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By FindLaw Staff | Legally reviewed by Tim Kelly, J.D. | Last reviewed September 23, 2022
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The United Nations' 2021 climate report deemed the current climate situation to be “Code Red." This finding makes it imperative that businesses take sustainability more seriously than ever. While large corporations will make the most significant strides toward alleviating the problems brought by climate change, it's clear that the impact of small businesses can be just as significant.
Business owners are “greening up" their endeavors. Many are turning toward sustainability models as they start new businesses. At the same time, customers are changing their buying habits and looking to sustainable companies for their products. In general, eco-friendly businesses find success by aligning themselves with environmentally friendly principles and making those alignments known to an eco-minded customer base.
This very brief overview will cover how to start a small business with environmentally friendly economic principles. It should give you some ideas of how to create a green business in your neighborhood and invite like-minded people to do business with you.
FindLaw's Starting a Business section provides a wide variety of articles and other resources to help you get started.
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Fledgling industries deemed important to environmental initiatives, such as solar and wind power, can often receive financial aid to drive growth. This aid can be through direct investments by the federal or state government. It can also be from rebates provided directly to customers. This has been the case with rooftop solar power installations.
Businesses in renewable energy and other earth-friendly fields need incentives to thrive. Lawmakers hostile to green enterprises may be less willing to extend rebates and incentives, thus having a chilling effect on the industry. Alternatively, regulations on air quality and carbon emissions may help bring the cost of high-polluting energy sources like coal up to par with renewable energy sources. As a result, regulations like carbon taxes and stricter pollution standards can help earth-friendly businesses compete.
A green business combines economic sustainability with social justice principles of family-supporting wages, benefits, and inclusivity.
It's not enough to merely operate a green business. You must also be able to explain what measures you're taking to reduce your carbon footprint. Nowadays, customers want to make informed decisions about the businesses from which they buy. The best way to let everyone know about your green efforts is by documenting them and sharing that information on your company website or through whatever other marketing channels are available.
A carbon footprint is a total amount of greenhouse gasses (gasses that trap heat in the atmosphere) generated, directly or indirectly, by any given activity of a person or enterprise. These gasses are considered a primary driver of human-caused global warming.
Whether a business is "green" or not is measured by what that business's carbon footprint is. Certain activities reduce a carbon footprint while others increase it. A "green business" has a smaller carbon footprint than a similar business that does not adopt sustainability.
The average annual carbon footprint of a US individual is 16 tons. The average for the rest of the planet is four tons. The Environmental Protection Agency (EPA) has a useful carbon footprint calculator to determine a specific business's footprint.
One way to reduce your business's carbon footprint is through a "green procurement policy." This is when a business transacts with other companies that are also engaging in green practices. This can be your suppliers, the people who provide transportation, or even the retail outfits where you will make purchases. Research their sustainability practices and conduct eco-friendly transactions with businesses that have the smallest carbon footprints.
And remember to shop and network locally. This creates community and cuts down on expensive energy costs. Once you've established yourself, you can create or join a local group with other green business owners. You can also form social media groups, advertise, hold social events, and sponsor community events—the list is endless once you start making connections.
A business plan is used to show potential funders and others that your business idea will work in real life. A green business plan accomplishes this by showing the reader how the business owners intend to make money using green methods and principles. All worthwhile business plans have the same essential components. They are:
A green business plan should use every section as an opportunity to inform the reader how your new business will distinguish itself in sustainability. This is your chance to show that you aren't just greenwashing or faking it. Here are a few suggestions of how to do that.
It will follow the so-called “Triple Bottom Line" approach:
Use real-world examples to prove the viability of your business. One such way would be by pointing out that, in 2020, sustainable US equities outperformed non-sustainable equities by 5%.
Make sure that the reader of the business plan knows that you are inspired by sustainability principles. Be able to explain how this business will contribute to the green economy. If you are manufacturing a product, describe how it's sustainably manufactured. If it is a service, will the mission include education or participation by the community? How will the business impact the local community? And how will internal operations (the office) be as green as possible? Analyze all the stakeholders through a sustainability lens.
In the executive summary, lay out the environmental needs that the business addresses. The mission statement should include sustainability goals, which should be at the core of your mission and integral to operating.
The company description should also contain the business's projected economic and environmental impact on the local community. Start with something like "We are an environmentally conscious company that…." Next, list any green third-party endorsements of the business or certifications of the principles.
Your section on products and services should have a green emphasis, focusing on why the green aspects give your company a competitive advantage. Your marketing section should emphasize your green target market, customer trends, green marketing tools, and potential collaborators.
As for your business's operations, you can write out the plan to make the office green—recycling, energy savings, going paperless, etc. Do the same for the manufacturing facility, personnel environmental training, and transportation. List your suppliers (local and green themselves, when possible).
Be sure to relay how your management team and advisory board will be trained, certified, and committed to green business. Finally, show in the financial plan how going green will positively affect your bottom line.
No matter what business you're getting into, you will need an office of some kind. Regardless of any goods or services they provide, every company that maintains an office has a measurable carbon footprint.
Even if you do not manufacture a green product, if you reduce your company office's carbon footprint, you will still be able to call yourself a green company. Businesses can become greener by imposing these basic sustainable practices:
Everybody needs to eat. The food business will always beckon certain people. No matter where your business is on the food chain—growing, delivering, retail grocery, or restaurant—green principles can help save money and positively impact the community and the environment.
Here are two brief examples of “green" food businesses to explore.
Organic food is the heart of the green food business. This food has been produced through approved processes, using organic fertilizers and farming practices promoting qualities like recycling and biodiversity.
Certified organic food can be sold at a premium. The United States Department of Agriculture (USDA) provides a portal for all things organic. They designate local agencies as agents to administer the certification process. Here are the USDA's five steps to organic food certification:
If you are opening an organic food store or restaurant, you will be wearing your green bona fides on your sleeve. Your eco-friendly philosophies need to be the headline of your business plan and the very core of what your business presents to the public.
Still, you don't have to be an organic/vegan restaurant to employ and profit from sustainability principles. Almost all restaurants—especially new ones—operate on a very slim margin. Most new restaurants fail in the first three years. But sustainability principles can help with the overhead costs that drive restaurant owners crazy and damage their businesses.
Here are some tips for making any restaurant more sustainable.
Finally, check out the Green Restaurant Association. They have helpful tips, certification information, and a network of members available to help you.
There are several governmental agencies and non-governmental groups that certify green businesses in various ways. You may want to become certified as a green or environmentally friendly business, or you may want to look at the certifications of other companies to see who you want to do business with.
In addition to the USDA, here are some other domestic certification programs to look out for depending on your business model:
Becoming certified shows consumers and business partners that your business and products meet the criteria set out by the certifying body. For example, you can't legally advertise your canned tomatoes in the US as "organic" without certification from the USDA. Keep in mind that different organizations and agencies usually have different standards for the same thing.
No matter what kind of business you start, you probably will run into situations requiring legal know-how. But earth-friendly enterprises, particularly heavily regulated or subsidized, often need even more legal expertise. Consider meeting with a business and commercial attorney familiar with environmental regulations and green businesses.
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