketing initiatives.

From an investor's point-of-view, these kinds of green marketing initiatives can prove essential in building and maintaining a valuable brand, particularly for consumer-facing companies such as Starbucks. However, some critics argue that green marketing can exacerbate the existing advantages of larger companies at the expense of their small or mid-sized competitors. After all, implementing robust social or environmental programs often involves additional overhead costs. For large companies, these costs can easily be borne and may even form part of the company’s existing marketing budget. For smaller companies, however, the addition of these costs may significantly impair the profitability or viability of the business.