This article was published by The Economist (Insights) in November 2014, and can be found here.
Many companies have achieved energy and resource efficiency gains within their own operations, and are now eyeing the next prize: improving efficiency outside their organisational boundaries.
Companies such as GSK and Ikea have led the way, with sustainability targets for their whole value chains including upstream supply chains, downstream channels and even customers.
A company’s customer base can be a major source of environmental impact and risk through the way its products are sold, used, and disposed. However, unlike their supply chain, businesses have little or no direct control in managing it.
Consumer-facing products and services must therefore be sustainable by design. Furthermore, any initiative to influence behaviour must contend with the instinctive and emotional nature of buying decisions. Ignoring this will relegate sustainable products to the ‘green’ niche, and will fail to get traction with mass market consumers – a missed opportunity.
Make it right
A good place to start is making all core products more sustainable by designing sustainability into everything a company does – from product to business model. For example, sportswear manufacturer PUMA has pioneered the use of more sustainable materials within its products, and has taken an Environmental Profit and Loss (EP&L) approach to managing its business and supply chain. This means that everything a consumer buys will be a more environmentally-friendly choice.
Disruptive business models are also emerging, which provide better customer propositions that happen to be inherently more sustainable and resource-efficient. Companies such as Uber and Zipcar provide better, cheaper, more convenient urban mobility for many of their customers.
Sell it like you mean it
Companies need to use the full marketing and advertising arsenal at their disposal to encourage customers to buy sustainable products. Branding, packaging, promotion, and placement all have to be deployed effectively.
Just as importantly, the sustainability agenda must be translated into benefits that consumers can relate to, such as better performance, saving money or improving health. For example, Unilever has shown that compressed deodorants can be just as effective, while having a more convenient size and reducing carbon emissions by 25% per can.
Empower with information
We are mostly on autopilot when shopping, but at times we want to look under the hood and read the fine print. However in most cases information on product sustainability is neither accessible nor meaningful to consumers.
Companies are beginning to address this. For example the Carbon Trust has worked with Coca-Cola on helping consumers understand their personal carbon impact and make informed consumption decisions. The Carbon Trust’s label is also being used internationally by many companies as an indicator of product sustainability.
Technology will increasingly improve the availability and utility of information. For instance, sports brand Nike has developed an app that intuitively communicates the impact of materials it uses. Companies need to anticipate customer demand for transparency and harness the volume of information that will become available (for example generating insights through ‘big data’ and consumer engagement via mobile applications).
Collaboration is key
Consumer behaviour is not easy to change. Messaging is most effective when it comes from multiple trusted sources, so collaboration between partners and even competitors can be especially powerful. Furthermore, internal collaboration between company functions is essential to pilot and scale up sustainable products and services.
Companies also need to seek sustainability-enhancing innovations from outside sources. This is why things work best when businesses, NGOs and governments work together to drive things forward, as they have done with major issues such as food waste.
With an exploding global middle class, finding ways to create greener consumers will be fundamental to addressing the escalating environmental and resource challenges we face. It is going to be a tough nut to crack, but the problem has been recognised and action is being taken. If industries and society work together there is every reason to be positive that the challenges can be overcome.