How Does Sustainability Affect Consumer’s Behaviours and Decision Making?

Our study of 187 participants found that information about the sustainability of a product, in the form of a sustainability score, can have a significant impact on consumers’ buying behaviour.

This research project sought to examine the potential effectiveness of providing consumers with a product-level sustainability score during their buying journey.

 

This product sustainability score was displayed as a metric displaying the environmental impact of the product, from Very Bad to Very Good.

Figure 1. The mock sustainability scoring metric presented to our study participants

 

This research found that the product-level sustainability scores were as influential as customer rating systems (1-5 stars) in consumers’ buying decisions. This supports that retailers’ ability to provide information on the environmental sustainability of their products will become more important to their consumer base, in line with strengthening consumer sustainable attitudes in the modern sustainable era.

 

The main component of this study was discrete choice analysis methodology, used to assess the relative buying effect of sustainability metrics against other e-commerce buying factors. Respondents were also assessed on their sustainable attitudes and understanding.

 

In summary, the potential social, economic and environmental value of sustainable purchasing is evident. With increased sustainability awareness and regulatory incentivization, the positive influences of sustainability metrics upon consumers’ buying decision are likely to increase.

This research was carried out to assess the influence of sustainability metrics in the consumer buying decision and the feasibility of producing a universal product sustainability score.

Definitions:

 

❖ Sustainability score: A quantitative metric capturing the cumulative CO2 emissions (or equivalent) throughout a product’s lifecycle.

 

❖ Buying effect: The relative influence of individual factors in the consumer buying decision.

 

❖ Buying decision: The consumer’s process of identifying wants/needs, evaluating alternatives, and ultimately selecting a specific product and brand. Post-purchase assessment of the potential for the development of brand loyalty, influence the repurchase decision or related behavioural changes.

 

Although “consumption has moved beyond its primary function of serving basic human needs and is increasingly linked to symbolic meanings, values and lifestyles” [17] modern climate science suggests that these functions must be unified to the basic needs of humanity, if it is to subsist.

 

Sustainability has been identified as a potentially powerful influence over many consumers’ buying decisions. It interacts directly with strong personal attitudes and has overwhelmingly positive associations amongst Western consumers. Studies have shown that, in general, there is a strong positive buying influence amongst people with varying degrees of awareness and understanding [14]. This is indicative of sustainability having potentially universal relevance.

 

Climate change has now been recognised as a global issue; Barack Obama defined it as the “one issue that will define the contours of this century more dramatically than any other” and, at the UN Climate Change Conference 2020, Sir David Attenborough suggested that “if we continue on our current path, we will face the collapse of everything that gives us security”. These are just two of the multitude of examples that now place it at the forefront of the media agenda and rapidly growing within the collective consumer consciousness.

 

Most ‘solutions’, to the challenges that climate change pose, hinge on a combination of global behavioural changes and the implementation of several “undoing” measures. The editing of mass behaviours has been extensively researched to assess the effectiveness of alternative techniques, including a significant number of investigations into the effects of sustainability labelling and sustainability scores. The literature typically calls for government led educational programs designed to build public understanding, prime sustainable attitudes, by connecting consumers personally to the issues, and then initiate sustainable behaviours, including sustainable purchasing, by providing relevant and trustworthy information to consumers. [16][21]

What is the buying effect of our sustainability score for a selective range of products relative to other established buying factors?

Our research question in the final survey was split into four sections:

 

❖ Attitudes: Assessing levels and frequency of sustainable attitudes using 5-point Likert scales (strongly disagree to strongly agree)
❖ Understanding: Of supply chain and sustainability through multiple choice questions
❖ Behaviour: Assessed using discrete choice analysis to model the e-commerce consumer buying decision, in order to determine the relative influence of buying factors for two independent industries; clothing and home appliances
❖ Socio-demographics

Consumers are more critical of brands/companies’ approach to sustainability, than they are of their own behaviours.

We found an overwhelming consensus in support of both brand and personal sustainability, with 96% and 89% respectively. However, only 71% of respondents currently make a conscious effort to live sustainably themselves.

When attempting to quantify attitudes, the degree of agreement is an important measure of conviction. When isolating the cohort that strongly agree, an even clearer trend of attitudes emerges; 70% strongly agreeing that brands should be environmentally friendly, 60% are in strong support of environmentally sustainable lifestyles, but only 26% strongly agree that they actively make a conscious effort to live sustainably themselves.

Figure 2. Break down of attitude levels for questions regarding brand and personal sustainability

 

Brands that are perceived as environmentally friendly are clearly favoured relative to those that aren’t. The latter appear to suffer a disproportionate negative consumer reaction.

The evidence suggests that consumers presume their individual sustainability to be less important than brand sustainability. This presumption is incorrect; experts widely concur that sustainable consumer behaviours are key to the fight against climate change and increased pressure for sustainable consumption will feature heavily in climate change education and future economic and social policy. [14]

Despite agreeing that an environmentally sustainable lifestyle is important (89%), and that climate change is a major issue (94%), fewer than half of respondents report that they currently buy sustainable products (49%).

This attitude-behaviour gap in sustainable purchasing is well researched.  “30%-70% of consumers say they want to buy greener … but only 1% to 5% actually do” [9] Consumers have so far been unable to proportionally translate sustainable attitudes into sustainable behaviours.#

 

Evidence is growing that sustainability-driven behaviours, such as recycling or driving more fuel-efficient cars, have been on the rise.  The UK Department for Environment, Food and Rural affairs reports material year-on-year increases in recycling rates across the UK since 2016. The most recent data indicates that 49.35% of household waste was recycled in 2019. In parallel annual electric car registration in the UK increased from 100,000 in 2016 to 600,000 in 2021 (SMMT, OLEV, DfT Statistics, 2021). It is apparent that consumers are not incapable of enacting their sustainable attitudes but rather that sustainable purchasing has yet to be fully understood as an effective and meaningful outlet.

 

In the car industry, due to a combination of government regulation and education, sustainability information is readily available and well understood. Consumers are increasingly selecting the sustainable option and have been willing to pay an environmental premium of c.10%.  [13]

 

Raising the collective level of understanding of the issues involved together with clear, consistent, and comprehensive information have been identified as prerequisites for actualising sustainable attitudes. [13][15][18] Consumers with greater understanding of the supply chain and sustainability are able to significantly leverage product sustainability information, value-differentiate product options and activate and deploy their sustainable attitudes.

Figure 3. Results for attitudes related to broad sustainability vs sustainable behaviours.

 

Sustainable attitudes continue to increase. Consumers recognise an increase in their own environmental attitudes and anticipate further increases in the importance of sustainability in the future.

 

Increasingly widespread climate protests, the rise to prominence of climate change activists such as Greta Thunberg and President Biden’s 2021 sustainability agenda consume the media. As global temperatures approach the 1.5°C increase threshold of 2015’s Paris Climate Accord, following the hottest decade in recorded history, sustainability is becoming far too relevant a topic for consumers to ignore. The global shift in focus onto climate change is now beyond dispute and gathering more and more momentum by the day.

Figure 4. Sustainable attitude changes over a 10-year period.

Our research suggests that consumers accurately assess the relative importance of different elements of sustainability and even rank their impacts consistently with expert opinion. [16]

Perhaps surprisingly, consumers appear able to differentiate between products, reflecting on the different aspects of sustainability throughout the supply chain rather than simply during the consumption phase. [15]

Figure 5. The most important aspects of product sustainability according to consumers, ranked (y-axis) in order of expert opinion.

 

Despite this good level of overall knowledge, people appear not to fully appreciate the environmental impact of different stages of a products supply chain and, in particular, fail to identify manufacturing as the point of greatest environmental impact.

 

Respondent choices were relatively evenly distributed across a number of elements of the supply chain, indicating a certain degree of confusion and lack of consensus.

Figure 6. The most important stage in the product life cycle according to consumers, ranked (y-axis) in order of importance.

 

Ultimately, a good understanding of the impact on sustainability of a product’s complete supply chain will be necessary to allow consumers to easily convert sustainable attitudes and preferences into sustainable behaviours.  Nevertheless, even when consumers struggle to fully comprehend the exact meanings of labels [14] or the personal and ecological benefits of, for example, low carbon cars [13], positive utility of sustainable information is still observed.  This suggests that information on a product’s sustainability and environmental impact has positive influence even if it is not fully understood. Increased perceptibility of the labelling and sustainability information appears to reinforce the message; 36% of consumers were shown to have increased utility for two labels as opposed to a single label, even when the information contained was essentially the same. [14]

 

As expected, consumers trust their own research and statutory labelling significantly more than they do brand advertising or word of mouth. Although consumers use multiple inputs when assessing product sustainability, formal ‘market-standard’ statutory or regulatory labeling is shown to have greater influence. Therefore, to maximise its impact, a sustainability scoring system would benefit significantly from real or perceived formal endorsement as a regulatory standard.

Figure 7. How consumers decide if a brand or company is environmentally friendly.

 

Sustainability conscious consumers look to both label content as well as the credibility of its source to aid in value differentiation. Positive product sustainability credentials have strong lifestyle associations and can appeal to those seeking to make conspicuous ethical or ideological statements. Leading to both increased retail conversion rates and consumer satisfaction. [17] Increasingly, the absence of sustainability information and confusing labelling appear to elicit measurable negative consumer reactions.[17] The evidence indicates that consumers are increasingly demanding more, better, and clearer information on a product’s sustainability.[9][14][15][17]

 

As expected, consumers trust their own research and statutory labelling significantly more than they do brand advertising or word of mouth. Although consumers use multiple inputs when assessing product sustainability, formal ‘market-standard’ statutory or regulatory labeling is shown to have greater influence. Therefore, to maximise its impact, a sustainability scoring system would benefit significantly from real or perceived formal endorsement as a regulatory standard.

 

Beyond this ‘organic’ trend towards placing greater emphasis on sustainability in the consumer buying decision, many studies conclude that rapid and widespread adoption will only be achieved with the assistance of government incentives (e-vehicle rebates), targeted education and regulation. Laws, policies, and administrative procedures should be designed to strengthen information transition and provide a facilitator of sustainable attitudes. Given the time imperative that has attracted so much attention recently, this intervention is essential and evidenced by the growing importance attached to events such as the UN Climate Change Conference in Glasgow (COP26).  There has literally never been a better time to commercially leverage the provision of sustainability impact data.  The products and services in sectors most closely associated with sustainability and reducing emissions have already in many instances experienced significantly increased market share. [12][16]

 

This underlines the opportunity for an organisation/s that can credibly gather and maintain the data to reliably measure a product or service’s climate impact and provide a transparent scoring metric that could plausibly become the market standard.[12][16]

 

A standardised system of self-explanatory, regulatory labelling would meet with the approval of c.84% of consumers. [14]

Across the albeit limited universe of our tested products, our research indicates that sustainability shows a mean relative attribute score comparable to that of the popular customer ratings, which have dominated e-commerce for over two decades.

Figure 8. The relative influences of different ecommerce buying factors for T-shirts and washing machines. Relative attribute importance is a measure of the relative influence of different factors in the buying decision.

 

It is apparent that sustainability scores in an ecommerce environment, can be effective in both targeting consumer affinities, as well as an effective digital search parameter, that is, selecting only for products with the highest sustainability scores.

 

Curiously, price was significantly more influential in the buying decision for T-shirts than Washing machines. This result is significant. The highest and lowest price options for T-shirts were picked less often than those for washing machines.

 

For most people, washing machines are relatively high value and high involvement purchases, they occur rarely and require research and extended consideration; factors other than price can play a significant role. Conversely, t-shirts are low involvement purchases for which price is a more dominant consideration. [12]

 

The relative effects of buying factors inevitably vary significantly across product types. [9] This observation provides scope to differentiate products not by category, such as food, clothes, or vehicle, but rather by function, type of good and involvement in order to better differentiate which products are likely to have particular relative buying attribute patterns associated with them.

Individual attribute analysis indicates a powerful positive elasticity of demand for sustainability and once again comparable to that of independent customer ratings. The point of greatest elasticity is the region between ‘Bad’ and ‘Average’ scores, this is referred to in the literature as negativity bias [12] and means that even average sustainability scores have a valuable positive buying influence

Figure 9. Relative attribute level influence for customer ratings and sustainability. A negative attribute percentage equates to a negative buying effect.

 

This suggests that the products which benefit most from introducing an association with sustainability are those that are presently viewed as ‘bad’ or at least below average in their sector. In other words, they offer maximum ‘bang-per-buck’; the greatest increase in demand for the smallest increase in perceived sustainability.

Figure 10. Relative attribute level influence for price.

 

Diminished sensitivity observed at both extremes is also consistent with the academic literature and linked to ‘prospect theory’, a Nobel prize winning behavioural model which suggests that consumers assess economic actions about a reference point and visualise their decisions as losses or gains relative to this reference. Loss aversion typically provokes a visceral reaction from consumers, it is this reaction that creates the asymmetry associated with negativity bias. [12] This same trend is mirrored in the price elasticity of both sustainability and customer ratings.

Figure 11. Customer rating and sustainability score levels plotted against price, creating a marginal willingness to pay for changes in levels. This is calculated about a baseline product (average sustainability and 3 star customer rating), with change in price representative of a change in only that level from the baseline, all other levels remaining the same.

Sustainable attitudes and understanding are closely linked to increased environmental education and to the maturing of Gen Z. Both of these factors represent powerful and rapidly growing demographics.

 

The majority of our participants (49%) fit the 18-25 year old age bracket, and Gen Z will be “the majority of US consumers … in just 5 years” (Forrester’s Greener consumers demand sustainable brands report, 2021) and this trend is closely mirrored elsewhere in the Western world.

 

Gen Z, for whom sustainability has been an ever present pressing and contentious global issue, show an especially strong affinity to the associated values and beliefs and is strongly expressed through their attitudes and behaviours. (Forresters)

 

Participation rates in higher education (HEIPR) have been steadily increasing over the past 15 years and, as Gen Z reach maturity, the era of sustainable attitudes and its tangible impact on buying behaviours is gaining momentum, growing inexorably.

In summary, the key findings of our research are:

 

❖ Sustainability already has a strong influence on consumers’ buying behaviours and the evidence indicates that the impact will continue to grow.

 

❖ Consumers judge product sustainability in relative not absolute terms. They are most responsive to differences in sustainability where products fall into the Bad to Average category.

 

❖ It is not a question of if sustainability factors will be an important influence on buying decisions and supply chains, this is inevitable, the outstanding questions are how and how soon. As Gen Z become the dominant force in the consumer markets, differentiating between products and services on the basis of sustainability will become uncontroversial and just an accepted feature of life.

 

❖ Attempting to optimise for sustainability throughout the supply chain will have value for even those companies and industries that rank relatively poorly for sustainability. This is because regulation will increasingly require companies to bear the full costs of producing their products and services recognising their environmental, social and governance costs (ESG). Optimising their supply chains for sustainability will therefore have a real economic benefit for them whilst offering wider society the desired positive environmental impact.

 

❖ Developing effective metric/s and labelling are clearly essential prerequisites for the empowerment of consumers’ and actualisation of their sustainable attitudes.

 

❖ Our research suggests that we really are on the cusp of quite dramatic change in this area. It’s therefore critical to explore any potential to capture ‘early mover’ advantage as well as how to maximise the likelihood that we can attain the ultimate goal of offering the local or global standard in sustainability measurement and reporting.

 

Whilst many of our findings were probably quite intuitive, it appears pretty much incontrovertible that sustainability will be a powerful influence on consumer buying preferences going forward. Our research findings have only served to reinforce this.

 

Our focus, therefore, needs to rapidly move to the practical questions of how the technical challenges of data availability, data quality and ongoing data maintenance are overcome.

At least as important, will be figuring out how we win the hearts and minds of consumers, regulators, policymakers and, of course, our prospective corporate clients in this highly competitive and complex arena.

 

 

Research project designed, conducted and written up by Elliot Giles, Sustainability Research Intern at Ocula ’21

 

Reference Number and Source	Link
1.       Pricing Research: The Good, The Bad, And the Good Enough	https://www.decisionanalyst.com/blog/pricingblog/
2.       Using the Gabor-Granger pricing method to determine the price elasticity of products and services	https://www.questionpro.com/features/gabor-granger-price-sensitivity.html
3.       Question Pro	https://www.questionpro.com/help/gabor-granger.html
4.       Demand and Price Elasticity Modelling	https://www.actuaries.org.uk/system/files/field/document/C04%20Demand%20and%20Elasticity%20Modelling.pdf
5.       Price Elasticity of Demand	https://scholar.harvard.edu/files/alada/files/price_elasticity_of_demand_handout.pdf
6.       Price Elasticity: Data Understanding and Data Exploration	https://towardsdatascience.com/price-elasticity-data-understanding-and-data-exploration-first-of-all-ae4661da2ecb
7.       BPTO (Brand Price Trade Off)	https://www.b2binternational.com/research/methods/pricing-research/bpto/
8.       Discrete choice experiments with multiple price vectors for products sold in a wide price range	https://core.ac.uk/reader/301578857
9.       The Impact of Sustainability Information on Consumer Decision Making	https://www.researchgate.net/publication/283162050_The_Impact_of_Sustainability_Information_on_Consumer_Decision_Making
10.       What’s Covered in Our Ratings?	https://web.archive.org/web/20180917194518if_/https://www.goodguide.com/about/ratings#/
11.       Using conjoint analysis to determine customer willingness to pay for environmental initiatives in hotels in Helsinki	https://www.theseus.fi/bitstream/handle/10024/80264/Valkama_Aino.pdf?sequence=1
12.       Worse is worse and better doesn’t matter? The effects of favourable and unfavourable environmental information on consumers’ willingness to pay	https://onlinelibrary.wiley.com/doi/full/10.1111/jiec.13141
13.       Consumers’ willingness to pay for green cars: a discrete choice analysis in Italy	https://link.springer.com/article/10.1007/s10668-018-0141-z
14.       The bunch of sustainability labels – Do consumers differentiate?	https://www.sciencedirect.com/science/article/abs/pii/S0959652616320339?casa_token=b3p9XBzlIuQAAAAA:gsUehMHjQ-0HGOohoYBUxqKrOMwJVYwiJJb0u338NnkrqIFaia7r-zlapT94MGVo71lZWbgTMQ
15.       Sustainability labels on food products: Consumer motivation, understanding and use	https://reader.elsevier.com/reader/sd/pii/S0306919213001796?token=A49E03F5DE1DB9E3DB2224667C66C8A4BA141B1D405F4AA1108CE5D1D0AB285BD2DF30BAA1CC56EF4DA0FE01E5647393&originRegion=eu-west-1&originCreation=20210715082145
16.       Influencing factors to facilitate sustainable consumption: from the experts’ viewpoints	https://sci-hub.st/10.1016/j.jclepro.2015.12.111
17.       Feed them facts: Value perceptions and consumer use of sustainability-related product information	https://www.sciencedirect.com/science/article/abs/pii/S0969698914000496?via%3Dihub
18.       The more I care, the less I will listen to you: How information, environmental concern and ethical production influence consumers’ attitudes and the purchasing of sustainable products	https://sci-hub.st/10.1016/j.jclepro.2017.12.054
19.       Appliance energy labels and consumer heterogeneity: A latent class approach based on a discrete choice experiment in China	https://www.sciencedirect.com/science/article/pii/S0140988320301791?casa_token=kWJnR2p3wvoAAAAA:WFHGW7-heihZ61q-Gd_w0QtshFnbz3uvILmRHVdZmd8C5fdd7s132ImxHb7XgMBiNRL9J3V-
20.       Product carbon footprint labelling consumer research	https://prod-drupal-files.storage.googleapis.com/documents/resource/restricted/Product-carbon-footprint-labelling-report-v3.pdf
21.       The buying decision process and types of buying decision behaviour	https://d1wqtxts1xzle7.cloudfront.net/62024899/Dm20200207-80677-rejoul-with-cover-page-v2.pdf?Expires=1631116633&Signature=NZny0RTLcBGK-YzAWGAwmwLSO28AdO2UCJ-NBXV3gtvwufiachcDUVkLHB6Xj26XbHcgZvzM~HDyQRGY-edOtBvaVlN0OhdM2GJh1pZFtNCM94PhbG5r~jEC6sLfuMe4fmjGToo5ZRwhwXdlfqayx0Ls-UsgwTeeHA1zHAQSe4r7PadERFafqbDyi0~VaGRFJP2Yk9STkqXFG9sZBoQ1Jq0un9n-hxXsAWPUOF5DOpZIPVsOLfGuG3uKuvCXSujl5hPqX6UFjpHmn7znFAumtlJsXarbBmm3-pVI-Eho4u75J7FPf8jnfd8nrEVrZM68j0ZxyjDhuuKVUduC0hyHHg__&Key-Pair-Id=APKAJLOHF5GGSLRBV4ZA