Consumers Are “Mixed” Over Impact of ESG Labels on Purchasing Decisions

Image: H&M

Consumers Are “Mixed” Over Impact of ESG Labels on Purchasing Decisions

A report from Fordham University’s Gabelli School of Business suggests that interest among U.S. consumers in labels that highlight products’ “sustainable” attributes – and about such “sustainable” attributes more fundamentally – is mixed. Surveying a sample of ...

September 23, 2022 - By TFL

Consumers Are “Mixed” Over Impact of ESG Labels on Purchasing Decisions

Image : H&M

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Consumers Are “Mixed” Over Impact of ESG Labels on Purchasing Decisions

A report from Fordham University’s Gabelli School of Business suggests that interest among U.S. consumers in labels that highlight products’ “sustainable” attributes – and about such “sustainable” attributes more fundamentally – is mixed. Surveying a sample of 500 consumers in the United States about how fashion brands could provide information on Environmental, Social, and Governance (“ESG”) efforts, including via labels on their garments and accessories, Gabelli’s Responsible Business Coalition found that just 13.1 percent of consumers indicated that they were “very interested” in using ecolabels to help guide their fashion purchases, while approximately 50 percent of consumers surveyed indicating “some level of interest” in ecolabels, and almost 18 percent indicating that they had “no interest at all.” 

Setting the stage in the report it released this summer, the Responsible Business Coalition (“RBC”) states that companies – including those in the fashion space – are “being called upon to be both innovative and socially innovative to achieve a sustainable, responsible future,” with the United Nations Sustainable Development Goals, in particular, “calling on companies to adopt sustainable and socially responsible policies to solve systemic societal and environmental issues such as accelerated climate change, pollution, and inequality.” Such sustainability-centric pushes from regulators and intergovernmental organizations like the UN, paired with research that consistently shows that “a significant increase in the public’s concern for environmental and systemic social issues,” have prompted (at least some) brands to focus on “making their products more sustainable and socially conscious.” 

Against this background, the RBC sought insight into “the most effective means for brands to communicate [their ESG efforts] with consumers” – with an emphasis on the use of labeling. Among the top-line takeaways is that while approximately half of the consumers surveyed indicated “some level of interest” in ecolabels, “a large segment of customers” (almost 50 percent) does not consider the inclusion of ecolabels to be particularly valuable tool when it comes to helping them decide what garments and/or accessories to buy. The RBC notes that interest in fashion ecolabeling is significantly impacted by age, with older consumers being far less interested in ecolabels than are younger consumers, and the most interested consumers falling in the range of 25 to 44 years old. 

Consumers’ level of education also significantly impacts their interest in fashion ecolabels, the RBC determined. “Specifically, the greater the level of education post high school, the greater the interest: Consumers with only a high school degree have the lowest level of interest. By contrast, those with degrees post Bachelor’s (e.g., Master’s, Ph.D., JD, MD, etc.) had the highest level of interest.” Also, the survey results revealed that where consumers live – and their employment status – also impacts their interest in ecolabels. In short: The RBC’s findings indicate that ecolabeling is “most relevant for younger, college educated, employed, urban consumers.” 

Assuming brands were to start making use of labels that identify the ESG elements of their operations and output, nearly half (46 percent) of the consumers surveyed by the RBC indicated that “recyclability” was an issue of importance to them. This was followed by human rights, which was important to 39 percent of consumers, while chemical usage, animal welfare, and material usage were each selected by 33 percent of surveyed consumers. Information regarding a firm’s carbon footprint was important to 31 percent of consumers surveyed, and finally, one in five (20.7 percent) of consumers surveyed showed interest in information about companies’ diversity and inclusion efforts. 

Like its findings regarding consumers’ overall interest in brands adopting ESG-centric labels, one in five consumers (20.9 percent) indicated that “none of these information options would be important in their decision making.” 

When asked to rank the ESG attributes that they believe are the most important for fashion brands to address and inform consumers about, one-third survey participants listed “recyclability” and “human and labor rights” in their “Top 3.” “Material composition” was among the Top 3 for 24 percent of respondents, followed by “animal welfare” and “chemical usage” (23 percent of respondents put them in their Top 3), and carbon footprint (22 percent). Finally, less than 15 percent of consumers surveyed listed “water usage,” “diversity and inclusion,” and “employee education” in their Top 3 priorities for companies. 

Taken as a whole, the RBC states that these results indicate that eco-conscious fashion consumers may, in fact, want easy access to garments’ sustainability credentials, and that their “first priorities are knowing how to recycle their clothes, and that they can be comfortable that people were treated fairly in the creation of their garments.” As for how consumers want to access such information, the majority of survey participants (65 percent) pointed to ecolabels attached directly to the products that they are considering purchasing as ideal, followed by indication via “a website icon or a website filter for sustainable products.” This is distinct from QR codes, for instance, which were the “least desired ecolabeling option” with only one in five consumers indicating interest. 

The RBC’s findings come as a number of big-name brands have opted to cease their use of the Higg Materials Sustainability Index (“MSI”), a suite of tools aimed at helping companies to measure – and make information available to the public about – the environmental impact of their offerings, in the wake of allegations of greenwashing. The controversial Higg MSI is one of many certifications available for brands to calculate and tout the sustainability of their wares in light of rising consumer concern over climate change. A slippery slope, “Certification in general is sort of this false promise, and it is this license to greenwash,”  George Harding-Rolls, a campaign manager at not-for-profit Changing Markets Foundation, told Quartz, noting that “certification programs like the Higg Index” – and other labeling initiatives – often trivialize the amount of change that the fashion industry needs to take to become sustainable.” 

Prior to the most recent round of pushback, Allbirds landed on the receiving end of a false advertising lawsuit last year for allegedly failing to live up to the claims that it makes in its sustainability-centric marketing, including ones about the carbon footprint of its popular footwear, which it measures using a proprietary life cycle assessment tool and the Higg MSI. While plaintiff Patricia Dwyer took issue with the footprint-measuring tool, arguing that its calculations are based “on ‘the most conservative assumption for each calculation, skewing the calculations in its own favor,’ so [Allbirds] can make more significant environmental claims,” a New York federal court tossed out the case this spring.

In examining Allbirds’ environmental impact claims, Judge Cathy Seibel of the U.S. District Court for the Southern District of New York stated in April that Dwyer’s “criticism [is] of the tool’s methodology,” not with Allbirds’ statements about its products, thereby, letting the sneaker-maker off the hook.

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