July 7, 2008

Home Depot Solves and Eco-Problem

This post first appeared at Harvard Business Online.

Home Depot announced last week that it will collect and recycle compact fluorescent light bulbs (CFLs) in nearly 2,000 of its stores. This is great news since it eases the transition to low-energy bulbs by solving a big customer problem: what do I do with this bulb when I'm done with it? Home Depot is the not the first - IKEA and local stores have CFL recycling programs - but it brings a bigger scale and reach to solving the problem.

First, bravo. Home Depot is, in part, taking responsibility for the "end-of-life" of one of its products (in wonky terms, this is "extended producer responsibility" and it's the law for some products in some parts of the world, such as electronics in Europe). But in the New York Times article on this program, one quote really struck me. Ron Jarvis, the company's SVP for environmental innovation (cool title) said, "We're trying to do the right thing...Some of the things that we do are for the community and not for the bottom line."

I'm always a bit frustrated at a slightly sheepish explanation for a green program that costs some money and might impact the financial performance of the company. Of course it will affect the bottom line. But I think it will help it. No doubt Mr. Jarvis meant what he said, but may be wrong, and here's why. When are people most likely recycling a bulb? I'm going to go out on a limb and guess that it's when they need a new one. Why wouldn't they buy it while they're at Home Depot recycling the old one? And what about that mop or plant or lumber they've been meaning to get? Solving a customer eco-problem can drive business.

From a strategy perspective, Home Depot is utilizing a critical eco-advantage mindset and approach: thinking about the value chain. Here's how I'd recommend finding these kinds of business and green opportunities. To oversimplify...

1) Think about - and measure if possible - the full value chain impact of your products. Where are the big impacts for energy use, water, toxic waste, and so on?

2) Look forward in the value chain (after thinking about upstream opportunities as well). What issues do your customers face? In this case, you might hear two complaints:
A) Boy are my energy bills going up;
B) I have no idea what to do with my old CFL bulb.

3) See if you can solve their environmental problem. Solving A is easy: sell them CFLs (and insulation and better windows and on and on). Solving problem B is harder but possible with scale: start a recycling program.

4) Reap the benefits of a closer relationship with your customer who now thinks of you as a solution provider (and if you're Home Depot, sort of apologize for it).

OK, Home Depot didn't mean to do the last part of #4 I'm sure. But I can't figure out why any company should have to dance around how a green program might help the bottom line after costing some money upfront - in most cases, that's just called investment. Only on environmental initiatives do people feel the need to apologize about short-term expense. Home Depot and its execs were right to crow about the environmental benefit and doing the right thing. But they are also fully justified to promote the likely payback and business benefits of investing and bringing customers into their stores.

Or perhaps Mr. Jarvis and the Home Depot team are craftier than I realize. Maybe they didn't want to let their competition know how much of a win-win this could be. Sorry if I let the cat out of the bag.


On July 30, 2008 10:21 PM, Mario Vellandi said:

Exactly. Reap an opportunity for replacement and upselling. One can include product recommendations in direct mail or through pop displays strategically placed near the bulb receptacle, which guides customers to aisles with additional energy/water efficient products, low voc paint, etc. I like the concept - use reverse logistics through retail as a pull strategy for additional sales.

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