What’s next for sustainability?

Powerful events and forces – from natural disasters and pandemics to geopolitical disruption and government intervention – have reshaped the course of sustainability over the last decades. These forces lie beyond the direct influence of companies and consumers, who need to deal with their unpredictable consequences.

Governments, for example, have historically intervened with mixes of regulations, tariffs, subsidies, and other incentives to influence corporate and consumer behavior. These interventions can significantly change how companies and consumers allocate their resources. In our newsletter edition entitled "Are You Dead Yet?" we cited a global report from the IBM Institute for Business Value that found that companies are currently spending 43% more on sustainability reporting than they spend on sustainability innovation in the wake of recent stronger regulations on compliance. In other words, tighter regulations mean that companies end up “hitting targets but missing the point.”

In The Demand Revolution we divide the consequences of these forces into two groups, based on how they affect companies and consumers: either they create high-speed lanes or detours. High-speed lanes encourage commercial creativity, accelerate progress, and can lead to exponential growth even sooner. Detours throw off companies’ plans, discourage consumers, and stall progress.

A new American direction?

The election of Donald Trump on November 5th may lead to several decisions that will affect progress on sustainability in the United States. They include the withdrawal from the Paris Agreement to limit global warming and the elimination of a tax credit for electric vehicle purchases.

Withdrawing from the treaty, a move which Argentina might emulate, would add to the concerns that other leaders have about an emerging detour.

Danish Prime Minister Matte Frederiksen told Politico last week at the COP29 climate summit in Azerbaijan that the “political focus is not at the level where it should be” regarding global warming. She has noted a “change in awareness and focus” among European governments.?

Support for a US withdrawal from the Paris Agreement is mixed, however, even within the petroleum industry. When asked about the possibility, Exxon-Mobil CEO Darren Woods said that “I don’t think the stops and starts are the right thing for businesses. It is extremely inefficient. It creates a lot of uncertainty.”??The Wall Street Journal’s report noted that Exxon has publicly supported the agreement’s goals since 2015.?

The other potential action by the Trump administration would be to eliminate a tax credit of $7,500 that Americans receive when they purchase an electric vehicle. This Reuters report from last week shows some of the scenarios that could come about if the incentive goes away. One scenario is that the move benefits Tesla at the expense of established and start-up US automakers. Tesla could benefit further if tariffs reduce the number of foreign vehicles that would enter the US market.

Where does this leave consumers?

These changes to policies and subsidies could disrupt the transition to a more sustainable lifestyle, because they reduce the ability of consumers to pay for their desired sustainable lifestyle in the short term. But we contend that consumers will ultimately triumph and assert their will. A recent report in The New York Times, highlights the struggles that some consumers face in their personal efforts to live more sustainably and make their own contributions to reducing waste.

One study cited in the report describes how different actions or interventions motivate consumers to change their behavior. Having more information had the weakest effect, while financial incentives had a strong affect. The strongest effect, however, came from “social comparisons” that consumers make with friends, neighbors, or other third parties. This finding confirms insights from our research. As we wrote in The Demand Revolution, all eight of the consumer archetypes – even the Non-Believers – are strongly swayed by the power of personal and social networks, although the form and intensities vary by archetype. We also noted that “consumers give little weight to the communications strategies from a brand or an organization— many of which cost millions of dollars to create and disseminate— unless friends, family, neighbors, social media contacts, and influencers have filtered the content and either endorsed it or dismissed it.” In short, consumers are teaching themselves about sustainable practices by drawing inspiration from each other and then paying it back with their own advocacy.

It is too early to say whether the incoming US government’s actions will create more detours than high-speed lanes. If fewer regulations reduce the compliance burden, it can free up resources that companies can use to develop the more affordable and less wasteful solutions that consumers want. The paths and obstacles may look different, but by following the new innovation paradigm, companies can still seize these lucrative opportunities, claim a first-mover advantage, and scale it to a profitable sustainable business.

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Last week MIT Sloan Management Review published our feature article called “The Myth of the Sustainable Consumer.” You can access the article here. They also released the recording of our recent webinar titled “Tapping Into the Hidden Consumer Demand for Sustainability”, which explores the content from The Demand Revolution in greater depth. You can view the webinar here.

Nicolai is excited to continue his European book tour. This week he and co-author?Caroline Kastbjerg?will be in Berlin for the?annual European conference?of the Professional Pricing Society, where Nicolai will deliver a keynote speech. They will also sign copies of The Demand Revolution. Next week Nicolai will launch the book in the Dutch market at an exclusive client event, together with his Dutch colleagues. You can sign up for the event here.

We have also updated our dedicated book homepage with a number of videos from the The Demand Revolution authors, who explain the background of the book and its insights. You can visit the book’s homepage here.

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Please click here to order your copy of The Demand Revolution: How Consumers Are Redefining Sustainability and Transforming the Future of Business.