Green: by popular demandPosted on Written by Reagan Haynes
The marine industry is continuing its march toward sustainability in response to consumer demand, regulations and increased efficiencies, and also because the industry depends on protecting its water and air.
The greener focus extends to factories, dealerships, marinas and emissions, and despite the need for an initial investment — such as Massachusetts-based Imtra’s decision to install solar panels and convert all of its building lights to LED — in many cases it pays off; Imtra now has a “modest revenue stream” from solar over-generation, says CEO Eric Braitmayer.
“I think there’ve been such dramatic improvements made over the past couple of decades that our industry is very clean,” says National Marine Manufacturers Association president Thom Dammrich. “The air quality in our factories is much better. Emissions in our factories are much better.”
But as a new generation comes of boating age, companies continue to push the envelope, and many of them are sure to include those younger voices in the process. At BRP, the Canada-based maker of Evinrude engines, millennials inside and outside the company are helping to influence a concerted push toward green technology, says Olivier Pierini, director of global marketing and strategic planning.
“[Millennials] are vocal, they have buying power, they have knowledge, so it’s actually pretty challenging for companies, but it’s also good because this is what makes you better,” says Pierini. “I’m a proponent of transparency and hard work and honesty because it pays off, always. With the work and research we’re doing now on internally rebranding, we took millennials into account more than you know. When it comes to brand and education and investments, we took into account millennials first because they are our current and next generation of customers, and they know lots of things.”
Studies show …
A 2015 global online Nielsen study of 30,000 consumers found that millennials were willing to pay more for products and services from companies committed to a positive social and environmental impact — up from 55 percent in 2014 to 72 percent in 2015. “Brands that establish a reputation for environmental stewardship among today’s youngest consumers have an opportunity to not only grow market share but build loyalty among the power-spending millennials of tomorrow, too,” Grace Farraj, senior vice president of public development and sustainability at Nielsen, said in the report.
“But younger generations aren’t the only ones who say they care, so don’t abandon baby boomers in the quest for millennials,” the study is quick to point out, echoing the sentiment expressed in the 10 interviews we conducted with representatives from various sectors of the marine industry. More than half, 51 percent, of boomers ages 50 to 64 were willing to pay more for sustainable products, 7 percent more in 2015 than in 2014.
Thirteen percent more respondents — again, from all age groups — said they’d spend more on products from companies they know to be environmentally friendly, from 45 percent in 2014 to 58 percent in 2015. “I think that’s the trend,” Dammrich said. “Whether you’re a millennial or not, that’s the direction society is moving. I think we’ll continue to move in that direction.”
The shift does seem to be widening its reach across the boating industry. The British team in the 2017 America’s Cup and its partners have lent their support to an effort to use a robot to capture invasive lionfish in Bermuda, where the competition is being held, The New York Times reports. Last year, the British team’s skipper helped persuade teams to sign a sustainability charter that committed them to eliminating single-use plastics, avoiding water pollution, reusing materials and protecting marine habitats.
But some think millennials might push the trend more quickly — the group comprises a quarter of the Earth’s population, making them “a growing consumer force that businesses must reckon with,” stated another 2015 Nielsen report.
Millennials comprise about a third of what Nielsen calls “opinion elites — an influential subset of the public who are highly informed, engaged and active when it comes to social and business issues.” All members of the group want to buy from companies they perceive as “doing good,” but younger members define that differently — for older members of the group, that translated to philanthropy; among younger members, it meant companies that protected the environment.
Because millennials are a rapidly growing and increasingly influential consumer market, Credit Suisse Group AG looked at how companies can bring them on board and how their focus on sustainability affects products in sectors that include the auto industry.
“If we apply sustainability to the automobile industry and the fight against climate change and pollution in this case, we can expect millennials to favor electric cars over diesel cars and shared cars over owned cars,” wrote Credit Suisse Group research analyst Julie Saussier in a report published in January. “Stricter emissions testing leaves no choice for the traditional carmakers but to commit greater resources to electric cars. Developments in technology companies such as Google or new entrants such as Tesla are pushing car companies to act today, and many manufacturers have revealed ambitious electric auto development programs.”
The search for sustainable behavior is pushing millennials to adopt new consumer habits, opening up growth opportunities in the sharing economy, Saussier wrote, with spending being diverted away from retail business but opening up new growth opportunities.
Freedom Boat Club has been on the receiving end of those opportunities, with membership pushing 16,000, compared with 13,000 last year, says CEO John Giglio. “About half of our members are newcomers to boating, and while we don’t have the specific statistics, we know that a significant growth area in membership is among millennials,” Giglio says. “Several of our hot markets attract millennials, including San Diego, Huntington Beach and Stockton, Calif., along with Chicago, Boston and Austin, among others.”
The age group hasn’t quite come into prime boat-buying age, and they also “recognize and respect the sustainability story,” Giglio says. “Freedom Boat Club offers a fleet of boats that are shared, so there are fewer boats operating on the water. In addition, our fleets throughout the country represent late-model boats featuring the latest engine technologies, which is good for the environment and a bonus for boaters.”
This is a concept BRP has been considering, as well. “We do take into account this evolution of customers, and even how we sell our products,” Pierini says. “We know millennials are more into the use of the product than the ownership of the product. So we are partnering with some serious partners right now to participate in boat sharing, if you will.”
Demand for electric
The Tesla example brings up another potentially important factor for the boating industry. German company Torqeedo, which offers 32 electric boat drives ranging from 1 to 80 hp, is poised to grow about 36 percent this year after several years of double-digit growth worldwide.
Industry veteran Marcia Kull recently joined the company as president of the Torqeedo Group, in part because she was watching where the propulsion market was heading. “We’re on a steep growth curve on electric and hybrid propulsion, both in commercial and recreational boating,” Kull says. “And on the personal side, too, this is the way I like to boat.”
The company has deployed more than 70,000 electric propulsion systems worldwide, and Kull thinks there is untapped potential, possibly fueled by younger generations. “I think millennials expect, being the parent of two of them, that the products they purchase are sustainable. I don’t think they would investigate who is most sustainable. I think they expect it. It’s part of their purchase expectations that something is not going to harm the environment and that it’s going to be produced without child labor or slave labor.”
The technology can also benefit the boomer generation, Kull says, as more use small motors on the backs of kayaks. “It doesn’t mean you don’t want to kayak all day long … but the beauty of that electric assist lets everybody participate and allows the aging boomers to pursue their favorite hobbies, as well.”
Millennials are quick to embrace electric propulsion, Kull says, which could precipitate more drastic changes. For example, the San Francisco Bay area is looking to reduce congestion and is looking to move more people via boat and seeking sustainable options, and she thinks more coastal metro areas will follow suit.
“When I compare my early teen years and the adulthood that I had with my children, it’s really different. I had so many self-imposed rules. My kids are a whole lot more open,” Kull says. “They’re far wiser than I was at that age, they’re far more worldly and they’re far more connected, as a result of social media and the Internet. They have friends around the world. They will research something and go off and do it. We didn’t have that freedom, and we didn’t have those tools. They’re engaged, and they’re really powerful, individually and as a group.”
A push to be cleaner
BRP’s current Evinrude engine lineup is a result of a seven-year program, Pierini says. Its E-TEC is a direct-injection 2-stroke system controlled by an engine management module that injects the precise amount of fuel or oil into the cylinder, eliminating the high exhaust emitted from the 2-stroke engines of 20 years ago.
“We want to make sure everything we sell is the cleanest, to push the boundaries in terms of standards and be above standards,” Pierini says. “Today we have technology we are testing; if you see innovation in the car market, usually it comes on the market rapidly because of the volume of production. That’s why this business is more conservative — the investments are big.”
BRP tries to leverage its economies of scale to bring new technology more rapidly to the industry, Pierini says. But because the investments in pushing sustainability are so large “we are extremely careful in what we do and how we do it,” he adds.
The company is rolling out new internal brand positioning with a focus on heritage, 2-stroke and innovation. “We have a strong belief that our technology can evolve to be even cleaner. We have things slated to launch next year or the year after that really break through in terms of environment protection,” Pierini says. “And that’s one of the reasons why millennials are a big factor in that brand positioning.”
The company is analyzing hybrids and alternative fuels — already it sells Evinrude Multi-Fuel Engines, or MFEs, to the U.S. Department of Defense. “This engine runs on pretty much everything,” Pierini says. “It can run on whiskey. In product demonstrations we put Jack Daniels in it. The engine is unique for the industry and is only for military applications — we sell to the Navy SEALs and the U.S. government.”
As a global company, Evinrude keeps its standards consistent with the most stringent ones. The U.S., led by California, has very strong emissions standards, and Europe’s are being strengthened. More stringent regulations are good for the environment and consumers, Pierini says, but in some markets, regulations are more lax and older, dirtier engines linger.
“We have a global ecology,” Pierni says. “An environmentally conscious company cannot sell dirty engines in markets with lower standards; it is not the right thing to do. We’d like to lobby on this point — we’d be very happy to be part of a group project — there are a lot of engines right now that are very old and very dirty that could be replaced with new, cleaner technology for a reasonable price,” Pierini says. “They did it in countries to renew existing car parts; we could do the same in the boat business. It goes way beyond product. It’s about the legacy we have.”
The outboard revolution
One reason for the rise in outboard propulsion is the cleaner, quieter outboards of today, says Kull. “People want to hear the birds and the slap of water against the hull. Clearly not everybody. There’s never one boat for all people. As manufacturers we have to think about where the bell curve is moving. I think the bell curve is moving toward more sustainable solutions and more quiet solutions. They’re two different things, but I think they’re both equally important.”
John McKnight, senior vice president of government relations for the NMMA, recalls testifying in front of the California Department of Water Resources board, saying, “We’ll never be able to build engines over 135 horsepower.” He laughs as he tells the story because the industry has far surpassed that, but this was when the industry had carbon monoxide issues stemming from direct-injection 2-stroke engines, which catalyzation has addressed.
“They’re lighter, cleaner, quieter, better-performing, safer — so we’ve seen great inroads to greener technology,” McKnight says. “Also they’ve improved from the perspective of the consumer. They’ve got electronic ignition — they’re easier to start. You turn the key, and the engine starts right up. All these are benefits that the catalyst for was the Environmental Protection Agency. People may argue with me and say it would’ve happened anyway, but what created that was that by a certain date we needed to meet these emissions standards. We knew it was going to cost a lot of money, but it provides a lot of benefits.”
Another standard that prompted change was the evaporative emission rule in 2010, regulating diurnal emissions, which led to standards requiring an automatic shutoff.
Although automatic shutoff had been required in cars for years, boaters filling tanks always had to pay close attention to avoid overfilling or gas would land either on their feet or in the water. Now systems are required to have automatic shutoff — valving that works in conjunction with the fuel nozzle’s shutoff.
“Government intervention has done great things in our industry,” McKnight says. “On the flip side, it’s so important to continue to educate them because they do make terrible mistakes. But if you go and start an old, carbureted 2-stroke engine, and all that smoke comes out the back, you’d be like, ‘Oh my gosh, we used to run boats like that?’ But some of the things I work on would put you to sleep. It’s about administrative burden and has to do with more paperwork and oversight. The message we always have to regulators is we have a consumer that demands clean, quiet boats.”
The Correct Craft plants have changed their processes through the years — not driven by regulations, but because it was the safe, cost-effective thing to do, says CEO Bill Yeargin.
“I have a little different view on regulations,” Yeargin says. “I look at countries that don’t have them. I think that’s how the United States was in the late 1800s, when our rivers caught on fire, and we don’t want to go there. We want healthy regulations that keep workplaces safe. We need a clean environment or people aren’t going to go out and boat. I want to have common-sense regulations, but we definitely need some. I believe that without them we would have a safe work environment because that’s part of our values, and think many would, too. But not everyone would.”
As consumers, people are making their own choices now, regardless of what the government does, Kull says. “There’s nothing that said buy a Prius or buy a hybrid or electric car, and yet we continue to see sales in those technologies rise because people are making their own choice.” (That said, all-electric and plug-in hybrid cars purchased after 2010 are eligible for tax breaks of as much as $7,500, depending on the battery capacity.)
The price of green
The EPA has done a great job of cleaning up the nation’s waters, and the Clean Air Act has been good at cleaning up the waters and the air, Dammrich says. “The issue is, we need some regulation, and some regulation leads us to a cleaner environment. The problem with most bureaucracies is their job ends, they keep going. So they’re looking to infinitesimally progress, and the costs are onerous, and there’s no longer an ROI for additional improvement.
“Nobody wants to see any backsliding, but when you add expense through regulation that adds very little or no benefit, is that good for the public? No. It’s raising the price of everything for little or no benefit,” Dammrich says. “If you look at the engine technology, we’ve seen such dramatic improvement in emissions from engines and drastic improvements on the part of manufacturing plants. You can’t get to zero.”
“For anybody who might complain about regulation, what it has done is it has driven a cleaner, more reliable product,” says West Marine CEO Matt Hyde. “Who wants to go back to the days of my childhood of old 2-stroke engines and breakdowns and smoke all over the place? That’s not pleasant.”
However, Hyde also worries about the cost that’s added to boats as a result. “What we have to balance that with is affordability, and boating has become more expensive,” Hyde says. “That’s probably what makes paddle sports more attractive now. We have to make sure that boating doesn’t isolate itself into becoming an activity only for the wealthy.”
Better for the bottom line
Though a shift to sustainability comes with a reputation of being expensive, in some companies it can pay off.
Block Island Power Co. says America’s first offshore wind farm, located off Block Island, Rhode Island, will not only be more sustainable than the diesel fuel it was using, but it also will ultimately save the company money despite the $300 million investment to have Deepwater Wind build five offshore wind turbines. The power company’s owner, a lifelong Republican, told news outlets that the economic benefit was the main draw for him in trying to supply the notoriously energy-insecure island with power. The situation on Block Island is unique, but it brings the reminder that companies benefit by assessing opportunities, location and local tax breaks.
Such was the case for Imtra’s switch to solar, which Braitmayer says has been “a tremendous business decision.”
“We paid off the initial investment in less than five years,” Braitmayer says. “When you combine the solar generation and the conversion of our interior lighting to LED, we now generate as much power as we consume — and have a modest revenue stream from the solar over-generation. Government tax credits for converting to renewable were critical in the accelerated payback schedule. It also aligns very closely with our company values around limiting our environmental impact, so it was a win-win decision.”
He can’t say whether that creates a draw for potential employees — “though I would expect that it’s more likely to attract than repel in any recruitment or hiring,” Braitmayer says. “We talk about our mission and values with prospective hires, so hopefully people that share similar interests would be attracted to our company.”
Several marinas are also going solar, according to Eric Kretsch, legislative and outreach coordinator for the Association of Marina Industries, who posed the question to several marina owners about their shift to more sustainable establishments.
“The real reason people are putting up solar panels is they make business sense. A lot of marinas have large roof spaces at storage facilities, and it reduces electricity consumption,” which can be extremely high at marinas, Kretsch says. “I think it also adds to the aesthetics for some people who are looking for more environmentally friendly places, but it’s an amenity that’s in addition to other things people are looking for.”
As an increasing number become designated as Clean Marinas, Kretsch says owners tell him it contributes to employee pride. “Owners see benefits in overall productivity and retention. On another note, I realized I can speak from personal experience. I am a new boat owner and a millennial,” says Kretsch, who is 25. “In the future when shopping for moorage I will be looking for Clean Marina-designated places. For me personally I set that above all other amenities that are being offered.”
Not a liability or profit center
Hyde says he initially made some mistakes when he tried to implement some socially responsible programs during his days leading outdoor equipment chain REI.
“You can’t make sustainability or social responsibility a project or a program that doesn’t make sense for your company just to say you’ve done it,” Hyde says. “You have to infuse this into your operations and make it something you just do. If it ends up being a cost center, then it won’t last. You have to find ways to be socially responsible and sustainable in a way that builds your business and doesn’t just add cost to your business.”
It’s important to infuse sustainability into the company culture if a company wants to tout its efforts, Yeargin says. “You can’t just do a little bit and spin it; people — especially millennials — will see right through that. They want people to be real.”
Hyde disputes that millennials, or anyone, will pay more for sustainable hard goods, despite market research showing otherwise. “I’m no expert on social responsibility or sustainability, but I’ve been working on it a long time,” Hyde says. “There’s tons of research that says people say yes, they will pay more. I disagree. It is an absolute expectation that people will abandon your brand if you don’t embrace this. But they won’t pay extra. I can tout my packaging. It does not give me permission to charge a penny more.”
Plants, processes and materials
Founder Bob Johnstone was determined to use epoxy composite construction at his MJM Yachts, in part to make the boats lighter and more efficient, requiring less power for performance.
“A number of core materials in boats are just much lighter today,” McKnight says. “Engines are expensive, so [builders ask themselves], can I put a 90-horsepower versus a 135? If I build the boat lighter, I can. So there’s been a big move on the boatbuilder side to build lighter, as well.”
MJM Yachts has a webpage dedicated to the company’s “green mission” explaining the use of less petroleum-based resin, resins that are greener to produce, epoxy that emits no VOCs when they cure and closed-molding techniques, Johnstone says.
The company’s licensed builder, Boston BoatWorks, also has exceptional safety and working conditions, Johnstone says, adding, “The side benefits are lower workers’ comp insurance rates, lower product costs through higher productivity and morale, better employee retention and lower training costs.”
“We’re using a lot of closed molding for lamination” for some of the Correct Craft boat brands, says Yeargin. “Centurion Boats and Supreme Boats out in California, they’re doing all the decks closed-molded. Nautique does a lot of small parts closed-molded. That’s definitely improving and getting better. It’s good for employees and it’s good for the environment. It’s nice not to have to wear equipment.
“Economics drive a lot of improvement at Correct Craft, and that’s why in the next few years we’re going to reach a tipping point on economics on a few things where we’re not just doing them because it’s the right thing, but because the economics make sense,” Yeargin says.
The company is doing a cost analysis of whether solar panels are a good investment at its Florida headquarters and Yeargin thinks those types of things are important to employees. “You’re appealing to workers and millennials, and that’s a great pitch, too, that you’re working in a place that’s basically getting its energy from renewable sources. You’ve still got to have good pay and benefits, but that would resonate.”
People at West Marine often discuss how to welcome the next generation of boating enthusiasts, says Hyde. As the company works on repositioning its brand it focuses on sustainability as part of overall social responsibility.
“Millennials look at [sustainability] differently and value it differently than baby boomers do,” Hyde says. “We brought in an outside group, and they are repackaging all of our inside products so there’s consistency in branding, but also sustainability in packaging.”
The work the company has done repositioning its Blue Future Fund has also helped drive the sustainability issue, Hyde says, and its Go West program fits into the social responsibility aspect, giving employees an opportunity to get discounts on health care by being active and healthy and offering them smoking-cessation programs if they’re smokers.
“We ask ourselves, how do we operate as a socially responsible company as we attract millennials to our industry? That is incredibly important,” he says, because the company is based in Watsonville, Calif., at a time of extremely low unemployment.
“You can jump in the car and in 40 minutes, you can be in Silicon Valley, which is one of the best economies in the world. We have to think very hard about how we compete in a tough employment market where we want to attract the best people and minds,” Hyde says. “Everything they say about employment in Silicon Valley is true — you can’t exaggerate it. We think about how we can differentiate ourselves and make ourselves stand out. This whole social responsibility aspect and how we brand at a company means a lot. Everyone has choices. I guarantee they’re getting lots of phone calls from lots of people, particularly in this market, so it does make for a competitive advantage, especially from an employment front.
“Here’s a huge competitive advantage that the industry has,” Hyde says. “We sell a lifestyle, and people are passionate about this lifestyle. For the most part, folks we hire at West Marine come because [they] have a deep, personal interest in some sort of recreation on the water. Going along with that is this connection to the environment, which gets back to sustainability and social responsibility.”
This article originally appeared in the July 2017 issue.