We've switched to CFLs, outfitted the family with Klean Kanteens, dutifully recycle everything we can and are looking for the next painless green step we can make in our household - the reusable hanky. Handkerchiefs have a quaint old fashioned quality to them and many of us have fond memories of our fathers (who likely still carry them) wiping our noses, cheeks and eyes with them over the years.
But with kids around having a single hanky in our pocket isn't going to cut it and we also don't want to be finding used handkerchiefs dropped haphazardly around the house. Allyson Hill has switched to handkerchiefs in her home and has come up with a solution for stockpiling them and collecting them once they're used. She's made clearly labeled "clean" and "dirty" receptacles and placed them around the house for retrieving or depositing hankies. She made fabric versions and as well as labels to put on ceramic bowls (download templates for each on her blog). [Allyson has some organizational gifts - you may remember the product she designs and sells for keeping car backseats tidy.]
One note: Handkerchiefs are ideal for allergies and everyday sneezes and running noses, but to prevent spreading germs, disposable tissues are the way to go when you or your kids have a cold.