Consumer confidence hits sustainable demand

From: POLITICO's The Long Game - Thursday Jul 14,2022 04:02 pm

Jul 14, 2022

THE BIG PICTURE

Column chart showing increasing year-over-year inflation

Companies are claiming they're going full steam ahead on their sustainability commitments, even as inflation and a potential recession loom.

But consumer demand for sustainable products may be softening as goods get more expensive.

More than half of consumers are planning to switch from sustainable products to brands that are not eco-friendly due to price increases, according to a survey of 9,000 people across nine countries including the U.S, conducted earlier this spring by Kantar, a global marketing data and analytics company headquartered in London.

Consumers are the most sensitive to changes in the cost of baby products, the survey found, with 67 percent of respondents saying they planned to or already have switched to brands that are not eco-friendly. Sustainably branded paper and cleaning products had the most loyalty, but about 55 percent still said they were open to switching brands.

A chart showing consumer attitudes toward sustainable brands.

What about companies? After all, 20 large companies contribute more than one-third of energy-related emissions alone. What corporations do matters.

Don’t expect many to openly admit needing to scale back sustainability promises to cut costs to maintain profits and retain their workforces during an economic downturn. But, as it turns out, sustainability might actually be sustainable.

"Many of the sustainability initiatives that companies initially take represent 'low-hanging fruit' in the sense that they are sensible measures that actually save money for the firm," said Sandra Waddock , a scholar of corporate responsibility at Boston College's business school.

Companies that are further along the sustainability curve, in contrast, have shifted their business models in ways "that will presumably 'stick' even in a downturn," she said.

“Issues like climate change and equity are important to a range of stakeholders from employees, to customers to investors,” said Renee Morin , the chief sustainability officer at eBay. “As companies consider cutbacks across a number of business functions, with the global eye on sustainability, I don’t see ESG being disproportionately affected by a recession.”

While companies that have already made sustainability promises may not be likely to reverse them, the real impact of a recession will be what we don’t know: the corporate promises that haven’t yet been made, said John Tobin-de la Puente, a professor of practice of corporate sustainability at Cornell University.

“These longer-term commitments, even when times are tough, you’d be surprised how much these companies stick to them,” Tobin said. “That’s when something is public and once a formal commitment has been made. Anything that’s not yet out the door, that’s a very different situation.”

There could be some upside to a recession. Almost half of respondents to the survey said they were walking more due to the high cost of fuel. A third said they were relying more on public transportation, and a quarter said they were bicycling more.

A chart showing poll respondents walking to their destinations more.

The U.S. showed the least responsiveness to fuel prices in terms of switching to walking. But 16 percent of U.S. respondents said they were driving SUVs and trucks less.

And rising prices can cut both ways. Half of homeowners — 41 percent in the U.S. — said they were planning on making efficiency improvements to their homes in the next year, and 65 percent said the current economy was accelerating their plans to do so.

Companies that have made a point of positioning themselves to capture sustainability-minded business are expressing confidence that demand will only keep increasing.

"I don't think it's going to change because the whole of society is demanding it," said Greg Dawson , director of corporate affairs for D.S. Smith, which makes paper and cardboard packaging. He said he was seeing some softening of demand in the home-improvement industry but that other types of demand have stayed strong. "People might be holding back on a bit of a garden project or a home project to see how this inflation plays out in the next few months," he said.

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How are today's economic conditions impacting your sustainability habits? We want to know.

The Long Game is your source for news on how companies and governments are shaping our future. Team Sustainability is editor Greg Mott, deputy editor Debra Kahn and reporters Lorraine Woellert and Jordan Wolman. Reach us all at gmott@politico.com, dkahn@politico.com, lwoellert@politico.com and jwolman@politico.com.

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