We now see a clear consumer trend, which is, supporting products made sustainably.
The question is “How well does this translate to customers’ switching to brands that follow sustainability?”
There are many reasons customers switch from a brand that they have been loyal to. For one, the price of the products of the brand they buy, increases and they no longer find the value for money they seek. Then, the decline in the brand’s after sales services and general service levels that the customers start to notice.
Thirdly, the customers have known the brand over a period of time and now, want to go for ‘something new.’ Another factor is that the brand does not adhere to the customers’ needs / requirements and is not responsive to their feedback, distancing it from the customers.
Yet another factor (that is now seen more and more) is that the brand is not conscious about principles of sustainability and ESG which makes the consumers to turn away from it. Research by Deloitte (conducted 2020) showed consumers expect businesses to step up when it comes to issues of climate change and the environment. It was conducted in January 2020 in six countries with 10,000 respondents. The results showed that 64% of consumers saying recycling and reusing among their top three concerns. Another 64% said reducing single-use plastics as one of their top three concerns, and 62% feel strongly about air pollution. “23% said they will switch to buying products from an organization that shares their values on environmental issues, 42% have changed consumption habits themselves due to their stance on the environment, and 21% have encouraged others to switch to a company whose values align with their opinion on an issue”-(deloitte.wsj.com).
As climate change effects become a threatening reality, consumers too are increasingly switching to brands that adhere to sustainability. However, this is fraught with its own challenges. Especially, the inflation challenge and prioritization of budgets for ESG as well as higher costs incurred for sustainable manufacturing.
With continued inflation reported across the globe thanks to COVID, climate change and resulting economic downturns, organizational budgets have been slashed and one of the immediate line-items that faces the axe is sustainability. An example is Garner’s Survey. The 2022 June Gartner survey found 39% of CFOs and CEOs (totaling 128) in their study indicating sustainability “the second most popular area to reduce investments besides M&A” (www.cfodive.com). This is despite the fact that CFOs and CEOs rating sustainability as a top strategic priority in early this year according to May 2022 Gartner survey. Randeep Rathindran, vice president of research in the Gartner finance practice remarked about the findings: “It’s more surprising to see sustainability so close to the chopping block because CEOs rated it as a top strategic priority for the first time in 2022, and ESG disclosures are increasingly becoming enshrined in legislation’(www.irmagazine.com).
Another catch in the going sustainable is the cost of going green itself. In that, despite all the good intentions to help the planet, green manufacturing or sustainable manufacturing invariably costs more. The well-known Earth Day 2020 Consumer Sentiments Study by the consultancy Kearny in Netherlands, revealed the shocking truth on sustainable products-that, sustainable products “are often almost double the price of conventional products.”
“Amid this green mindset, manufacturers have been creating products in a new way—with ecofriendly goods popping up in a variety of categories …However, the product prices often include exorbitant markups that many are unwilling to tolerate. In fact, our research reveals that sustainable products are often almost double the price of conventional products. Although environmentally friendly production does tend to cost more, the price passed on to consumers could be much lower. Instead, wholesalers and retailers are using traditional price markup and accounting rules to set the prices, and this is hindering consumers’ adoption of green products.”
Accordingly, it became clear that whatever the country, there’s a huge price escalation when it comes to organic products in comparison to conventional products. According to theminimalistvegan.com organic rice costs 185% more, organic pasta costs 65% more and Organic Dairy free Ice Cream costs 233% more, in comparison to conventional ranges of the same!
Interestingly, while sustainability goes on the organizational chopping block due to cost constraints and being sidelined, its bigger cousin is receiving more and more acceptance.
