With increasing concerns about climate change and environmental degradation, a new generation of green entrepreneurs is emerging, determined to transform their sustainable business ideas into reality. These eco-friendly ventures offer numerous benefits: they help protect the environment, stimulate local economies, meet the rising demand for sustainable products, and are quickly attracting attention from investors.
Indeed, an increasing number of consumers prioritize sustainability when choosing products, services, and brands to support. This shift in consumer behavior creates significant opportunities for eco-friendly businesses.
Here’s how you can start a sustainable business.
What is a sustainable business?
A sustainable business, or green business, balances profit with the health of the environment and communities by reducing or eliminating any negative impact the business or its operations have on the environment. This is achieved with green operations, production, packaging, and sourcing of goods and materials. Many green entrepreneurs also incorporate sustainability into their business through energy-efficient lighting, heating, equipment, and renewable energy sources.
Green businesses also extend their footprint by working with vendors and suppliers committed to a low carbon footprint. They also minimize their inventory to reduce waste.
Many green businesses are also committed to social justice, such as creating jobs within underserved communities and neighborhoods.
Sustainable businesses must substantiate their claims of being eco-friendly to avoid the trap of “greenwashing.” To build credibility, they should outline clear, specific measures and set measurable goals that demonstrate their commitment to a greener future.
Step 1: Determine your niche for your sustainable business
To determine your niche, think about how you can balance your personal interests and sustainability commitment with market needs. Conduct market research to understand current trends, demand for sustainable products and services, and consumer preferences.
Understand your competition. What are their offerings, business models, and environmental practices? This will help you find a potential gap, ways to differentiate your business, or opportunities to do things better.
Here are a few green business ideas to help you get started:
- Local foods market
- Farm-to-table restaurant
- Eco-friendly cleaning service
- Sustainable or secondhand fashion retail
- Upcycled home furnishings
- Green pet products
- Organic beauty products
- Green construction
- Sustainable event planning
- Sustainable landscaping
- Green business consulting
- ESG (environmental, social and governance) analyst
Step 2: Establish the purpose of your business
The purpose of your business is its driving force, mission, and core values. Consumers, partners, and investors will consider your purpose when deciding to engage with your business.
Develop a compelling mission statement and messaging that tells your story, invokes your passion, and describes what your product or service is, how it works, and why people should care.
For more information: How to do a market analysis for your business plan
Step 3: Get recommended and required certifications
Green certifications are crucial to demonstrating your business’s commitment to sustainability. There are many green certifications covering everything from products, operations, and buildings to food.
Depending on your business and industry, below are examples of green certifications you should consider obtaining:
- B Corp certification: A certified B Corporation is a business that adheres to stringent standards for social and environmental performance, transparency, and legal accountability to balance profit and purpose
- Green building certifications: Several green building certification standards exist worldwide. LEED (Leadership in Energy and Environmental Design) is the most widely recognized and utilized green building certification system in the United States Green building certifications are particularly valuable for professionals involved in building design, construction, or retrofitting, such as designers and architects.
- ISO 14000 environmental management: An ISO certification for businesses that require tools to manage their environmental responsibilities.
- Green and ethical product certifications: Ensure that products meet strict environmental criteria, have not been tested on animals, or are fair trade.
- Organic and sustainable food certifications: Ensure that food items are produced in an organic, sustainable, or ethical way.
For more information, see the Standards and Certifications page on the Library of Congress website.
Step 4: Create a business plan
A business plan is a detailed document that outlines your business's financial viability and how you plan to achieve profitability by incorporating sustainable principles. It should also describe the environmental and social impacts your business will have. In addition, a well-thought-out plan can help you make critical business decisions, set goals, and identify risks.
A basic business plan contains the following elements:
- Executive summary
- Company description
- Industry and market analysis
- Competitive analysis
- Organization and management
- Product or service offering
- Sales and marketing strategy
- Startup and ongoing costs
- Financial projections
Step 5: Choose a business structure
How you structure your sustainable business will impact your taxes, liability risk, and daily operations. Choose a structure that balances legal protections and benefits.
The four most common business structures for a green business are:
- Sole proprietorship: In a sole proprietorship, the business is owned and operated by one individual with no legal separation between the owner and the business. The owner retains all the business profits but is personally responsible for all the debts and obligations of the company.
- General partnership: A general partnership is the most straightforward form of partnership, automatically established when two or more individuals engage in a business venture for profit. As with a sole proprietorship, the owners bear unlimited liability for the business's debts.
- Limited liability company (LLC): This type of business setup is popular in the personal training industry. An LLC gives you limited liability protection, which means your personal assets are safe from any debts or problems with the company, and it also has pass-through taxation.
- Corporation: A corporation is a separate legal entity. It's owned by shareholders, which means the owners aren't personally responsible for any debts or obligations the corporation has.
For more information, read Comparing company types and Compare S corporation vs LLC.
Step 6: Follow legal requirements for your sustainable business
Your sustainable business may be subject to various legal requirements depending on your business structure and the location of your business.
- Licenses and permits: Regardless of your business entity type, it's crucial to comply with licensing and registration requirements. Your sustainable business will likely need a general business license at the local or state level. Even if you operate from home, you might be required to obtain a home occupation permit in certain jurisdictions.
- Sales tax: You may need to register with your state’s Department of Revenue.
- DBA filing: A DBA filing must be made with either the state or local jurisdiction if you intend to do business under an assumed name (also known as a trade name or fictitious business name).
- Obtain an EIN: If you plan to hire employees, you must obtain an EIN, register with the Department of Labor in your state, and handle payroll. You will also need an EIN if you form an LLC or corporation.
- Separate your business and personal finances: Corporations and LLCs must, by law, keep the business finances separate from the owner’s personal banking and credit cards. Set up a business bank account and credit card before you start your business.
Other requirements include getting a registered agent and filing a Beneficial Ownership Information Report with FinCEN.
For more information, see What are the legal requirements for starting a small business?
Step 7: Determine legal requirements for your industry
There may be additional legal requirements that relate to your industry. For example, the food industry is subject to federal, state, and local regulations specific to food businesses or food products. Regulations also change depending on the facility and location.
You should also consider regulations and legal issues around technology and marketing, such as consumer data privacy and protection regulations (GDPR and CCPA), and intellectual property rights.
There are also regulations to prevent greenwashing. Businesses can't make false claims in their advertising or product labelling to trick people into thinking their products are eco-friendly. Greenwashing litigation is increasingly commonplace and class action lawsuits are on the rise.
The Federal Trade Commission (FTC) Green Guides give brands tips on how to avoid making unfair or deceptive environmental marketing claims. In a recent update, the FTC advises marketers not to make broad, unqualified claims like "environmentally friendly" or "eco-friendly" because people might think the product has specific environmental benefits. The FTC has taken action in the past about deceptive claims related to recyclability, biodegradability, organic, and ecological certifications to make sure that environmental marketing is honest and based on evidence.
Several states have also adopted the FTC Green Guides into environmental marketing laws to prevent deceptive green advertising.
Frequently asked questions about sustainable business
Why is sustainability important in business?
People everywhere, including businesses and workers, demand transparency when it comes to using energy more efficiently and cutting down on greenhouse gases. In addition, governments worldwide are making new rules to ensure businesses do their part in using less energy and producing fewer emissions.
When businesses employ sustainable practices, they are being mindful of the environment and society while ensuring their economic growth. By reducing waste and pollution and using fewer natural resources, they can build a positive reputation, maintain customer satisfaction, and attract talented employees. Additionally, these practices can contribute to addressing major global issues such as climate change, inequality, and poverty, and benefiting society as a whole.
How can small businesses be more sustainable?
There are many ways to commit to sustainability – from the products you sell to how you operate your business. For example, eliminating paper and digitizing operations is one of the easiest ways to be more sustainable and reduce waste.
Small changes in energy consumption can also reduce costs. Install programmable thermostats, CFL or LED lighting, and remember to turn off equipment and lighting when not in use.
Recycle, reuse, and reduce. Replace paper cups and plastic drink holders with ceramic and glass. Instead of single-use plastic water bottles, install a water filter. Reuse paper wherever possible. And recycle disposable items.
Businesses can also be more sustainable by reducing water usage. Low-flow or dual flush toilets, and automatic taps can dramatically reduce use. If your property has green space and irrigation, install a rain sensor or install plants that thrive without a lot of water.
