As climate change intensifies, companies across sectors are transforming their business models to forge a sustainable future – one that protects people, planet, and profits. According to a 2022 report from the Institute for Business Value (IBM), in the race to reduce emissions, consumption, and waste – while protecting biodiversity – everything is on the table, and consumers are playing a vital role in making it happen.
51 per cent of respondents to an IBM environmental sustainability survey, released in February 2022, said that sustainability was more important to them than 12 months previous, with the vast majority admitting that the pandemic had influenced their views. Meanwhile, nearly half of the consumers surveyed had paid a premium for products branded as sustainable or socially responsible over the previous 12 months.
In a separate report, First Insight and the Baker Retailing Center at the Wharton School of the University of Pennsylvania asked senior retail executives and consumers in the US about how sustainable practices are impacting consumers’ shopping habits and purchasing decisions. The results pointed to a profound sustainability knowledge gap between these two cohorts, which presents opportunities for retailers not only to bolster their reputations and enhance consumer loyalty, but also to increase profits.
Understanding consumer priorities
The first step should be to attempt to understand what the consumer is looking for from the products they buy. According to the First Insight report, however, retailers and consumers are disconnected on factors ranging from consumers’ willingness to pay more for sustainable products, to their utilisation and preference for resale or re-commerce models.
In an editorial for Forbes, Greg Petro, founder and CEO at First Insight, says that Gen Z consumers have outsized influence on previous generations when it comes to sustainable shopping, and their influence will only increase as the younger members of this cohort grow into adulthood. By 2030, Gen Z will represent 27 per cent of the world’s income, surpassing Millennials by 2031, according to Insider. It would be wise, therefore, for brands and retailers to become aligned with these consumers to secure custom over the long term.
Additionally, Petro highlights the fact that almost all of the retailers surveyed believed that consumers rank brand name higher than product sustainability when it comes to purchasing decisions, when in fact, only 56 per cent ranked brand name as somewhat or very important.
A desire to help the environment was found to be the primary reason consumers purchase sustainable products and brands, with improving the environment, reducing production waste, reducing carbon footprint, and animal welfare all cited as reasons for this. Retail executives, however, believed that social signalling – a desire to be recognised as doing good – was one of the major reasons people shopped sustainably. Just seven per cent of consumers agreed.
Sustainability benefits the entire supply chain
Understanding, and being actively engaged with, consumer priorities with regards to sustainability, rather than cynically dismissing it as the latest trend, can have real benefits for all stakeholders. Sam Boarer, director at the Aegis Trust, has been an integral part of social enterprise Good Human Coffee, working to build sustainable livelihoods for coffee farming communities in Rwanda to create food security and economic stability while delivering peace education. He says that one of the key responses to the drive-in consumer desires is the adoption of sustainable business practices.
“Many companies are investing in renewable energy sources, reducing their carbon footprint, and implementing recycling programs to minimise waste. Many businesses are also taking steps to conserve natural resources, such as water and energy, and are reducing their use of harmful chemicals and materials,” says Boarer.
“In Good Human Coffee’s case, we work with partners who help to ensure that our coffee is grown using sustainable practices, but also help to create sustainable livelihoods for our farmers and local communities. We work with experts in the field of agriculture, nutrition, education, and charities to ensure that our process is not only good for the environment but is done in a way that provides long-term, positive change for our coffee-growing communities.”
The consumer drive for sustainability means consumers are more conscious about where, how and who is creating their products, meaning businesses have had to adjust and be far more transparent about their practices, or adopt new, more ethical ones.
“We have found that consumers are appreciative of being involved with or buying from brands that are clear, open, and honest about their practices, especially when it comes to sustainability, marking a clear change in tastes businesses must adjust to,” asserts Boarer. “Good Human Coffee aims to ensure that our communities are empowered and cared for, and are vocal about how our coffee is made, packaged, and processed to ensure our consumers can make an informed choice, but also know the impact their purchase is making.”
Communicating sustainability measures effectively
As Boarer says, proper communication is another key factor for businesses, as not acting, and not being seen to act, on sustainability is a massive risk to both near term reputation and long-term business resilience. Tal Donahue, senior associate director and Infinite Global, believes that many brands are seeking to project their sustainability credentials to remain competitive. This, he says, is to be welcomed, as it builds awareness and generates momentum for wider change.
This is also true in the experience of Jamie Hyman, managing director and co-founder of consultancy company Snow Hill, who says that clients are becoming more proactive when communicating their sustainable development. However, in addition to growing numbers of consumers factoring sustainability into purchasing decisions, companies are also increasingly aware of how the perception of greenwashing – regardless of whether it is true – can harm their businesses. It is in their best interests to be transparent about sustainable development, and companies are quickly and aggressively integrating these messages into their communications strategies.
“As recently as a few years ago, companies were hesitant to communicate about their sustainability strategies or goals unless they were also able to demonstrate meaningful results,” explains Hyman. “Now, there is a broad understanding that change requires time, and customers want to know that companies prioritise sustainability before they open their wallets. The companies we work with are highly motivated to showcase their sustainability journey, which is a beneficial communications strategy if claims are supported by data.”
“There is, rightly, a low tolerance threshold for anything that could be construed as greenwashing,” adds Donahue. “In the UK, the advertising regulators have taken an increasingly tough line on environmental claims. Even when a company may in fact be making positive operational changes, claims made in advertising slogans which are absolute but unsubstantiated will be treated with short shrift. Catching the ire of the regulator has broader implications, not least for bigger brands, because of the inevitable resulting negative publicity. Accusations of greenwashing in the headlines can quickly erode good will that has been carefully built up, and reputation repair may be needed.
“Companies, first and foremost, need to be self-aware. And, if they are going to go on the front foot, be prepared for scrutiny from all stakeholders. The climate emergency must be treated seriously, and slogan without substance will not cut it.”
The spectre of crisis fatigue
All of this, however, comes with a warning. GWI, an audience research company based in London, says that crisis fatigue is setting in, and the place sustainability holds in purchasing decisions is in flux.
According to their statistics, the number of US consumers who want brands to be eco-friendly is down eight per cent year-on-year. Even among Gen Z consumers – the group which Petro assures us will drive consumer sales strategy going forward – the number who would prefer to pay more for an eco-friendly product has dropped, as they prioritise how they spend their money during the cost-of-living crisis.
Ultimately, it has never been more important for brands to consider how consumers are collectively feeling and keep in mind the impact crisis overload is having on many people. Messaging around sustainability initiatives needs to be more actionable and meaningful, otherwise it is just noise.