Are Consumers Truly Embracing Sustainability?

The State of Sustainability in the CPG Industry

According to data, consumer spending in the United States is over $14 trillion annually, making up two-thirds of the country’s GDP. A significant portion of this spending goes towards everyday CPG, ranging from food and beverages to cosmetics and cleaning products. Given the size of the CPG sector—with millions of employees and trillions of dollars in annual sales—it plays a critical role in creating a more sustainable and inclusive economy.

In recent years, CPG companies have been increasingly devoting time, attention, and resources to integrate environmental and social responsibility into their business practices. A growing number of these companies are also making claims about their products being environmentally and socially responsible.

Do Consumers Truly Care About Sustainability?

When asked if they care about purchasing environmentally and ethically sustainable products, most consumers overwhelmingly respond affirmatively. In a 2020 McKinsey US consumer sentiment survey, over 60 percent of respondents said they were willing to pay more for a product with sustainable packaging. Moreover, a recent NielsenIQ study found that 78 percent of US consumers believe a sustainable lifestyle is important to them.

However, many CPG executives have reported that one of the challenges they face with their companies’ environmental, social, and governance (ESG) initiatives is the difficulty in generating enough consumer demand for these products. There are numerous instances of companies launching new products featuring ESG-related claims, only to find that sales did not meet expectations.

The Halo Effect in Consumer Decision Making

One of the ways people make decisions is by relying on authority bias, often referred to as the halo effect. This bias is a mental shortcut that means consumers do not have to put in the work to check information. Retailers in general act as an authority, which is why they lead the field in the food and drink sector when it comes to sustainability.

For instance, Coles, a retail giant, announced a decision to partner with Planet Ark, ‘Australia’s most trusted environmental organization’ rather than go it alone. This partnership provides Coles with credibility and the authority it needs to appeal to consumers interested in buying sustainable products.

Navigating the Sustainability Challenge in the Fashion Industry

Fashion is another industry grappling with sustainability. Despite active participation in the sustainability movement, the fashion industry was identified by ACCC as a significant source of unsubstantiated sustainability claims. The challenge lies in the industry’s model, which encourages consumers to buy more.

However, many boutique brands have started from a position of sustainability, making it central to their brand’s identity. For instance, Vege Threads, a Melbourne-based brand, makes clothes from organic and eco-friendly materials. On the other hand, established fashion brands are playing catchup and trying to leverage social norms to their advantage.

Communicating Sustainability to Consumers

Consumer confusion often arises due to unclear sustainability messages and greenwashing. One of the biases that come into play is that consumers tend to anchor to a word or a phrase. For example, a product’s packaging that claims ‘low fat’ will make most consumers think the product is ‘healthy’ without checking the sugar content or other ingredients.

To keep brands honest with their use of language, the ACCC has established guidelines for the type of claims and language that can be used to talk about sustainability. The message from the ACCC is clear: “If you make a claim about the environmental or sustainability benefits of your product or service – make sure it’s right, and if you are unsure or can’t substantiate these claims, then don’t make the claim.”

Converting Desire to Action

Even though people want to buy sustainable products, turning that desire into action requires navigating roadblocks caused by how the human brain is wired to make decisions. Brands can use these biases to help their customers make simple decisions that will make them feel good about their choices and convert desire into action.

Brands can leverage our herding instinct by presenting themselves as the sustainable choice that many people are making. They can also anchor to key trigger words or images, making simple, clearly defined statements that avoid the taint of ‘marketing hype’. Finally, people are susceptible to the halo effect, so making third-party or independent endorsements can be a valuable shorthand for sustainability.

Conclusion

The journey towards sustainability is a complex one, filled with challenges and opportunities. As more consumers express their preference for sustainable products, it’s clear that companies need to take their environmental and social responsibilities seriously. By understanding consumer behavior and leveraging human decision-making biases, brands can bridge the gap between desire and action, ultimately driving more sustainable consumption patterns.

To ensure a more sustainable and inclusive economy, it’s crucial that companies back any ESG-related claims they make with genuine actions. The appeal of environmentally and socially responsible products isn’t limited to niche audiences – it’s making genuine headway with broad swaths of consumers. As such, companies don’t need to choose between ESG and growth. They can achieve both simultaneously by employing a thoughtful, fact-based, consumer-centric ESG strategy.

References & Further Reading

• Environmental Sustainability: Who Cares?
• Sustainability – who cares?
• The rise, fall, and rise again of Eco-Active consumers
• Consumers care about sustainability—and back it up with their wallets