Will companies pull back from risky projects? Or will they re-jigger their efforts to support products that thrive in a recession…new or not.

Suddenly, innovation has a bull’s-eye on its back. As the recession debate shifts from “what if” to “how long,” claims a recent article in Business Week on the world’s most innovative companies.

Green entrepreneurs have no choice. Innovation is why they are in business. But, what strategies make the most sense for eco-friendly businesses facing a not-so-friendly economy?

Professor Scott Shane, writes about Four Mistakes Entrepreneurs Make in a Recession. How do these apply to green businesses?

1.Failing to take advantage of decreasing costs. Most businesses are both suppliers and customers at the same time. When demand slackens, your suppliers are hurting too. So often you can strike a better deal to cut your costs by paying your suppliers less or hiring better people at a lower cost.

Understanding this basic concept and being willing to bargain with your suppliers holds true for eco entrepreneurs too. But, because we often have few suppliers from which to choose recessionary times are those when it is important to evaluate the health of those suppliers and either seek out new ones or consolidate your business with the strongest.

2. Thinking the only way to increase demand is to cut price. Price cuts aren’t the only way to stimulate demand, and they aren’t the best approach for entrepreneurs. On average, entrepreneurs are more successful when they compete on service, quality, or something other than price.

Price cutting is a strategy that works best in a very competitive environment when there are easily substitutable products. That’s not often the situation in which a green entrepreneur finds him or herself. On the other hand, there is a “tipping point” a price at which a consumer won’t pay more for a better quality or greener product. That point may be dropping in your product category so it’s worth doing some research to see at what price the consumer isn’t willing to pay to go green.

3. Failing to recognize increased competition. In a recession, competition accelerates because more businesses are chasing less total demand. In addition, when unemployment rises, people start businesses …further increasing competition. So the need to have a competitive advantage is even more important in a recession than in a booming economy.

Recessions are well known as a time when down sized executives and laid off workers start businesses. Green is hot so many of those companies will be selling eco friendly products. Just as competition increases from large mainstream companies, it is also increasing from small start-ups. This is the time to ensure that you have a strong unique positioning and are promoting that differentiation at every opportunity.

4. Forgetting that some products, or even whole businesses, are counter cyclical. When customers cut back on their spending, they often substitute one product for another. For instance, in a recession, people might cut back the number of steak dinners that they eat out. But, … increase their purchase of cheaper foods, like pasta, making pasta a counter cyclical product. So, entrepreneurs need to avoid assuming that demand for everything goes down in a recession.

Many green products should actually do very well during this downturn. Though you may have been promoting your company’s products as eco friendly if they are also money saving, now is the time to emphasize that benefit. Products and services that are both are sure winners in this economy.

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Photo Courtesy: aturkus on Flickr under Creative Commons License

A recent ICOM study of U.S. shoppers found that two-thirds said they are more likely or somewhat more likely to use coupons during a recession. Well, the recession is here and eco-entrepreneurs should consider using this effective promotional tool.

“The consumer incentive certainly is there,” said Peter Meyers, ICOM marketing vice president. “Look at it this way: households of two adults and two children who use coupons wisely can save 25% on their grocery bill annually, without cutting purchases. That saves $2,400 a year based on a typical $800 a month grocery spend, which outstrips the $1,800 economic stimulus check this family has coming in May from Washington.”

While seemingly simple, developing an effective coupon requires research and forethought. Over the past decade, coupon redemption has declined to about 1%. That is, only 1 out of every 100 coupons distributed, on average is redeemed. But, a 3-5% or higher return is not unheard of if the couponing program is developed effectively.

With consumers more interested in and more likely to try green products than in the past, providing an incentive for purchase can build your business rapidly as word of mouth travels from consumer to consumer. An effective couponing program uses key selling point copy prominently displayed on the package and reinforced on the coupon face.

But, what about all of that paper waste? To a green company, couponing, at first glance seems ecologically wasteful and contrary to eco-business practices. Fortunately, today e-couponing has become mainstream with sites like coupons.com and ecoupons.com. Savvy shoppers check out the top coupon sites prior to making a major purchase or embarking on the weekly shopping trip.

The ICM survey found even more ways to leverage your couponing program.

In the area of coupon technology, 58% of consumers responding to the ICOM survey see their coupon use increasing if they could download a coupon from the Internet and have it automatically connected to an electronically swiped frequent shopper card.

Major grocery store chains, like Kroger are currently testing these programs. If successful we should see more of them in the future.

In the meantime, consider posting coupons on your company website. Include copy referring to your couponing program in press releases and test various means of distributing coupons for your products.

A more technologically savvy consumer combined with an economic downturn makes this the perfect time to perfect your couponing strategy.

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Photo credit: ninjapoodles at Flickr http://www.flickr.com/photos/ninjapoodles/ under a Creative Commons license.

A theoretical US policy to cut carbon emissions by up to 40% over a 20 year period could still result in increased economic growth; this, according to an interactive website created by the Yale School of Foresty and Environmental Studies.

The website reviews 25 of the leading economic models used to predict economic impacts of reducing emissions, and identifies the seven key assumptions account for most of the major differences in the model predictions.

“As Congress prepares to debate new legislation to address the threat of climate change, opponents claim that the costs of adopting the leading proposals would be ruinous to the U.S. economy. The world’s leading economists who have studied the issue say that’s wrong — and you can find out for yourself,” said Robert Repetto, professor in the practice of economics and sustainable development at the Yale School of Forestry & Environmental Studies

The interactive website allows visitors to define the truth of one of the seven statements, and then view the prediction of the models.

“The website shows that even under the most unfavorable assumptions regarding costs, the U.S. economy is predicted to continue growing robustly as carbon emissions are reduced,” said Repetto. “Under favorable assumptions, the economy would grow more rapidly if emissions are reduced through national policy measures than if they are allowed to increase as in the past.”

To check out the website click here, and proceed to the calculator via the link at the bottom.

It was a time when prices were increasing at the gas pump and grocery store, and when the economy sputtered along with little or no growth. Some neighbors saw their wages flatten — or their jobs disappear altogether. Gold, often seen as a barometer of economic confidence, was at an all time high (adjusted for inflation). I was pre-teen in a comfty Detroit suburb with a father who worked at then stalwart, GM, so a roof over my head and food on the table was never a concern.

But here we are today, with Priuses outselling Suburbans. Oil and gold are at all time highs. Things seem far more perplexing, interconnected, global. First, there’s the perception of a housing crunch, even though fretting over a 15 percent decline in home values over the last year or two seems rather odd given the incredible run-up of many homes over the past decade, sometimes by over 100 percent.

Second, the sub-prime mortgage mess has snared many who agreed with greedy lenders that living beyond our means was okay. That more jobs are being outsourced overseas or replaced by fancy machines in this increasingly global marketplace isn’t helping either.

Even if the Federal Reserve or Congress and the Bush Administration do manage to convince the American people that they should keep on spending by splurging with windfall tax refund checks — thus avoiding a recession — the printing presses rolling off fresh greenbacks and mounting debt on a national level could result in the onset of stagflation. Oil, while swinging up and down with the speculator’s bets and value of the dollar, will continue on its upward trajectory reflecting the reality of “peak oil,” the period by which its extraction and refinement will get ever more expensive and difficult. Our economy, and those linked around the world, are based on this fuel and this fuel is largely denominated in US dollars. When the dollar falls in value, the price of a barrel of oil must increase.

So why will ecopreneurial businesses fare any different than all the rest if, in fact, our economy morphs into stagflation? Because green businesses are based on ecological principles and, more importantly, practices. Self-reliance, localization, community-based interconnections and wise use of all resources, including energy, materials, and people. For the best ecopreneurial businesses, there is no waste. Like in nature, green businesses seek to use resources in the most efficient way possible.

Only the most productive, innovative and energy efficient businesses will continue to thrive during a period of stagflation. As my wife and I write about in Rural Renaissance and ECOpreneuring, our business model — a model that’s rooted in a fiscally and ecologically conservative approach to enterprise — will sustain us and our community because most factors of inflation are less pivotal to the profitability of our business. What if your energy costs are zero or food costs but a fraction of the typical food costs for a comparable business? What if your local market needs the goods or services you provide, fairly priced and based on the fair wages you pay your employees? Many of the ecopreneur profiles in ECOpreneuring actually create products from the waste stream rather than from virgin materials. Some have embraced the “service economy” where products just keep getting used over and over again; for example, Interface Inc. offers floor coverings that are ecologically sound and can be replaced through a service contract with their clients (the old carpets are then transformed into new carpets).

No matter whether stagflation or recession set in, an ecopreneurial business can weather the economic storms ahead. In fact, many will emerge at the top of their game because — as in nature — stress and turmoil spur innovation. Our ecopreneurial business, Inn Serendipity, set out to produce more electricity than it uses. Now we’re exploring ways to eliminate the need to refuel our car at a gas station, perhaps through the investment in a plug-in hybrid. Until then, at least some of our local commuting will take place in an all-electric CitiCar, recharged with a photovoltaic system on site (which also recharges a lawn mower and other items).

How is your ecopreneurial enterprise set up to prosper despite a slowing economy, recession or stagflation? What’s your business strategy of survival, or, rather, as we write about in ECOpreneuring, your business strategy of abundance? In our case, rather than be dependent on limited and decreasing supplies of oil, we’re largely powered by unlimited and renewable wind and solar energy. Worth mentioning, solar and wind energy are also generated tax free (and for businesses, ecopreneurist owners may often qualify for tax credits for actual generation).

Will a recession—or the prospect of a recession—curb consumer desire for green products? In the shadow of flat growth, will corporations slow their corporate social and environmental initiatives? Will we see a decrease in the burgeoning world of green marketing? The word “recession” has been splattered upon every newspaper and on the tongues of anyone with some knowledge of the lending crisis and skyrocketing price of petroleum. The question on my mind is whether an economic downturn will play a factor when consumers shop. Will green products take a backseat again?

According to the big-poppa of all securities firms, Goldman Sachs, consumer spending will continue to slow as the sickly housing markets have made it difficult for people to tap into their home equity. Another interesting thing to think about is how this will cause the unemployment rate (currently 5 %) to increase — economists predict it will increase to 6.5% by the end of 2008. Fewer jobs equals less money to be mixed in the economic batter and one more reason why consumers may opt for less expensive non-green goods.

There has already been evidence of consumers tightening up their wallets in other areas needing of discretionary income: the technology sector, which was very recently a safe haven for investors fleeing the housing markets, is fleeing the squeeze as consumers cope with the decreasing value of their homes and increasing fuel costs. In the days prior to January 1, the S&P technology index dropped 7.7 percent, making it the worst performing sector. Will consumers be just as wary to opt for premium priced green goods?

In the fourth quarter of ’07 and even into the new year we’ve seen copious amounts of data pointing to increases in consumer spending on green goods or goods from companies with a green bent:

• “Consumers expect to double their spending on green products and services in the next year” read this
• “More than half of global consumers (53 percent/representing 1.1 billion people) prefer to purchase products and services from a company with a strong environmental reputation” read this
• “Approximately 50 percent of U.S. consumers consider at least one sustainability factor in selecting consumer packaged goods items and choosing where to shop for those products…” read this

My hope is that consumers will approach these times of frugality with the idea that reducing the amount they buy, and continuing to purchase local goods and environmentally preferable goods, is, in the long, much better than reverting back to less expensive alternatives with greater environmental footprints. I’m trying to believe the optimisism and feel comfortable that the green movement and green business has hit critical mass and has crossed the bridge of relapse, but I’m still unsure. One thing to hope for is more stringent government regulation as the White House has a change of tide, but if there is a recession, will political candidates talk more about stimulating the economy and less about the environment? As long as the price of oil continues to climb, perhaps we’ll see a vast embrace of renewable energies.

I welcome your thoughts and opinions.

photo credit: dollar bills