Sustainability & the cost of living: Are consumers still willing to pay more for greener goods and services?
It’s often said that sustainability sells, but the figures can sometimes feel conflicting.
A recent McKinsey study found that 60% of US consumers would pay more for a product with sustainable packaging, but a similar study by NilesenIQ found that nearly a quarter of shoppers say they’d struggle to identify which products and services which really are sustainable due to confusing labelling and competing claims. All the while, one third of consumers is skeptical of many sustainable marketing claims.
Whether it’s a statistical conflict or an issue with inaccurate self-reporting, understanding the true value of sustainability to consumers can be tricky to pinpoint. And as the cost of living crisis continues to bite, are tighter budgets preventing consumers from shopping more ethically?
Do products and services advertised as ‘sustainable’ really sell better?
Stories of companies struggling to achieve ESG (environmental, social and governance) goals due to lack of consumer demand are rife, with some organisations claiming to have launched new products with ESG-related claims to a lukewarm reception.
McKinsey decided to get to the bottom of this. In its 2023 sustainability survey, McKinsey found that products making ESG-related claims averaged 28% cumulative growth compared to 20% for products that had no ESG-related claims.
The study also found that products with multiple ESG-related claims grew about twice as fast as products that only made one claim; in nearly 80% of the categories, the survey found a positive correlation between the growth rate and the number of ESG-related claims a product made on its packaging.
We know that correlation isn’t causation – and the study also found that not every brand experienced this positive effect on sales. But broadly speaking, and with an awareness of the nuance required when working with this kind of data, the study revealed a ‘clear and material link between ESG-related claims and consumer spending’.
And it’s not just related to products. More and more people are looking for sustainable services as well as goods; 12% of respondents to a Deloitte survey have switched their personal financial investments to more ethical and/or sustainable options.
The cost of living crisis and consumer commitment to sustainability
As prices rise and purses feel pinched, you might expect well-meaning shoppers to forgo sustainable choices for cheaper, more economical options. In fact, consumers are thinking much more carefully about how far each penny goes – and finding that shopping with circularity in mind is also a cost-effective solution.
In Deloitte’s 2023 study, shoppers reported that durability (58%) and repairability (29%) are more important than recyclability or biodegradability when considering a purchase. This is an important shift; instead of being able to throw things out with a clear conscience, today’s consumers want to invest in pieces that last.
Circularity was a recurring theme in the surveys when it came to saving money. 55% of consumers repaired an item instead of replacing it in the last year, 46% bought second hand and 42% paid more in the first place for longer-lasting products.
This was reflected in bigger ticket items as customers chose to invest for longer-term savings. To combat rising energy costs, 31% of respondents had upgraded to double glazed windows, while a quarter had improved their property’s insulation. 36% had upgraded appliances to be more energy efficient.
But greener packaging and the option to recycle are still important; 46% of consumers now make an effort to return products at the end of their life to either the manufacturer or the recycling plant. And a third (33%) say that the amount of plastic a product or its packaging contains is an important differentiator.
The evidence suggests that fast is out and forward-thinking is in. For those that can afford it, investing in items that save costs in the long run is a priority. As well as making more environmentally-friendly choices, shoppers are rejecting throwaway culture for goods that last.
Getting sustainability right as a brand: what do consumers really want?
With the help of surveys from KPMG, Deloitte, McKinsey and YouGov, we’ve established how shoppers are behaving and what they look for before making a purchase. As more and more companies’ competing environmental claims vie for their attention, shoppers are looking for clear labelling and authentic sustainability claims.
- No greenwashing, please
Above all, consumers expect brands’ sustainability claims to stand up to scrutiny – and they’re willing to shop elsewhere if those claims fall short. Accusations of greenwashing range from unsubstantiated claims to a lack of publicly-disclosed environmental targets, but most consumers say they’d class a business as greenwashing if its actions and policies contradict one another.
Greenwashing is a hot topic to consumers, with one-fifth (18%) saying they’ve stopped using a brand after it was accused of greenwashing (either by NGOs, activists or regulatory bodies) and a further 54% saying that they would do so in future. Again, this isn’t only product-focused; 40% of KPMG survey respondents said they’d change their investment approach if they found a business or project they were investing in was greenwashing.
- Ensure labelling is clear
The studies reveal a growing distrust of corporate sustainability claims, but this can be remedied by clear labelling and ensuring labels, packaging and claims are genuine and consistent. With so many different eco-labels splashed across packaging, it’s no wonder 28% of shoppers said it can be difficult to identify the truly sustainable choice.
Shoppers look for sustainability labels they recognise, but awareness generally remains low. The fairtrade label (73%) and Rainforest Alliance Certifiied (44%) were the most recognised, but the B Corp (10%), carbon reduction (9%) and better cotton initiative labels (9%) had little impact on shoppers.
- Consistency is key
Consumers are looking for brands that make authentic sustainability claims and market a genuine commitment to ESG initiatives. And in a world of smartphones, environmentally-minded shoppers have all the information they need at their fingertips to stand in front of a row of products and dispel any less-than-concrete sustainability claims.
Any ESG-related strategy or sustainability marketing efforts need to be part of a wider, holistic approach to improving and innovating company wide.
Brands need to look inwards to identify their most significant environmental achievements and publicise them. They also need to work to enhance the sustainability of existing goods and services, while ensuring new ones are also rooted in a greener approach.
If you’re struggling to look inwards, why not look to us? Have a read of our sustainability marketing blog for more information on how to promote your brand with authenticity – or just give us a call.
