Would You Buy an Eco-Shoe? Yeah, Didn’t Think So.
Rethinking “going green.”
By Nadya Zhexembayeva
Once upon a time, there was a group of change makers that, it seemed, had figured it all out. Long before the awakening of the majority, this tiny minority saw the overfishing of the ocean—rising commodity prices and shrinking resource-based opportunities—at a distance and decided to act on it.
They took on the challenge of the disappearing economy to a new level and attacked it head-on with new products, new processes, and new services. They wrote numerous books and spoke at many conferences. They pushed for industrywide changes and gave birth to one unified answer to the resource challenge: the “green” economy.
I used to be one of them.
“Used to” is the crucial element here. For over a decade, I worked with countless companies on a range of sustainability risks and wrote articles and books on how to turn them into opportunities. All those years, it was a real pleasure and honor to work on projects that were much more than skin deep. Like many of you, I watched the rise in importance of everything “green” in media of every kind and attended the never-ending list of events that all seemed to suggest that “green” was the new black. The companies were courageous, the projects had impact, and the discoveries were potent.
Yet in the bigger scheme of things, I could barely see any change in the mindsets, behaviors, and outputs of the majority of companies worldwide. Green—as the answer to the challenge of the overfished oceans—was not working. Increasingly, something simply did not add up.
What comes to mind when you hear the phrase “green product”? Let’s make it a bit more tangible: Imagine an eco-shoe. What do you see?
Most likely, some ecologically sound raw materials would come to mind—recycled or biodegradable, organic or nontoxic. Would this product be beautiful, aesthetically pleasing? When I ask this question at conferences, executive-education sessions, and company meetings, most people shake their heads in an emphatic no.
What about functionality—would it perform on par with a traditional shoe and have as much research built into it? Again, most people don’t think so.
And what about the price? Here we also have an agreement: Green products are expected to cost more. The outrageously pricey organic lipstick that runs down your face in five minutes, the green car of the future that would hardly claim a proud spot in the owner’s garage, a sad-looking organic apple twice the price of its conventional counterpart—the list goes on.
If we sum it up, in the eyes of an average consumer, green products are ugly, underperform, and are expensive. Why in the world would we ever think that somebody is there to buy them?
The myth of “green” has been spreading like wildfire with the helping hand of marketing research. As far back as 2006, a National Consumers League and Fleishman-Hillard survey of U.S. consumers reported the social responsibility of a company as being the number-one determining factor of brand loyalty, with 35 percent of respondents placing it on top, well ahead of product price and availability, each of those receiving a bare 20 percent of respondents’ votes.
Three years later, Deloitte reported that while much of consumer behavior was still dictated by price, quality, and convenience, a whopping 95 percent of American consumers said that they were willing to “buy green,” while a BBMG survey that combined a national poll of two thousand consumers with ethnographic interviews supported the Deloitte findings: Two-thirds of Americans agreed that “even in tough economic times, it is important to purchase products with social and environmental benefits.” A year later, it became clear that concerns for the environment were not limited to the consumers from developed economies—the 2010 World Economic Forum report suggested that such concern was as strong in the emerging economies as well, “and in some areas stronger as they are often more directly affected, for example water pollution.” Sounds convincing, right?
The trouble in the research paradise started showing up when the announced “willingness to pay,” as economists call it, failed to realize in practice. Customers promised one thing and did another.
Take, for example, public utilities. Despite strong support for the “green electricity” idea in consumer polls, few utility companies have been able to attract any significant consumer following once the product was offered. The story of Massachusetts’s public utilities is a perfect illustration of this phenomenon. Massachusetts’ electric utilities have offered programs such as National Grid’s GreenUp that let customers choose clean-energy sources for their power supply, for a premium. But in spite of an extensive marketing campaign, which included putting inserts in bills, sending online newsletters, hosting booths at events, and posting on Facebook to promote the options, there have been few takers. After nearly a decade, barely six thousand of the 1.2 million Massachusetts customers, or less than half of 1 percent, had signed up for GreenUp. It turns out people do what they do, not what they say. Surprised?
In their painful discovery, Massachusetts’s electric utilities were not alone. For a number of years, market data and academic research alike have signaled that the prevailing idea of green is dead. In a 2011 Forbes article, Gregory Unruh puts it this way: “Consumers and the public . . . expect sustainability as a baseline condition of business. They don’t expect to pay for it. . . . Green marketers have known this for a long time. Consumers will consistently tell surveys that they are willing to pay more for socially and environmentally superior products. But when they are alone in the shopping aisle . . . they rarely fork out more for ‘green.’ . . . It’s a problem that established companies face when they add a new sustainable product to the portfolio. It immediately prompts the question ‘Well if this new product’s green, what does that say about the rest of your line?’”
Many corporate executives see this response as a slap in the face for taking the path toward sustainability. They are, in a way, being punished for going green.
In 2010, four professors from Villanova University and SUNY Albany discovered during the course of their research that even financial markets are willing to punish for sustainability misdoings while they balk at paying a premium for going green. The researchers found that being listed on a sustainability index doesn’t improve share prices. However, when a company is thrown out from the index, the market inflicts a strong punishment—an average 1.2 percent of share-price loss following the delisting.
Consumer and market research has consistently confirmed academic research of this kind: Trendwatching.com put the death of green as one of its eleven most important trends for 2011, speaking of the plateauing number of consumers searching for “green” products, with the mainstream starting to question the value of going green:
- While 40 percent of consumers say they are willing to purchase green products, only 4 percent of consumers actually do when given the choice.
- Fifty-eight percent of global consumers think that environmentally friendly products are too expensive, while 33 percent of global consumers think that environmentally friendly products don’t work as well.
- While the volume of green products available to U.S. consumers increased by 73 percent between 2009 and 2010, only 5 percent of products were not found to include some “greenwashing” claims.
Greenwashing—a practice of deceptively spinning data to create the perception of an environmentally and socially friendly company—has been a fertile ground for mistrust and aversion to green, which seemed to grow through 2010 and 2011. Data from 2012 is even more worrisome. An Advertising Age headline says it all: “As More Marketers Go Green, Fewer Consumers Willing to Pay for It.” What the magazine is referring to is the surprising results of the annual Green Gauge survey by GfK suggesting that while 93 percent of consumers reported they had personally changed their behavior to be more into conservation, they were becoming less willing to pay extra for green products.
That is exactly why Volkswagen decided not to sell its Golf TDI BlueMotion in the United States. At 106 mpg, the car is a beacon of efficiency and eco-friendliness. Yet VW sees more potential in Europe, “where gas prices are double those in America, because consumers are more willing to pay up front for efficiency.” Green is dead!?
There is no question that my portrayal of the green economy is oversimplified, generalized, and exaggerated. It is also very clear that the challenges that the vast majority of green products are trying to address are very real, worthy, and urgent. But if, with the help of bad marketing, “green” has become synonymous with overpriced, overhyped, half-baked products, that kind of green deserves to die.
Simply put, no market exists for such products. Even more so, this approach undermines consumer trust and kills the chances for any kind of green to be successful.
Environmentalists, who for a long time paid attention to environmental sustainability at the expense of financial sustainability, have to learn a hard lesson: Both are necessary. Gernot Wagner, an economist and author at the Environmental Defense Fund, made this point into a powerful plea: “Don’t stop recycling. Don’t stop buying local. But add mastering some basic economics to your to-do list. Our future will be largely determined by our ability to admit the need to end planetary socialism. That’s the most fundamental of economics lessons and one any serious environmentalist ought to heed.”