Consumers have been used to choosing products only based on price or brand, but today, factors like whether a product is "sustainable," "climate-friendly," "green," or "eco-friendly" are quickly becoming important to take into account.
More than two out of every three respondents worldwide, according to an IBM survey, think that "environmental issues are significantly (very or extremely) important to them personally," and 84 percent say that "sustainability" is crucial when selecting a company.
Despite the general consumer preference for sustainability and environmental protection, research shows that few consumers actually act on their positive attitudes toward eco-friendly products by spending more on "sustainable" goods. This may help to explain why fast fashion and other mass-market products continue to be in high demand.
Green, eco-friendly, climate-friendly — confused?
Given these worries about sustainability, it is not surprising that an increasing number of firms are saturating the market with products that are highly targeted.
For instance, the term "green" is used liberally to describe virtually everything pertaining to environmental protection, from production and transportation to architecture and even clothing. Everything from cosmetics to dishwashing soaps are labeled "eco-friendly," a term that refers to things that don't harm the environment but isn't quite as broad. In the meantime, "climate-friendly" refers to goods that lessen harm directly to the climate.
All these terms – most of which lack legal definitions and which are used interchangeably by brands – are used in labeling 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.”
Photo Credit: Tradlands
What is the standard?
While businesses use environmental promises to attract customers, they are also subject to more scrutiny. Concerned about accusations of "greenwashing," or representing a product as "sustainable" or "greener" than it actually is, many brands are turning to groups like Climate Neutral, Foundation Myclimate, and members of the Global Ecolabelling Network to support their claims and prevent widespread public relations crises.
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.
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.
Photo Credit: Zerrin
In the end, there is conflicting evidence in the studies on customers' willingness to pay more for green items. For instance, a survey indicated that although Japanese consumers were only prepared to pay 8 to 22 percent more for green products, Spanish consumers were willing to pay 22 to 37 percent more.
Almost every stage of the manufacturing and production process for eco-friendly products costs more than standard ones, from obtaining raw materials to shipping the finished product. This is due to a number of factors. Growing and producing sustainable resources is more expensive, and employing organic materials is more expensive than alternatives like mass-produced chemicals. Reputable third-party certifications also add to the cost.
Although there is still little demand for these goods, the cost is still considerable. More production and reduced unit price prices would result from increased demand. According to economists, when prices decline, our willingness and capacity to purchase a product rise.
To change the customer behavior
It is extremely difficult to make people pay more for goods in a free market economy. Brands, however, have the power to persuade customers to buy greener products. The nudge theory is used to comprehend how individuals think, act, and make decisions. It can be applied to assist people in making better selections and thinking.
According to studies, eco-friendly logos and labels can be used to influence customers to choose eco-friendly products, sustainable clothing, and food. Despite our best efforts, not all customers will be willing to pay extra for environmentally friendly products, but we can gradually influence them to make better decisions for the globe.
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