Sustainable Innovation

Consumers prepared to pay a premium for products supporting social or environmental causes

More and more companies take an active approach to produce products in a sustainable way. But do consumers really care? The recently published The Nielsen Global Survey results point out they do.

A majority of consumers is prepared to pay more for products and services from companies committed to positive social and environmental impacts. This proportion is higher in Asia-Pacific (64%),  Latin America (63%) and Middle East/Africa (63%) than in North America (42%) and Europe (40%) – and in all regions the proportion is increasing.

Proportions per region preferring products that support sustainable cause

Consumers care and willing to pay more from sustainable companies.
Source: Nielsen Global Survey of Corporate Social Responsibility, Q1 2014

What are the social or environmental causes that get the most support? Nielsen asked respondents to specify the causes they are most passionate about. 67% are willing to pay more for products associated with an increased access to clean water, 63% that help to improve access to sanitation and 63% products that ensure environmental sustainability. Amongst the Top 10 are also ‘eradicating exterme poverty and hunger’, ‘combating non-communicable diseases’, ‘reducing child mortality’, ‘improving maternal health’.

Percentage of respondents willing to pay more for sust causes

Social and environmental causes consumers care about.
Source: Nielsen Global Survey of Corporate Social Responsibility, Q1 2014

Notably the Millenials (age 21-34) and Generation X (35-49) are prepared to pay more for sustainably produced products. Checking the packaging to be assured about the social or environmental impact is most important in Asia-Pacific, Latin America and Middle East/Africa (63%, 63% and 62%) whereas in Europa and North America, this is only 36% and 32%. (Perhaps the jungle of eco-labels has made people lees receptive?)

And it is not just about buying products. Half of the Millenials prefer to work for a sustainable company, and a quarter of the Generation X likewise.

Proportions responsive to sustainability actions

Millenials most prominent in preference for sustainability actions
Source: Nielsen Global Survey of Corporate Social Responsibility, Q1 2014

So: embedding sustainability in product development can create additional business value. That is encouraging news. Off course, just having a social or environmental cause associated with your product won’t do the trick. Old-school product-performance, a reasonable price, splendid marketing and communication skills are also essential. But if you are determined to produce great products that also support Planet and People, and you have the right conditions in place, nothing should stand in your way to create a successful business. As a bonus, you’ll be preferred employer of choice as well.


Get to know the Aspirationals

Regeneration consumer segments

One third of consumers combine a materialistic orientation with an aspiration to purchase sustainable goods. Style and social status are key motivators for this segment called ‘Aspirationals’.

No, we are not talking about the ‘Advocates’ formerly known as’Treehuggers’ which represent 14% of consumers. Advocates are driven by responsibility and guilt, actively search for products with social or environmental benefits and are prepared to pay more for sustainable alternatives.

To Aspirationals, shopping is not associated with guilt – not at all. ‘Shopping contributes to happiness’. Aspirationals love to try new things, want to look good and are very much concerned about their social status.

These are among the results of the ‘Regeneration Roadmap’ study by BBMP, GlobeScan and SustainAbility, based on an online survey among over 6000 consumers in Bresil, India, China, Germany, United Kingdom and Unites Sates.

In fact, Aspirationals represent the ‘persuadable’ middle segment. Consumer goods companies should be carefully studying the needs and drivers of this group. Aspirationalists are always on the outlook for sustainable alternatives, and would buy products if this would connect them with their community of peers with shared values.

How to recognize the Aspirationals? They can be found amongst all age groups, with a significant higher share of households with kids. In China even one in two consumers can be counted among this group. One handicap: Consumers will not automatically come across products and brands that are conceived with a reduced environmental or positive social impact. Above average, this group trusts advice of friends and peers.

The challenge for companies will be to convince this well-connected group about the sustainability benefits of products despite their lack of trust in green claims or labels. Companies should consider social branding initiatives that make consumers connect with communities of peers, trust the social or environmental benefits and become – what’s in a name – advocates of sustainable brands.

The opportunity lies in the aspirations people have: sustainability connected with social status, style and a feeling of community. Companies not only should concentrate on developing green and socially responsible products, but create cóol products with great performance and sustainable benefits that people can be proud off.

In other words: Forget about the Treehuggers. Convince the Aspirationals.


Cultural Differences and Sustainable Development

If you ask people what sustainability is all about, you will probably get multiple answers. Between 2009 and 2011 I interviewed sustainability managers across Europe. I found out that sustainable development has different connotations. Interpretations are often linked to historical developments.

In France, sustainability (développement durable’) has a strong social connotation. The principles of the French revolution, ‘Liberté, Egalité and Fraternité’, are still visible in today’s society. People believe that rights of individuals, employees and families should be defended at all times. You can recognize this social connotation of sustainability in the approach of Orange and of La Poste.

The Swedes are known to be very close to nature. For many Swedes, sustainability is more connected to environmental aspects. You can read more about this in the case study about best practices of Ericsson.

Not only national connotations may differ. Differences in business culture impact the way how sustainable strategies can be implemented in a successfull way.

In France, the society is organised in a strongly hierarchical way. Important decisions are taken at top level. This allows a swift implementation of new strategies. Decisions are taken early in the process and handed top-down through the hierarchy, as is done for example at Danone.

In Northern European countries, important decisions are often being made after intensive consultation rounds. These consultatations are being used to gather ideas but notably to make sure that all participants agree on the specific decision. A disadvantage is that this process may be time consuming.

What can we learn from the above?

First: Never assume that your understanding of sustainability is being shared by everyone across Europe – let alone people in the Americas, in Asia or Africa. When you are developing a multinational sustainability strategy, make sure you understand the regional connotations and include them as much as possible.

Second: Be aware of differences in business culture. Your sustainability implementation plan will need to be challenged by local experts. You will probably need to adapt it to the local business culture and decision making process in order to be successfull.

Globalisation improves a mutual understanding between people in different countries. Also national business cultures may change. French organizations slowly get less hierarchical. Generation Y employees get in direct contact with company boards as the case study of the Veolia Environnement illustrates. Globalisation however needs time to develop. At date, the differences in connotations, historical legacy and business culture are still very important.

Develop global, but adapt to local conditions: Test your global strategy with regional experts, and complete your strategy with regional implementation tactics, for instance in cooperation with national governments and local NGO partners, as DSM, Philips and Nokia show.

More about Best Practices of European Sustainability Leaders in: ‘Your customers want your products to be green’.

Sustainability will be part of all business disciplines

Sustainability knowledge and tactics will be diffused accross organizations. It will be embedded in all functional areas. Which is a great thing.

All disciplines will be affected. Employees will need to be involved and trained in new areas that are logical extentions of their current activities, but with a sustainability focus:

    • Marketeers will be inspired by the new market dynamics related to environmental and social issues. All marketeers will learn about what works and what won’t in Green Marketing.
    • Innovators will be challenged to develop new products that create user benefits ánd create a positive social change, with reduced ecological impact
    • Sales reps will be trained to identify customer sustainability expectations and convince them of the advantages of new business models.
    • Purchasing will intensify at one hand the sustainable supplier criteria and audits, and at the other hand the cooperation with suppliers to search for sustainable sourcing solutions.
    • Controllers will be asked to track progress against social and environmental parameters in addition to the traditional financial indicators.
    • Human Resources have already discovered the power of Sustainability as a means to attract and retain employees. They will be encouraged to develop engagement plans and bonus plans that include sustainability performance indicators.

All functions will be affected. Yet a small group at headquarters will need to stay in place. This central sustainability team will be there to overview and align the companies sustainability activities, share best practices, set the companies KPIs, benchmark and track market developments and update the sustainability strategy accordingly.

More information on sustainability developments and best practices in my book ‘Your customers want your products to be green’. The book contains insights based on interviews with 19 senior sustainability & CSR managers of European frontrunners. Let me know what you think about it!

Dutch Business News Radio Interview

Why do customers want green?

This week I have presented my new book on the Dutch radio in the Business News Radio program ‘BNR Duurzaam’.

Presentator Mark Beekhuis, Jos Cozijnsen and I exchanged about sustainability news and strategies, employee engagement, cultural differences and the new book.

For those who understand Dutch find hereby the link to the radio emission:

Your customers want your products to be green

I am proud to announce my new book:

‘Your customers want your products to be green’

During the last few years I have had the chance to interact with senior managers of European sustainability frontrunners.

‘Your customers want your products to be green’ contains Best Practices of Sustainability Frontrunners such as Ericsson, Shell, Rabobank, DSM, Philips, Danone and Veolia Environnement completed with freshly printed business recommendations.

Create societal impact and develop new business opportunities. More information on The Green Take website here. Enjoy and be inspired!

I wish you a happy and healthy 2012!