Uncategorised

Corporate sustainability: B2C is defensive, B2B is opportunity

In a new forthcoming article in Ethical Corporation, our long-time columnist and writer, Jon Entine summarises some of the latest research and thinking on the ethical/green consumer.

The results? Unsurprising for anyone who has looked hard at the numbers.

Whilst organic is taking a big beating in the current troubled times, (and so it should, argue many, since it may be holding back land that could be a lot more productive) the idea that consumers could be persuaded to fund corporate sustainability has always been nothing more than a myth.

More on Jon’s findings in a moment.

My view on this is a simple one: Consumers expect big brands they WANT to trust to simply get on with being more sustainable. But they won’t (en masse), pay any extra for it. Some small groups will, but has Tony Hancock once whimsically said: “That won’t get the baby washed”.

Why should consumers pay for it anyway? It’s the company/brand that makes the profit, let them deal with it. That’s their view, or at least most of them.

The reward is continued custom. I can’t see what’s wrong with that. If greener/ethical products offer greater value (rather than the same, just without ‘guilt’), the situation CAN be different. But that can move a brand away from mass market quickly if care is not taken. (More on that below)

This state of affairs is not without problems of course.

I was with a company board of a 10 billion plus turnover company earlier this year talking about green strategy and consumer expectations.

A regional CEO, in charge of a billion euros a year in turnover, wanted to know how the company could communicate and market its forthcoming environmental policies to sell more products.

His face dropped when I pointed out the best they could probably do is customer re-assurance. It makes sustainability appear a solely defensive strategy where consumers are concerned. This does not help the business case.

As a millionaire investor and entrepreneur once put it to me: “I can walk into your house and tell you 10 ways to save money, and you won’t be nearly as interested as hearing about how you can make more money than you currently do”. He has a point there about human nature.

But for the B2C market, defence is essentially what sustainability strategy is for most companies. As Jon points out in his forthcoming article in our September edition:

“Perhaps the most encouraging twist is not the fragile green buying trend but the turn by manufacturers toward a greener style of business”

We know companies can save big in the supply chain by working with suppliers on running better businesses. More on that here.

Back to the consumer market, if you are not convinced, here’s some points from the forthcoming article by Jon Entine in our September edition.

So, on the one hand:

– The Lifestyles of Health and Sustainability (LOHAS) annual survey estimates that about 13-19 percent of American adults are dedicated green buyers, with total ethical purchasing topping $290 billion.

– The US-based Cone Communications, which publishes an annual Green Gap Trend Tracker, estimates that 70 percent of American consumers consider the environmental impact of their purchasing when they buy.

BUT:

– “According to leading marketing experts, these optimistic figures reflect attitudes not buying patterns. Studies of consumers have shown time and again that people wax environmental until its time to pay the bills.”

– “Nothing in the historical research suggests that consumers are buying green at anywhere near the numbers that these surveys claim they are,” says Shruti Gupta, marketing professor at Penn State University in Abington, Pennsylvania, one of the world experts in ethical behaviour. “Buying green products presents people with a social dilemma: they have to be willing to pay premium costs—not for their own direct benefit, but for the greater good. While people love to voice their idealism to survey companies, the cold facts are they almost always put their self-interest first.”

– “Consumers will buy pricier green products,” Dr. Gupta says, “but only if they are convinced that the sacrifice—higher prices—signals some genuine or measurable value.”

– “We need proof that a green product or service is “as effective and of the same quality” as alternatives, agrees Kate James of Grail Research, a leading consumer research company. Grail, which tracks actual buying patterns, reports that although 85 percent of US consumers claim they buy green at least occasionally, less than 8 percent actually do. Travel separates the wheat from the chaff. According to the marketing firm Ypartnership, although 8 in 10 vacation travelers consider themselves “eco-conscious,” only 1 in 10 books based on green considerations.”

– Finally, over to the UK for some stats: “The challenging economy has hit green purchasing hard, as almost two-thirds of consumers have cutback on green purchases. Even in more robust times, green was a challenging sell. A 2008 study funded by the UK Economic and Social Research Council found that 30 percent of consumers report they were very concerned about environmental issues but they struggled to translate this into purchases. As a result, the market share for “ethical foods,” one of the most visible segments of the green market, has yet to crack 5 percent despite a boom in environmental consciousness.

So what’s the answer here? To me it’s fairly simple, although the execution of is one of the hardest business challenges a company can and will soon face.

It’s all about embedding sustainability into the supply chain. Easy for me to say, very hard to do. Marks & Spencer are working hard at this, as are Unilever and P&G, as we all know.

Those savings may, or may not (as Jon points out in his article) end up being passed onto the consumer.

Whether they are or not, companies that want to communicate greener/more ethical credentials will need a clear, honest and transparent programme in place with suppliers if they want to convince consumers to keep buying their brands.

The bottom line? Corporate sustainability is all about defence with consumers, and opportunity with suppliers and partners.

If you are interested in meeting some of the leading companies doing this, they will be in New York in late October, and London in late November.

Comments are Closed

All rights reserved @ SustainableSmartBusiness

LinkedIn