Consumer Products and Sustainability Innovation

Perspectives

Consumer sustainability tops the innovation agenda

What are companies targeting for sustainability investments?

Over the course of the pandemic, consumers altered their buying behaviors—including toward environmental sustainability. Now, more manufacturers are pursuing new innovations to meet the demand for sustainable products. Our latest article breaks down consumer sustainability trends and outlines key opportunities to consider.

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Published February 2022

High demand for sustainable products...and low switching costs

Ask a consumer to recall their most recent sustainable purchase, and you probably won’t hear about an electric car or solar panel. Instead, people are most likely to name a consumer packaged good (CPG). Deloitte’s Global State of the Consumer Tracker survey of 1,000 US consumers suggests the same. Seven in 10 mentioned buying either an everyday household good, like a cleaning or paper product, or a food and beverage item as their most recent sustainable purchase.

Consumer demand for sustainability appears to be rising. Throughout the pandemic, nearly half of consumers altered their activities or purchase behaviors to help address climate change. Four in 10 consumers now say they choose sustainable goods often or whenever possible.1 As a result, companies are feeling the heat. A survey performed for Deloitte’s 2022 Consumer Products Industry Outlook found that 35% of CPG executives say consumers—more than investors, boards, or other stakeholders—are the most responsible for driving their companies toward sustainability (figure 1).

Changing to a more environmentally friendly soap or candy bar is an easy, fast switch for consumers who prioritize the environment. They simply start buying something else on their next trip to the store. For CPG companies, those low switching costs mean they could quickly lose share to competitors who offer a more sustainable product portfolio.

Figure 1: Stakeholders applying the most pressure to act on environmental sustainability

 

Source: Deloitte’s 2022 Consumer Products Industry Outlook Survey.

Investing in innovation

CPG companies are taking note and innovating. Deloitte’s 2022 Consumer Products Outlook found that 54% of CPG executives believe consumer sustainability will be the most critical area for consumer product innovation in 2022. In a follow-up survey of those executives, over 70% said their companies are likely to make significant investments in sustainability innovation this year. Top priorities for these companies included sustainable packaging (76%), followed by sustainably sourced new product offerings (71%) as the top priorities.

What’s guiding specific investment priorities within sustainable innovation? Consider this. Based on an analysis of their recent purchases, most consumers don’t want to accept a lower-quality product, wait longer to obtain it, or participate in a unique disposal process. However, 41% of respondents said they willingly paid more for a sustainable product. Sustainable packaging and sustainably sourced new products fit the profile. They may cost more, but ask little else on the part of consumers.

To be successful in their innovation efforts, companies indicate new technologies are most needed, followed by the assistance of third parties, which could also be a source of new technologies. Surprisingly, funding does not seem to be a significant barrier, nor does a lack of appetite for risk (figure 2).

Figure 2: Must-haves for making innovations in sustainability happen

Source: Deloitte’s 2022 Consumer Products Industry Outlook Survey, sustainability follow-up.

Key consumer sustainability takeaways

Consumer-product companies investing in sustainability innovation should consider the following:

  • Move quickly: With high consumer interest in sustainability, consumers could easily switch to buying from multiple niche players that are already making inroads. Speed is critical.
  • Minimize effort: For a better chance at consumer enthusiasm, focus on sustainability innovations that offer easy adaptability with little effort needed from consumers—even if it means they will have to pay a little more.
  • Find friends: Innovation is a team sport. Look for cutting-edge partners who can provide new technology and help projects move to market faster.

Authored by Barb Renner, Justin Cook, and Geetanjali Chitta. Special thanks to Derek Pankratz, David Weitzman, Jagadish Upadhyaya, Celine Fenech, and Srinivasa Reddy Tummalapalli for their support, analysis, and research throughout the development of this article.

Endnotes

1 Deloitte Global State of the Consumer Tracker, sustainability data from September of 2021
2 Deloitte 2022 Consumer Products Industry Outlook Survey and follow-up survey of executives who selected sustainability as the top area for innovation.

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