Shoppers once selected products based simply on price or brand, but now attributes such as whether goods are “sustainable,” “climate-friendly,” “green,” and “eco-friendly” are readily becoming part of the consideration. The latest IAG New Zealand Ipsos poll found, for example, that while climate change is “not the top concern for the public currently, more than half [of survey respondents said that they] worry about it regularly, including about the impacts of climate change that we are already seeing at home and abroad.” At the same time, an IBM survey found that more than 2 in 3 global respondents say that “environmental issues are significantly (very or extremely) important to them personally,” and 84 percent consider “sustainability” to be important when choosing a brand.
Despite prevailing attitudes of consumers to prioritize sustainability and environmental good, research continues to show that few consumers who report positive attitudes toward eco-friendly products actually follow through with their wallets and pay more for “sustainable” goods, which may help to explain the enduring demand for fast fashion and other mass-market goods.
Green, eco-friendly, climate-friendly products — confused?
With such sustainability concerns in mind, it is hardly surprising that a growing number of brands are flooding the market with very-specifically-marketed goods. For instance, use of the word “green” is applied broadly to almost everything related to benefiting the environment, from production and transportation to architecture and even fashion items. “Eco-friendly” – which is not quite so broad and defines products or practices that do not harm the Earth’s environment – is slapped on everything from beauty goods to dishwashing soaps. Meanwhile, “climate-friendly” is used to define products that reduce damage specifically to the climate.
All these terms – most of which lack legal definitions and which are used interchangeably by brands – are used in labelling to make us feel good if we buy products claimed to minimize harm to the planet and the environment. Some brands are even moving beyond simply eco-friendly and now seek to claim their products are “climate-neutral.”
Who says it is up to standard?
While companies are increasingly using environmental claims to appeal to consumers, they also attract greater scrutiny. Concerned about allegations of greenwashing – i.e., claiming that a product is “sustainable” when it is not or that it is “greener” than it actually is, many brands are turning to organizations, such as Climate Neutral, Foundation Myclimate, and members of the Global Ecolabelling Network, to legitimize their claims, and thereby, avoid large scale public relations scandals.
For example, the climatop label, as developed by Myclimate, certifies products that generate significantly less greenhouse gas than comparable products. The carbon footprints of the certified products are based on international standards (ISO 14040) and verified by an independent expert. Environmental Choice New Zealand is the official environmental label body that awards certificates and lists environmentally friendly products for green homes or businesses. Products must meet similar standards (ISO 14020 and ISO 14024). Good Environmental Choice Australia is a similar organization.
Third-party certifications may help brands to navigate this space, but as indicated by the widespread pushback against the Higg Index (including a Norwegian Consumer Agency’s move to take issue with H&M’s use of the standard to rate environmental and social sustainability throughout the supply chain, arguing that the index was insufficient to support its environmental claims), such certifications are not without issue.
A willingness to pay more for “sustainable” products
For years, researchers have examined climate-oriented consumption to see if it actually wins consumer support. Reports, such as Nielsen Insights, suggest the majority (73 percent) of people would change their consumption habits to reduce their impact on the environment, and almost half (46 percent) would switch to environmentally friendly products. But these results should be interpreted cautiously. As U.S. psychologist Icek Ajzen wrote, “Actions … are controlled by intentions, but not all intentions are carried out.”
Despite environmentally-friendly sentiments from large swathes of consumers (and putting inflationary pressures aside), such concern about the environment does not readily translate into the purchase of “green” products.
Commercial research reveals that 46 percent of consumers are more inclined to buy a product if it is “sustainable” or “eco-friendly,” but nearly 60 percent are unwilling to pay more money for that “sustainable” or “eco-friendly” product. Meanwhile, academic research has consistently identified this gap between purchase intentions and behaviors. Regardless of environmental concern and the positive attitude of customers towards sustainability and green products, it is estimated the market share of green products will reach only 25 percent of store sales by 2021.
Ultimately, the research that evaluates consumers’ willingness to pay more for green products has been mixed. For example, one study found Spanish consumers were willing to pay 22–37 percent more for green products, but Japanese consumers were only willing to pay 8–22 percent more for green products.
From procuring raw materials to shipping the final product, almost all steps of the manufacturing and production process of eco-friendly products cost more than traditional products. There are several reasons for this. Sustainable materials cost more to grow and manufacture, reputable third-party certifications add further costs, and using organic materials is more expensive than alternatives, such as mass-produced chemicals. Simple economies of scale also impact price. While the demand for such products remains low, the price remains high. More demand would mean more production and lower unit price costs. As economists say, as price lowers, our willingness and ability to buy an item increase.
The nudge to change behavior
In a free market economy, it is very difficult to force people to pay more for products. But brands can “nudge” consumers towards more eco-friendly products. Nudge theory is used to understand how people think, make decisions and behave. It can be used to help people improve their thinking and decisions.
Studies show eco-friendly logos and labels can be used to nudge consumers toward sustainable fashion, food consumption and eco-friendly offerings. So, while not all consumers will pay more for green “climate-friendly” products despite the best of intentions, we can slowly nudge them to make better choices for the planet.
Gary Mortimer is a Professor of Marketing and Consumer Behavior at Queensland University of Technology. (This article was initially published by The Conversation.)