The cost of buying green: Part II

The trend confirms what’s likely a global truth for green products. Consumers still perceive a significant tradeoff with cost. And given the economic headwinds ahead, some questions are being raised about the sustainability of green premiums.

A bullish signal

Consumers associate sustainable products with many environmentally friendly perks. Most often, consumers consider products to be sustainably produced when they’re made from recycled (55%) or renewable (51%) materials, using less energy (39%), and with minimal or biodegradable packaging (31%), among other features.² Consumers also recognize that these attributes come at a higher cost.

Despite the higher price tags, roughly four in 10 globally decided to buy green in the middle of a financially challenging year.

From that perspective, the resilience in green product demand could be a positive signal. In the face of economic uncertainties, these consumers choose to do right by the planet over what might have been suitable for their pocket. It’s also a good test of the possible floor (of which we will have a better idea in March 2023 when we survey consumers again). When the economic storm passes, buying green could be set for a significant rebound as consumers’ financial wellbeing recovers and companies continue to innovate.

What consumers buy … and what they don’t

Sustainable living goes beyond buying green products. Everything we consume connects to a carbon impact. And while financial stress is likely convincing more customers to leave sustainable goods on store shelves, it’s also likely making consumers more sustainable in other ways, even if only coincidentally.

For example, Americans who feel their financial situation worsened over the past year are significantly more likely to cite engaging in many behaviors tied to sustainable living (figure 2). They’re more likely to say they’re making efforts to reduce energy and water use in their homes, fly less, and order fewer packages to their homes.

Many consumers live in a moment of austerity—particularly those feeling the financial pinch. Over the past year, spending intentions slipped across more discretionary categories like entertainment and restaurants—as well as in less discretionary categories like clothing, household goods, and personal care.³

At least part of the recent green pullback is likely tied to much broader household spending cutbacks.

For the foreseeable future, consumers will likely perceive a cost to going green. When consumers’ sense of financial wellbeing is healthy, they are willing to pay at least a modest premium. When times are more challenging, they are more likely to pay (perhaps indirectly) by forgoing conveniences and entertainment.

Eventually, sustainability likely needs to scale to the point that sustainable products and services are the first choices based on their quality and price. Given the potential for price sensitivity, companies may have to innovate to bring the overall costs down continually.

Electric vehicles may serve as an example. Once a luxury for only the more affluent, more affordable options continue to hit the market each year. Governments around the world have put incentives in place to encourage adoption. While overall market penetration remains modest, the progress in the last decade has been notable.⁴

When the price of an electric vehicle matches or beats a traditional gas-powered vehicle, and the charging infrastructure is in place, consumers likely won’t be putting their pockets ahead of the planet because they won’t have to. Many forward-thinking companies are working to put other product categories on the same trajectories by innovating green technologies and installing infrastructure.

And, when they do, many consumers will be there even in tough economic times.