Consumers Abandon Sustainability When They Part with Green

Ask a consumer whether he or she supports a sustainable environment, and the chances are they will profess support. But when these individuals go to make a purchase they generally choose the cheaper product – even if it is less environmentally sustainable that more expensive options.

This contradiction is at the heart of one of the most difficult challenges facing company executives today: how to meet customers’ green expectations with investments in sustainability programs, in the knowledge that those same customers will probably shun products that carry a green premium in favor of cheaper alternatives.

Of course, there are exceptions. Companies such as Dr. Bronner and Patagonia that are fiercely devoted to high standards of sustainability have customer bases that share these principles. The buying habits of these consumers reflect their passion for green.

By and large, however, consumers generally pay verbal homage to the sustainable environment cause yet vote the other way with their wallets.

And it’s not just price that drives these buying decisions; convenience is another important factor. For example, individuals order products online even when these purchases have a large carbon footprint owing to activities such as truck deliveries that generate greenhouse gas emissions, as well as wasteful packaging. The convenience of the online channel is extremely compelling.

The way consumers perceive products also affects their buying decisions.

In general, individuals’ levels of concern can be positioned along a “in me – on me – around me” scale. People are most concerned about products they ingest, such as food. Next comes product they use on their bodies, such as cosmetics. The level of concern declines with products that impact the environment around them.

The amount of information available on products and the accessibility of that information also shapes consumers’ perceptual maps.

Search attributes are obvious tangible properties; a blue versus a red car, for instance. Experience attributes such as taste can be verified after a purchase. Intrinsic credence attributes such as the level of noxious emissions generated by a car can only be verified after the purchase using specialized expertise or equipment. Hidden credence attributes can’t be verified by the consumer. Examples of the latter include the use of child labor to make a product or the amount of pollution it causes in the manufacturing process.

Another complication is the varying effectiveness of green labels that attest to a product’s environmental credence. Attributes such as the trustworthiness or level of clarity of a label influence its effectiveness. The sheer number of labels can confuse consumers.

When consumers find it difficult to distinguish between a high-quality product and an inferior one, they will not pay extra when a seller argues that their product is superior – they will only pay for average products. This is called the Akerlof Effect. The result is that sellers of superior products leave the market and the quality deteriorates over time until the market collapses. It follows that if consumers can’t judge the degree to which a product is sustainable, they will not pay for “responsible” products.

Given these ambiguities, it makes perfect sense for companies to do the minimum needed to burnish their sustainability credentials. Look behind many of the triumphant statements in press releases, and you will find projects that are much more modest than the promotional material suggests.

Again, there are exceptions. As I noted in last month’s blog post Why the Decision to Go Green is Far From Black and White, sometimes going green coincides with good business practices that lower costs. An example is how retailer Macy’s eliminated 21% of empty miles and saved about $1.75 million annually by joining a program that posts retailers’ empty miles and finds shippers that can use unused truck capacity. The program also enabled the company to shrink the carbon footprint of its truck transportation services.

Outside of such win-wins, until consumers undergo a shift in mindset and start opting for green products regardless of the price or relative convenience of these purchases, companies will put minimal effort into sustainability programs.

A change in behavior could be prompted by regulations designed to make green purchases more attractive. But, as long as consumers are not “on board” such actions are authoritarian and run counter to the democratic processes that underpin capitalism.

It is possible that attitudes will change over time. Studies indicate that younger demographic groups such as millennials are more supportive of environmental causes than their older peers. Younger consumers are more likely to base their buying decisions on the environmental reputations of the companies they patronize. However, history shows that as individuals get older and accumulate more wealth, they tend to drift rightwards politically, and more cost-conscious.

Time will tell. Meanwhile, companies will continue to tread the line between their customers’ green aspirations and real-world buying behavior.

Yossi Sheffi’s new book is Balancing Green: When to Embrace Sustainability in Business (and When Not To), (MIT Press, April 2018).