When sustainability stops being a side hustle

Taking sustainable products from premium niche to mass market is driving consumer companies toward an important innovation agenda

Leon Pieters

Netherlands

Stephen Rogers

United States

James Cascone

United States

Consumer brand empires have been built on product quality, cost, and convenience innovation. In the coming years, brands capturing a larger share of the EU’s €8.5 trillion in annual consumer spending might be those leading in sustainability innovation.1

Consumer companies have been launching sustainable product lines for decades, aiming to tap into the global rise of conscious consumerism. Over the years, the product segment has come a long way. Globally, about 4 in 10 consumers surveyed since 2021 purchase at least one sustainable product every month (figure 1). While green purchases tend to concentrate in food and household goods, roughly 40% happen in other categories like clothing, home furnishings, and personal care.2 In 2023, sustainable products commanded an estimated 18.5% of consumer-packaged goods market share in some major economies.3

Some signs, however, suggest demand might be hitting a ceiling.

The global population of green-buying consumers isn’t growing. In fact, it has slipped a bit over the past few years (figure 1). And while a current market share of 18.5% might seem impressive, it’s only grown by 4.8 points since 2015.4 At this rate, green products would take another 50 years to reach just a 50% market share.

This pace may be too slow for the EU to accelerate its transition to a more circular, lower-carbon economy. To help expedite progress, sweeping eco-design regulations are being introduced for many products sold in the EU.

However, a look at consumers’ experiences with the cost, quality, and accessibility of today’s sustainable products can shed some light on why progress isn’t likely to come without innovation.

The demand ceiling

Even with the rise in global climate change awareness, demand for greener products is likely to struggle when consumers are forced to choose between what’s better for the planet and what’s better for their wallets or lifestyle. Sustainable products can come with trade-offs because producing something green at the same cost, quality, and convenience of a traditional product continues to be a challenge.

Interestingly, trade-offs tend to vary across product categories. For example, it tends to be price in personal care and beauty. Among consumers whose last green purchase fell in cosmetics, skincare, or soap, about half said they paid more for it (figure 2). Consumers report paying premiums of about 25% on average in the personal care category, with 1 in 5 paying 40% or more.5

So, for players in the personal care space, scaling green products while remaining cost-competitive likely means overcoming input cost challenges. And sustainable products often bring many, ranging from investments in research and development and higher costs of eco-friendly materials to smaller production scales, complex supply chains, regulatory compliance, and even marketing and consumer education efforts.

Until now, the moderate demand from more affluent, eco-conscious consumers has been a double-edged sword. The ability to pass on higher costs to a group of consumers with the means and willingness to pay more has acted as a safety-net for consumer companies experimenting with new green product lines. This is especially true in personal care, where premium ingredients like organic plant oils, eco-certified natural extracts, and sustainably harvested botanicals may help feed into the perception of higher quality (figure 2).

But the cohort is also limited in number. And because there’s likely finite demand, consumer companies don’t seem eager to fully commit to greener product lines. Doing so, while remaining cost-competitive, would require taking big-picture cost challenges head-on. And success is difficult for any single actor without the nudge of regulation leveling the playing field across the broader value chain.

The challenges ahead aren’t only about cost. In product categories with better cost-parity, quality and accessibility can be an issue. Within home furnishings, for example, only about 20% of consumers who purchase sustainable textiles like linens and towels said they pay more (figure 2). However, 40% say they accepted lower-quality products, and 45% waited longer to obtain them (figure 3).

The shift in trade-offs points to a different set of challenges. How can innovation help textiles made from sustainable materials like organic cotton, bamboo, or recycled fibers match the feel and quality that consumers have come to expect from conventional cotton and synthetic blends? How can companies achieve quality parity without the chemical treatments that enhance the softness, wrinkle resistance, and color retention that can drive consumers’ buying decisions? The magnitude of these challenges can help explain why such substantial trade-offs still exist in the market.

Interestingly, clothing sub-categories ranked relatively well in both cost and quality parity among respondents (figure 2). However, that doesn’t necessarily mean that the textiles industry is free from challenges on the path to a more sustainable future. One reason for the better ranking in cost and quality could be the rise of circular business models in the fashion industry. Nearly a third of consumers surveyed since 2021 who purchased sustainable clothing reported buying something used or upcycled.6

While popular online resale platforms have had a hand in promoting circular fashion, circularity still has a long way to go in textiles. In the United States, the Environmental Protection Agency estimates that only 15% of textiles are recycled.7 Innovation, from enhanced recycling processes to durable fabric technology, holds enormous potential to advance circularity further.

Tomorrow’s opportunities

The trade-offs consumers experience with sustainable products today point to tomorrow’s opportunities.

Until recently, companies have targeted sustainable products at a niche market of affluent, eco-conscious consumers, capitalizing on “greeniums” to help offset costs and drive profitability. However, the approach has resulted in finite demand.

With European Sustainable Product Regulations (the ESPR) entering into force in July 2024, sustainability could shift from an ancillary product line strategy to a core boardroom priority. Unfolding regulation will likely drive a reactionary focus on compliance. However, the strategic advantage might go to those who proactively prepare for how new design, durability, reparability, and recyclability requirements will alter the economics of competition. Products will need to be greener. And not all can command a premium. Companies that innovate to maintain competitive prices and meet broader market demands will likely be better positioned for long-term success.

It could be a tall order for some. In some cases, making products more sustainable will likely require companies to rethink decades of manufacturing innovation that made products cheap, higher quality, and convenient.

But challenges of similar magnitude have been overcome. Perhaps the most striking example from the business world has been the dramatically recast relationship between cost and quality.8 Fifty years ago, these were generally seen as mutually exclusive choices, a direct trade-off. However, the quality movement proved the opposite to be true, taking a deeply held but outmoded mindset and triggering leaps of creativity, invention, and profitable progress for businesses and the world. The total quality management movement revolutionized business over a few decades, demonstrating that cost and quality could be mutually accelerating rather than mutually exclusive.

Business leaders who successfully merge sustainability with cost, quality, and convenience will likely be those already assessing their readiness to transition toward a more circular economy. Evaluating sources for secondary materials, the feasibility of new repair services, and the impact of potential new packaging rules on the product portfolio, logistics, and operations are all examples of high-impact first steps.

Radical science and technology in areas like material science, bioscience, and biomimicry, as well as cross-sector partnerships, will likely provide lifelines for companies throughout the longer-term circular transition. In the shorter term, companies will likely need to address some of the broad elements of the ESPR such as Digital Product Passports (DPP), sooner rather than later. DPPs are digital records that provide detailed information about a product’s lifecycle, including its materials, production, and recycling processes, helping to promote transparency to consumers and other stakeholders.

While product-level requirements may still be a few years away, companies can’t afford to wait that long to start focusing on their sustainability data foundation. This effort could require a data and information pipeline that can potentially serve as a catalyst for progressively larger opportunities to reimagine the manufacturing value chain of products.

by

Leon Pieters

Netherlands

Stephen Rogers

United States

James Cascone

United States

Endnotes

  1. Eurostat, 2022.

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  2. Leon Pieters, James Cascone, Stephen Rogers, Derek Pankratz, and Anthony Waelter, “Green products come of age,” Deloitte Insights, May 31, 2023. 

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  3. New York University Stern School of Business, “Despite inflation, sustainable products hold 18.5% of CPG market share, an increase of 1.2 percentage points since previous year, finds research from NYU Stern Center for Sustainable Business in partnership with Circana,” press release, June 5, 2024. 

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  4. Ibid.

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  5. Deloitte ConsumerSignals.

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  6. Deloitte ConsumerSignals.

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  7. US Environmental Protection Agency, “Textiles: Material-specific data,” Nov. 8, 2024. 

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  8. Eamonn Kelly, “Innovating toward sustainable abundance,” Deloitte, accessed Jan. 16, 2025.

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Acknowledgments

The authors thank Rohith Reddy and Sanjay Vadrevu for their contributions to the article.

Cover image by: Harry Wedel