Commentary: Are we willing to pay more for climate-friendly products?

Some brands are even moving beyond simply eco-friendly and now seek to claim their products are climate-neutral.

On Earth Day 2020, the organisation Climate Neutral — an independent non-profit organisation working to decrease global carbon emissions — confirmed 103 brands had completed its certification process in 2020 and 50 other brands were still in the process.

While companies are increasingly using environmental claims to appeal to consumers, they also attract greater scrutiny.

Concerned about allegations of greenwashing — claiming a product is green when it’s not — many brands are turning to organisations such as Climate Neutral, Foundation Myclimate and members of the Global Ecolabelling Network to legitimise their claims. 

For example, the Climatop label certifies products that generate significantly less greenhouse gas than comparable products. 

The carbon footprints of the certified products are based on international standards (ISO 14040) and verified by an independent expert.

Environmental Choice New Zealand is the official environmental label body that awards certificates and lists environmentally friendly products for green homes or businesses. 

Products must meet similar standards (ISO 14020 and ISO 14024). Good Environmental Choice Australia is a similar organisation.

A WILLINGNESS TO PAY MORE?

For years, researchers have examined climate-oriented consumption to see if it wins people’s support.

Reports such as Nielsen Insights suggest the majority (73 per cent) of consumers would change their consumption habits to reduce their impact on the environment, and almost half (46 per cent) would switch to environmentally friendly products.

But the results should be interpreted cautiously. As US psychologist Icek Ajzen wrote: 

“Actions, then, are controlled by intentions, but not all intentions are carried out”.  

Consumer concern about the environment does not readily translate into the purchase of environmentally friendly products. 

Commercial research says 46 per cent of consumers are more inclined to buy a product if it is eco-friendly. 

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But nearly 60 per cent are unwilling to pay more money for that eco-friendly product.

Academic research has consistently identified this gap between purchase intentions and behaviours. 

Hence, despite environmental concern and the positive attitude of customers towards sustainability and green products, it’s estimated the market share of green products will reach only 25 per cent of store sales by 2021. 

Ultimately, the research that evaluates consumers’ willingness to pay more for green products has been mixed.

For example, one study found Spanish consumers were willing to pay 22–37 per cent more for green products, but Japanese consumers were only willing to pay 8 per cent to 22 per cent more for green products. 

A NUDGE IN THE RIGHT DIRECTION?

From procuring raw materials to shipping the final product, almost all steps of the manufacturing and production process of eco-friendly products cost more than traditional products.

There are several reasons for this. Sustainable materials cost more to grow and manufacture, reputable third-party certifications add further costs and using organic materials is more expensive than alternatives such as mass-produced chemicals. 

Simple economies of scale also impact on price. While the demand for such products remains low, the price remains high. 

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More demand would mean more production and lower unit price costs. As economists say, as price lowers, our willingness and ability to buy an item increase. 

In a free market economy, it is very difficult to force people to pay more for products. But brands can “nudge” consumers towards more eco-friendly products.

Nudge theory is used to understand how people think, make decisions and behave. It can be used to help people improve their thinking and decisions. 

So while not all consumers will pay more for green “climate-friendly” products despite the best of intentions, we can slowly nudge them to make better choices for the planet.

Gary Mortimer is a Professor of Marketing and Consumer Behaviour, Queensland University of Technology. This commentary first appeared in The Conversation.