Contributed by: Aaron Fairchild, CEO of Green Canopy, Inc.

I have often cited Daniel Goleman to explain a consumer’s desire to make an impact with his or her invested dollar. In Ecological Intelligence, Goleman explains that consumers will always buy what they perceive to be a less toxic or more environmentally friendly product given price parity with a competing product. While the consumer may not be buying the perceived “better” product to make a positive impact in the world, they are likely buying it because they view the product healthier or better for their family. 

This consumer behavior pattern offers a direct analogy for financial investors. It goes without saying that investors invest capital to generate a return. If an investor can invest in an opportunity that generates a similar risk-adjusted rate of return to competing investment opportunities yet the investment will also deliver outcomes that better align with their values, then the investor will likely choose to invest their capital in such a value-aligned opportunity. 

Enter Green Canopy. Our mission is transformational; our company was deliberately created with the mission to inspire resource efficiency in residential markets. We have two impact product offerings for consumers to buy.

Our primary impact product is our homes. We build homes that are more environmentally sustainable than what is required by city code and  have third party  audits  verifying our homes meet or exceed a local or national green building standard. In other words, a Green Canopy home is healthier for the planet, consumes less energy to operate (we guarantee that), and is simply a better home than the comparable code-built home. The kicker: we price our homes for sale on par with other homes on the market. We have to price our homes competitively with other homes because if we don’t, buyers would choose to acquire the less expensive yet comparably located and sized home. So buyers of our homes acquire a Green Canopy home at a competitive price that delivers outcomes that align with their needs and values. 

Our second impact product is our real estate fund offerings. We currently manage two debt funds that generate competitive returns for investors. If it were not for these funds, we would not have enough debt financing to build more environmentally sustainable homes at our current scale. Investors in these funds buy membership units that are designed to generate competitive rates of return and deliver outcomes that align with their values. 

I believe the United States has entered a relatively new era where the general market is looking for values-aligned solutions. I witness this daily in both of our product offerings. However, most consumers and investors remain price sensitive and will continue to be so. This is where many people believe the government and foundations can play a role. However, I don’t believe it is incumbent on the government or others to subsidize product offerings, or for that matter the market to simply accept the market-price mismatch. 

Entrepreneurs innovate. The role of being an entrepreneur is to figure out how to bring new product to market in such a way that the market is willing to pay for it. Government incentives and infrastructure are helpful catalysts and support structures for market change. But the role of efficiently bringing new product to market is ultimately the role of entre- and intra-preneurs. 

Additionally, foundations, the government and other mission-driven sources of capital can aid in providing lower cost of capital to kick-start product offerings and help stimulate demand (think of the Bullitt Center or the ZHome development). However, values alignment should not be seen as an impediment to bringing socially and environmentally impactful product offerings to market—it should be used as a competitive advantage. Sound business people focused on values-based product offerings will continue to innovate within the cost/price constraints of the market and ultimately bring more and more highly sought after product to meet consumer demand. Impact alignment and the balance between supply and demand are really just a matter of time and innovation.

Post contributed by Aaron Fairchild:

Not too long ago I gave a talk at Bloom!, a local Seattle function where sustainable business entrepreneurs have 18 minutes on the clock to tell their story, answer questions and then move on.

It is a jazzy and frenetic format, and I had a lot of fun being part of the party-like speaking event. A week or so afterwards I asked the event organizers if they received any feedback on my talk, good or bad. The response was for the most part positive, except one person who commented that I was, well, “too capitalistic.” Pause… Deep breath… Contemplative grin…

I cut my green teeth nearly 20-years ago, at what was then, the hippy liberal University of Western Washington, taking classes on environmental justice and ethics. At the time I lived with Johnny D, an Earth First activist who used our kitchen as the hub that the local Earth First crew used to plan out their next monkey-wrenching action against the man. We thought that a career in environmentalism meant that you were either going to be an activist, an advocate in a non-profit somewhere, or an academic. No one at that time was considering capitalism’s role in the environmental movement. We considered capitalism to be the cause of our environmental problems, and not one of many remedies that can be used to cure them.

I understand where the comment after the speaking event comes from, and it continues to cause me to smile when I reflect on it. I don’t begrudge that perspective; I welcome the discussion as long as we don’t get bogged down in it. I continue to think it is amazing that there is even a discussion to be had, which is a sign of how far we have come. The fact is, markets that are allowed to run free within the regulatory framework imposed by society have efficiency, scope and scale far beyond academia, advocacy, and activism. However, we shouldn’t embrace free markets and capitalism at the expense of the others. They all need to co-exist and be cross-functional and supportive, but we must recognize that economy rules our world, and a fringe issue that is not embraced by the economy will always remain on the fringe. Until capitalism goes green, or the green movement goes capitalistic, society will continue creating brown fields, brown skies and toxic resources at the expense of future generations. Let’s take a peek into where capitalism is heading…

Daniel Goleman, the nationally known social psychologist and author of the #1 bestseller, Emotional Intelligence, recently completed a new book, Ecological Intelligence. In his book he explores how to remedy the lack of insight and understanding into the ecological impacts of the products we buy. He argues that by boosting our “ecological intelligence” we will collectively increase our understanding of the hidden ecological impacts and in so doing, bolster our resolve to improve them. He discusses how brain researchers examining purchase decisions have demonstrated that consumers’ emotional reactions to products’ ecological impacts matter for sales. Goleman examines how companies in several industries such Wal-Mart and industrial chemical production companies are already changing the way they manage their supply chains to address the need to limit their impacts and position the business to thrive in a radically transparent marketplace. He states that his mission is to, “alert businesses to a coming wave, one that will wash over any company that markets a man-made product.” He calls for “radical transparency” in the marketplace that allows consumers to be ecologically intelligent about the products they purchase.

Another new arrival on the marketplace scene is the L3C. The L3C is a “Low-Profit, Limited Liability Corporation.” This is a new type of LLC that is designed to attract private investors and philanthropists in ventures designed to provide a social benefit. An argument can be made that a new legally designated entity doesn’t need to be created in order for organizations to provide a social benefit. If a profit maximizing organization tackled the same business sector as a low-profit organization I would submit that it could provide a far greater social benefit. There are several issues that would need to be addressed to flesh out the argument, but the fact that there is an argument to be had is encouraging. The L3C is yet another sign of our progress and the nature of our progressive times.

There are more examples of capitalism gone green, from Socially Responsible Investing (SRI) to sustainable supply chain management. In fact, there are so many examples that I simply can’t mention them all, however, one example that is close to home remains. At G2B Ventures we are actively engaged in helping to support efforts in profitable environmental enterprise. We are working hard to demonstrate the value of smart energy efficient refurbishments in the residential housing market using a market-based approach that is acutely aware of public policy overlap into the sector. By being focused on profit maximization, and working with several local stakeholders to develop a market-driven premium for energy efficient homes, we will capitalize on the enhanced returns of energy efficiency to the benefit of our investors. If we can do this, we will be one more example that when green goes capitalistic, society and the environment are beneficiaries as well as the investor.