As extreme weather prompts growing environmental concern across the globe, new research from Bain & Company shows more than 60% of businesses are off track to meet their current sustainability goals. Progress will require a combination of technology, policy, and behavior change. An increasingly conscious base of consumers and employees may prove helpful.
“We have spoken to thousands of executives about their sustainability ambitions and the associated trade-offs,” said François Faelli, partner and head of the global Sustainability practice at Bain & Company.
“They know they have a key role to play in the energy and resources transition. Many view this as their legacy, but they are worried about the growing gap between their progress and public commitments.
“While it will not be easy, there are three levers CEOs must prioritize: policy, technology, and behavior. Bain’s new research offers some promising news for businesses—their customers and employees are adaptable and eager to contribute along the path to progress.”
To get a broad sense of environmental concerns around the world, Bain surveyed 23,000 consumers. The results underscore the growing urgency of sustainability topics. Some 64% of people reported high levels of concern about sustainability. Most said their worries have intensified over the past two years and that their concern was first prompted by extreme weather.
Surprising truths about consumers
Bain’s research reveals several surprising truths about consumers, dispelling some common misperceptions. Among them, the ideas that consumers won’t pay more for sustainable products and that consumer behavior is fixed.
Baby boomers are often just as concerned as Gen Z. Many companies have long viewed younger consumers as more focused on sustainability than their older counterparts, but the reality is not as clear-cut.
For example, 72% of Gen Z consumers and 68% of boomers globally are very or extremely concerned about the environment, but in countries as diverse as India, France, and Japan, boomers are more concerned.
Both liberals and conservatives are concerned about the environment. In the US, 96% of consumers agree that the climate is changing. Among those concerned about the environment in the US, 85% of self-described liberal voters are very or extremely concerned about climate change, compared with 39% of conservative voters. Yet conservatives say they worry more about specific issues such as water, biodiversity loss, and air pollution.
Consumers are willing to pay a premium for sustainable products, 12% on average, but they are still priced too high. As concerns grow, consumers are looking to make environmentally sound choices and are willing to pay more for sustainable products. Yet, they often run into barriers.
As extreme weather continues to highlight environmental concerns, Bain & Company’s recent research underscores that over 60% of businesses are falling short of their sustainability goals. The path to meeting these goals will hinge on integrating technology, policy, and behaviour changes. Companies must prioritise sustainability in business strategies to align with the rising consumer demand for sustainable products. These environmentally friendly companies face the challenge of bridging the gap between their public commitments and actual progress. Consumer expectations for sustainable products are growing, with many willing to pay a premium for these items from environmentally friendly companies. However, the disconnect between consumer desires and available sustainable products points to a crucial need for sustainability in business.
For example, consumers in the US are willing to pay an average premium of 11% for products with a minimized environmental impact. However, 28% is the average premium for products marketed as sustainable in the US.
Consumers in fast growing markets, where Bain found environmental concerns to be highest—such as India, Indonesia, Brazil, and China—are willing to pay an even greater premium, between 15 and 20%.
Consumers in the UK, Italy, Germany, and France, on the other hand, are only willing to pay between 8 and 10% extra.
Consumer behavior can change more quickly than many companies anticipate, with external factors such as government regulation heavily influencing the market.
China began offering financial incentives on electric vehicles in 2009; now 19% of Chinese consumers report driving an electric car, compared with 8% of consumers globally.
In England, the use of single-use supermarket plastic bags has fallen 98% since the government began requiring retailers to charge for them in 2015.
There is a disconnect between what consumers want and what most companies sell. Worldwide, 48% of consumers consider how products are used when thinking about sustainability. These consumers are more concerned about how a product can be reused, its durability, and how it will minimize waste.
In contrast, most companies sell sustainable goods based on factors such as how they are made, their natural ingredients, and the farming practices deployed. These factors cause many consumers to conflate “sustainable” with “premium.”
One result of this disconnect is that nearly half of all developed-market consumers believe that living sustainably is too expensive. By comparison, roughly 35% of consumers in fast-growing markets believe this.
Consumers struggle to identify sustainable products and don’t trust corporations to make them. In Bain’s survey, 50% of consumers said sustainability is one of their top four key purchase criteria when shopping.
Yet they may be making decisions based on misconceptions. When asked to determine which of two given products generated higher carbon emissions, consumers were wrong or didn’t know about 75% of the time. Consumers say they rely most on labels and certifications to identify sustainable products, yet most were unable to accurately describe the meaning behind common sustainability logos, such as organic production or Fairtrade.
A lack of trust in corporations compounds the issue. Bain found only 28% of consumers trust large corporations to create genuinely sustainable products, compared to 45% who trust small, independent businesses.
Four critical areas of focus for companies
The momentum behind sustainability and dynamic shifts in consumer behavior have profound implications for any company. Bain sees four critical areas of focus.
- Devise a future-proof and flexible strategy. Few companies plan beyond the typical 3-year strategic planning window, and even those that do look out 5 to 10 years tend to focus on expectations for technology adoption. These plans fail to fully consider two other factors that move just as rapidly and with as big an impact: regulations and consumer behavior.
- Acknowledge a fragmented consumer base. Companies need to deaverage consumers and innovate products and design propositions that appeal to different segments— local markets, consumers with different definitions of sustainability, and consumers with a range of purchasing motivations.
- Test and learn to determine what works—and repeat. In such a fluid environment, companies can lean aggressively on marketing experimentation, using digital tools to quickly test the sustainability messages that resonate with different segments and adapt accordingly. It’s a way to help consumers gain enough clarity to make decisions that are consistent with their values.
- Get out in front of regulations. As we’ve seen throughout the world, government policy inevitably becomes a huge contributor to changing consumer behavior. Across all industries, companies need to be at the forefront of helping to shape the regulations affecting their business. A company’s ability to anticipate policy shifts and build future-proof portfolios will help determine whether it can outpace competitors.
Upskilling employees to rise to the challenge
Bain found 75% of business leaders believe they have not embedded sustainability well into their business. The instinct of many CEOs is to prioritize external hiring to address all skill gaps, including in sustainability. Bain advocates for addressing sustainability’s challenges through a combination of smart upskilling and cultivating a learning mindset.
A new Bain survey of 4,700 people found 63% felt different skills and behaviors would be required for their company to execute on its ESG ambition or strategy. Yet only 45% of nonmanagers said their employer offers the reskilling and upskilling opportunities that would enable internal mobility.
Despite almost every CEO saying they have a talent problem, few companies have defined what it means to be a great employer. In Bain’s recent survey, 44% of respondents said it is easier to find a better opportunity outside of their company than within it.
About Maritime Fairtrade
Immerse yourself in Singapore’s dynamic maritime industry with Maritime Fairtrade. As a top digital news platform, we specialise in offering detailed and timely coverage of the Asian maritime trade sector. Our unwavering commitment to quality journalism ensures our audience remains well-versed in regulatory developments and new trends transforming the maritime field. Maritime Fairtrade presents a comprehensive maritime guide in Singapore, packed with vital information, detailed reviews, and expert guidance. Our goal is to empower our readers with the knowledge and tools necessary to confidently navigate the intricate world of maritime trade.
Photo credit: iStock/ paulaphoto