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Economy

Altruism Vs Profitability: Latin America's Green Debate

It's not easy being verde
It's not easy being verde
David Cornejo

SANTIAGO - In 2009, the European Union agreed to gradually prohibit classic incandescent light bulbs, finishing the process in September 2012. The idea is to replace them with energy efficient light bulbs and kick start sales of green products. At the same time, Argentina was much more radical - at the beginning of 2011 the government completely prohibited imports and sales of incandescent light bulbs. While summits like the Rio+20 haven’t succeeded in getting global agreements on sustainability, the market for green products, companies and consumers is moving right ahead.

According to the Meaningful Brands study done by Havas Media with 50,000 consumers in 14 countries of Europe, America and Asia, 53 percent of consumers questioned are prepared to pay 10 percent more for a product if it is produced sustainably. And in Latin America, that number rises to 63 percent. “Green products will always be good business. Consumers and markets have demonstrated that buying ecological products creates added-value,” said Pascoal Koutras, CEO of Phillips in Latin America.

The advances in this market are based on the increase in the scale of production, which reduces costs at the same time as the consumers’ perception of green products has matured. For companies, the increase in green products is based on their commercial viability, since the market doesn’t change due to altruism. “You are not going to ask a company to be responsible for the environment just because of ethics. It works when you can show numbers that make sense from a financial point of view, because you save money,” said Juan Verde, advisor to Barack Obama on sustainability and co-director of his reelection campaign.

An eco-citizenship that is conscious of the importance of conserving natural resources can tip the balance so that companies are more sustainable in their products and processes.

Green-washing

Green products available in Latin America move forward through word of mouth, at least as much as through the nearly inexistent marketing in the green economy. The green consumer can become a missionary in his or her eagerness for a sustainable continent. A sustainable evangelizer.

Companies in the region are incorporating more and more sustainability criteria into their operations. And they are including sustainability in corporate visions and missions. On the other hand, as consumers have become more and more interested in the subject, it has also stirred up some disillusion. According to the Meaningful Brands survey, 63 percent of consumers in Latin America think that companies have started sustainability initiatives as a way to green-wash their public image. “There are many different green products on the market, but we need more information to make good choices, with more complicated labeling,” says Alex Godoy-Faúdez, director of the master’s in Environmental Management at the Universidad de Desarrollo (Development University) in Chile.

Juan Verde thinks the region is on solid ground for growth in the green market. “Latin America is much better situated to implement these ideas in light of the economic turbulence,” he says. “Being green means having a sustainable economic model that allows you to earn money in the long run. If the people want these changes, then it is logical for the companies to follow them,” he added.

Marcelo Bisordi, vice-president for international relations for Brazilian conglomerate Camargo Corrêa, says that Latin America should incorporate the development of sustainable products into its DNA, despite some limitations due to geography and economics. “Some countries are already running up against environmental obstacles, like in Peru, where there is a shortage of water in some regions.” People in Latin America are also worried after having seen the direct effects of damage to the ecosystem. We are ecologists by necessity.

Altruism versus Profitability

Now we just need the consumers’ green proselytizing to catch on with the companies. “The most common error that companies make is to think of sustainability as an element that makes products more expensive and less competitive. On the contrary, they should think of them as an investment and an opportunity,” says Marcelo Bisordi from Camargo Corrêa. He adds that taking planned actions towards sustainability can actually protect companies from risks that effect cost increases.

And we’re not just talking about promises of future returns. Around 39 percent of the products sold by Phillips in 2011 were green. “We know that they are more expensive then other technologies, however, we can recoup the investment in the medium-term,” says Pascoal Koutras. Those energy-efficient light bulbs are one example: they last longer and have lower maintenance costs.

But a green economy that is based on profitability has an inconvenient key point. There is a risk that companies will not enter markets that are not attractive. “Most companies concentrate on the most profitable investments and not on the investments that the society really needs,” says Norwegian sustainability specialist Jorgen Randers. It’s altruism versus profitability. The economy’s eternal karma.

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