Incentive is a central concept in economic theory. Without proper incentive, it’s difficult to compel action which in the catalyst necessary to extract value from resources (human and material). That’s the capitalist outlook. It has been posited that one failing of communism is its lack of meaningful incentive. Collectivism may not motivate people as much as personal gain. If you’re only going to make the same wage no matter how hard or efficiently you work what is the motivation to work extra hard or to pursue efficiency or quality through innovation? The state of Cuba and North Korea today and Russia after communism’s collapse, bear some of this thinking out (though I do acknowledge other factors are also involved in all three situations). It is also worth noting that China’s ascent accelerated greatly only upon adopting some capitalist aspects into its economic structure. While this is a broad, sweeping account, I believe it is safe to say that incentive matters.

Incentive also figures into business quite a bit. From compensation to marketing to the strategies and tactics involved in buying and selling entire companies. Incentive leads to motivation and motivated people tend to be more productive.

Interestingly, incentive and motivation aren’t always matched to the people being asked to act. I attribute this to the easily-triggered trap of assuming that the people being solicited are like the people doing the solicitation. In short, assuming they want the same things the solicitor wants. Parents deal with this when their child’s life goals(“I want to be a painter”) are different than their own (“We want you to be a lawyer”). Managers deal with it when their employees goals (“Don’t rock  the boat, rocking the boat gets you fired”) are not aligned with that of the company (“Think outside the box.”). Marketers encounter it when their perception of a product’s value (“Thicker, stronger denim”) proposition is not aligned with what the target is looking for in the product (“The label is too big and the cut is weird”)  Sometimes the product itself is simply being sold to the wrong target altogether.

Recently I’ve been working on projects related to the Green space. Here, again, I see ongoing evidence of a misalignment of incentives and motivators between the solicitors (organizations seeking funding) and those solicited (corporations).

Today “Green” is enjoying immense popularity. It has emerged from niche interest to become a national headline topic. It’s on everyone’s agenda from the President on down.  Not coincidentally, we’re in a recession too.  That’s a blessing and a curse for the Green groups. The problem here is two fold.

1. On the plus side, recession boosts awareness. Without pesky money to think about, we have time to think about other aspects of our lives – like the environment. Corporations, often vilified in recessions for their greedy behavior also turn to social issues during recession for some much needed PR love. However, the very lack of money running around the economy that gives people and corporations time to think about the environment can also inhibit them from acting on it.
2. When the economy recovers lenders start lending, spenders start spending and soon the popular incentives of growth in a capitalists culture – more money, a promotion, a bigger home, that plasma TV – distract us from those feel-good balance-seeking social concepts. We see this cycle repeated after each recession. The media’s fickleness only compounds our inherent A.D.H.D. and we’re easily swept up in the next big thing (which sometimes is also the next big bubble).

For  Green to sustain itself (financially and as a priority topic among corporate benefactors) especially during boom times, it needs to be recontexualized in terms of incentives that motivate corporate interests These incentives are well known – enterprise value, growth, higher share price, positive brand perception, loyal customers, etc. They are the incentives that surface in marketing campaigns and around finance discussions.

In this sense, if Green organizations want to appeal to more than the philanthropy wing of a company they must translate the incentives that motivate them (protecting the earth, reducing pollution, saving wildlife, conserving resources, etc.) into those that motivate corporations.

How might carbon offset, renewable energy, pollution reduction, resource conservation etc. contribute to reducing manufacturing costs or improving customer purchase intent? What is the quantifiable value of these outcomes in terms of sales, marketshare, or enterprise value?

Conversely, because today Green tends to be more expensive than the environmentally less-friendly options, it might be worth looking at the negative angle of the argument (though the marketing folks don’t like to lead with a downer). For example:

Let’s assume a loyal customer base of 100,000 people.

You produce 100,000 widgets at -1¢  cost/widget  saving $1000 each month supplying widgets to your full customer base. Over a year that’s $12,000 saved by using a less environmentally-friendly manufacturing process.

Then let’s say you get ‘outed’via the Internet which feeds into the mainstream media spreading the word quickly. (A very real scenario in a Twitter-impulse world.)

In response, 10,000 customers (10% of your audience) stop buying the widget because it pollutes the environment.

That’s 10,000 fewer $1 transactions per month or $120,000/year in lost revenue.

Even at 2% customer base reduction, you still end up losing twice as much as you saved using a polluting process vs. a Green one. (Say nothing for the flaming you get from bloggers, activist Facebook groups, nosey reporters, etc., all of which will cost money to turn around through positive PR and advertising.)

Admittedly these numbers are oversimplified, but the point is clear. Rather than talking to corporations with an emotional appeal positioned as a charity with soft metrics built around it, Green interests should seek actionable, consumer insights about their customers, the corporate executives. Doing so might reveal a way to address Green as a core business proposition that impacts a company’s balance sheet.

Sure, the corporation’s marketing arm will put a feel-good consumer-facing spin on it for advertising purposes and glean that benefit as well. But alone, positive feelings and goodwill are not likely to motivate a corporation to look any further than that small, discretionary philanthropy budget.

Meanwhile an opportunity is lost to Green interests and corporations alike because more and more, the trajectory of the planet, its resources, pollution level and the collective cultural environment consciousness lends itself to a truly quantitative ROI for incorporating Green not as marketing spin but as a core operating principle.