Tough climate: can businesses be green and fight inflation?

Sus­tain­abil­i­ty is a grow­ing pri­or­i­ty for mil­lions of con­sumers around the world, but as infla­tion surges and the cost of liv­ing cri­sis inten­si­fies, shop­pers are find­ing it increas­ing­ly hard to be as eth­i­cal as they’d like.

Accord­ing to research by GfK, some 80% of con­sumers glob­al­ly say that sus­tain­abil­i­ty remains impor­tant to them. Yet more than 30% of Euro­peans say they will put their own eco­nom­ic secu­ri­ty and well­be­ing before envi­ron­men­tal prob­lems this year, with that ris­ing to over 40% in the US and 50% in devel­op­ing Asia.

This is forc­ing fast-mov­ing con­sumer goods com­pa­nies (FMCG) and tech and durables busi­ness­es to rethink their oper­at­ing mod­els – from the design of their prod­ucts to the way they engage with cus­tomers and stake­hold­ers. Both sec­tors are major car­bon emit­ters and the life­cy­cle envi­ron­men­tal impact of their prod­ucts is sig­nif­i­cant. Con­sumers expect them to take action no mat­ter what the eco­nom­ic cli­mate is like.

FMCG com­pa­nies have been respon­sive when it comes to embrac­ing sus­tain­able busi­ness prac­tices, from cut­ting back on sin­gle-use plas­tics to using more sus­tain­able mate­ri­als in their prod­ucts. It’s paid off, with the glob­al eco-con­sumer mar­ket now worth $800bn each year – a huge rise from a decade ago and a fig­ure pro­ject­ed to increase to $1tn in 2030. The tech and durables sec­tor has been slow­er off the mark but ‘eco-active’ rev­enue is still expect­ed to exceed $700bn in 2030.

Rethinking green business models

These firms must con­tin­ue to devel­op their sus­tain­abil­i­ty agen­das as shop­ping habits change, says Jut­ta Langer, vice pres­i­dent con­sult­ing at GfK. “Dur­ing the pan­dem­ic, many con­sumers had more time to think about their con­sump­tion habits and the spare cash to spend on eth­i­cal goods. Now, we are see­ing a high­er cost con­scious­ness when it comes to these prod­ucts,” she says.

Cus­tomers are still buy­ing green, Lenneke Schils, glob­al insights direc­tor at GfK, adds, but many pre­mi­um lifestyle brands in FMCG are los­ing mar­ket share as shop­pers move to more afford­able store own-label ranges.

“What sus­tain­able looks like is also chang­ing,” Langer adds. “It is becom­ing less about ‘clean­ing up’ and more about ‘sav­ing’, be that using less ener­gy or water, reduc­ing waste­ful con­sump­tion or recy­cling more. The trend is not new but is being tur­bocharged by the cost of liv­ing cri­sis.”

Com­pa­nies are already chang­ing their prac­tices. Appli­ance man­u­fac­tur­ers are mak­ing prod­ucts eas­i­er to repair or refur­bish to pro­long their lifes­pans. The trend of leas­ing as opposed to sell­ing goods is also gath­er­ing pace, reflect­ing con­sumer desires to save mon­ey while cut­ting waste.

Brands like Bosch, Blue­Move­ment, Decathlon and Ikea are just a few big names start­ing to adopt the rental mod­el. Mean­while in the FMCG sec­tor, the suc­cess of the Too Good To Go app – which lets shops sell goods near­ing their expiry dates at a dis­count – proves there is true con­sumer val­ue in curb­ing food waste.

As house­hold bud­gets are squeezed, com­pa­nies might be tempt­ed to hold back on prod­uct inno­va­tion, but that would be a mis­take. FMCG and tech and durables com­pa­nies should con­tin­ue to take the lead, not wait for con­sumers or legal mea­sures to force them.

That may make shop­ping slight­ly less con­ve­nient ini­tial­ly – as hap­pened when New York State banned sin­gle-use plas­tic bags in shops, or the EU banned plas­tic straws – but con­sumers will ulti­mate­ly adapt and respect the brand more for stick­ing to its prin­ci­ples. This is espe­cial­ly true when embed­ded in the right com­mu­ni­ca­tions cam­paign.

Get your messaging right

The mes­sag­ing around sus­tain­abil­i­ty is, of course, key and com­pa­nies will have to rethink their mar­ket­ing as con­sumer trends change. Green­wash­ing – when a brand exag­ger­ates its green cre­den­tials – is a grow­ing prob­lem as more com­pa­nies adopt envi­ron­men­tal poli­cies under pres­sure from cam­paign­ers and share­hold­ers.

Accord­ing to GfK’s research, more than 60% of Euro­pean shop­pers dis­trust what com­pa­nies tell them about their sus­tain­abil­i­ty prac­tices. When you con­sid­er that one in four has doubts about the prop­er func­tion­al­i­ty of green prod­ucts, it seems this trust issue could become a real deal­break­er for brands.

“If com­pa­nies are mak­ing a huge effort to change their busi­ness mod­el and prod­ucts and con­sumers don’t ‘buy it’, it’s a key chal­lenge,” says Schils. “Trust is vital and trans­for­ma­tion­al mar­ket­ing will play a big role here.”

FMCG com­pa­nies must use clear and com­pelling com­mu­ni­ca­tion to help prod­ucts stand out, empow­er­ing green con­sumers who want to find sus­tain­able prod­ucts. There’s also a need for bet­ter guid­ance and clas­si­fi­ca­tion of prod­ucts at the point of sale. Shop­ping involves thou­sands of small deci­sions and peo­ple don’t always have time to process what is print­ed on pack­ag­ing or writ­ten in online prod­uct descrip­tions.

“One in four peo­ple glob­al­ly have nev­er even seen zero car­bon labels on prod­ucts, which is a huge short­fall,” says Schils. “Clos­ing this imple­men­ta­tion gap is key to keep­ing cus­tomers on board.”

A massive opportunity

It may seem like a tricky bal­ance to strike, but com­pa­nies have the mar­ket behind them. Last year, some 52% of shop­pers glob­al­ly said that sus­tain­abil­i­ty had become more or much more impor­tant to them because of the pan­dem­ic. Mean­while, con­sumers who pri­ori­tise envi­ron­men­tal con­cerns when they shop account­ed for 28% of the Euro­pean pop­u­la­tion in 2021, up from 18% in 2019.

This year, the cost of liv­ing cri­sis will cause a – tem­po­rary – dent in this growth path, as shop­pers are forced to deal with short-term wor­ries. Putting eth­i­cal goods with­in the reach of many should be a key pri­or­i­ty for com­pa­nies and retail­ers alike. But in the longer term, the large-scale shift in con­sumer atti­tudes presents a huge oppor­tu­ni­ty for busi­ness­es bold enough to take it.

GfK pro­vides key insights on glob­al sus­tain­abil­i­ty trends and fac­tu­al behav­iour change, enables effec­tive con­sumer tar­get­ing and sup­ports clients in their sus­tain­able growth strat­e­gy. The organ­i­sa­tion has found an observ­able dis­con­nect between how con­sumers want to buy and how they actu­al­ly buy.

Over­com­ing this gap will be key to cap­i­tal­is­ing on all that untapped poten­tial, Langer says. “More than half of con­sumers glob­al­ly could fall into the eco-active cat­e­go­ry by 2029. But only brands that under­stand how to remove the bar­ri­ers to sus­tain­able retail behav­iour will cap­i­talise on this huge growth,” she says.

“To do so they must increase the per­ceived val­ue of sus­tain­able prod­ucts, ensure their effec­tive­ness and use and com­pelling com­mu­ni­ca­tion to cre­ate trust and to dri­ve their mes­sage home.”

Want to learn more? Join GfK’s free webi­nar ‘Green ambi­tions, gold­en oppor­tu­ni­ties: Sus­tain­abil­i­ty in times of insta­bil­i­ty’ on Sep­tem­ber 27th. Sign up today at gfk.com/fmcgsustainability

Pro­mot­ed by GfK