What Is Green Marketing? Definition, Example and How It Works

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.

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 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. 

When a company’s green marketing activities are not substantiated by significant investments or operational changes, it may be criticized for false or misleading advertising. This practice is also sometimes referred to as greenwashing, and the fines and negative press can be tremendous. For example, on April 8, 2022, the Federal Trade Commission (FTC) made a public announcement that it was issuing a $5.5 million penalty via its Penalty Offense Authority to Kohl's Inc. ($2.5 million) and Walmart, Inc. ($3 million) due to their deceptive environmental claims about rayon products. This is the largest civil penalty in FTC history.

Example of Green Marketing

Starbucks 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 a 2018 report, Starbucks reported that it had committed over $140 million to the development of renewable energy sources. The company purchases enough renewable energy to power all of its company-operated stores throughout North America and the United Kingdom.

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.