Going green adds to costs but boosts opportunity, report

With margins coming under more and more pressure on account of rising raw material, processing and transport costs, making the initial investment in a greener business strategy is a more difficult decision to take in the current climate, but it is one that could still pay dividends.

Driven by greater consumer awareness of environmental issues consumer demand is continuing to grow for natural cosmetic and personal care products despite the economic slowdown in both Europe and the US, according to a report from researcher Kline, entitled Natural Personal Care.

The report highlights the fact that despite shrinking household incomes, consumers are still willing to pay a premium for natural products, a factor that is underlined by double-digit growth for the category in both the US and Europe.

Green leads to opportunity​

“The establishment and sourcing of sustainable natural and/or organic ingredients are ostensibly challenges to costs of goods and ultimately profitability, but going green also helps create an opportunity for higher price points, increased sales and future cost savings,”​ the report points out.

Following a green or sustainable strategy has become almost unavoidable in the current business climate, but although it does take an initial investment to get the ball rolling, it can lead to an advantageous market positioning as well as longer-term cost savings.

“Almost all the companies we profiled have a sustainable or green strategy with long term goals of having a certain percentage of their operations, products or packaging being green or sustainable,”​ said Laura Mahecha, industry manager at Kline.

“It’s an investment now but, is expected to yield cost savings in the future,”​ added Mahecha, in reference to the fact that greener production, processing and transportation invariably use less materials and energy, which can eventually lead to significant cost savings.

Greener packaging can mean cost savings​

The report highlights that one of the most significant areas where cost savings can be made by going greener is packaging, particularly by concentrating on the use of less materials and more sustainable packaging materials.

Simpler, lighter weight packaging means less material and less cost, but likewise moving away from petroleum-based plastic packaging is also starting to pay dividends as the cost associated with this kind of material has been rising rapidly on the back of international oil prices.

“Ultimately, despite initial higher costs, sustainability can serve both the market and the industry by insisting upon more natural constituents - be they ingredients or packaging – and enhancing both the image of the consumer and the personal care company,”​ the report states.