Consumers are buying sustainable products again, after the global economic downturn reduced demand.
“Sustainable, welfare and ethical buying …is a re-emerging trend,” says Jon Copestake, chief retail and consumer goods analyst at the Economist Intelligence Unit.
Demand for organic products was hit hard by the downturn, but there are signs of a resurgence. After four years of decline, organic sales in the UK rose 2.8 per cent in 2013, according to research by the Soil Association.
Fairtrade, meanwhile, continues to gain ground. According to the Fairtrade Foundation, sales of Fairtrade products in the UK reached £1.78bn in 2013, a 14 per cent increase on the previous year.
Overall, according to the Co-operative Group’s 2012 Ethical Consumer Markets Report, the total value of UK ethical markets had risen from £35.5bn at the onset of the recession to £47.2bn by 2011.
In the general merchandise market, which includes clothing and homeware, issues around the impact of fast fashion have come into focus following the Rana Plaza factory disaster in Bangladesh in 2013, in which more than 1,100 people were killed. The Co-op found that ethical clothing was one of the losers during the downturn.
“I don’t think consumers ever went away from expecting big business to be well behaved,” says Mike Barry, head of sustainable business at UK-based retailer Marks and Spencer.
The demand for sustainable products is also helping shape companies’ strategies.
Eight years ago, M&S launched Plan A, a set of 100 environmental commitments – now increased to 180 – concerned with reducing waste, cutting its and its customers’ carbon footprints, using natural resources more efficiently, being a fairer partner and improving its customers’ health and wellbeing.
Two years ago, Kingfisher, the DIY retailer that operates in the UK, France, Spain, Poland, Russia, Romania, Turkey and China, introduced Net Positive, which aims to create a business that benefits the environment and the communities in which it operates.
Hennes & Mauritz, the Swedish fashion retailer, recently launched a sustainable fashion collection, Conscious Exclusive. This includes items made of organic leather and silk, and from sustainable sources, while garments carry Clevercare labels that provide cleaning instructions that are environmentally friendly.
Meanwhile, Unilever, the world’s second-largest food producer by sales, recently issued a £250m “green bond” to finance environmentally friendly projects.
“It is working both ways. There is a bit of push and a bit of shove,” says Mr Copestake. “Companies are very keen to do this to differentiate themselves from competitors. That implies there is demand for it.”
Kingfisher’s UK-based DIY chain B&Q recently introduced a range of sustainable bedding plants easyGrow, which are grown in peat-free compost and come in a recyclable tray. Not only is the product more sustainable, but the plants should be healthier.
“That is the holy grail, says Sarah Greenaway, senior brand manager at B&Q.
But Mr Copestake says that while consumers say they want sustainable products, since the global economic downturn they have been less willing to pay for them. Consumers, particularly in the grocery sector, remain very focused on price.
“There is no price premium on having a greener product. [Consumers] expect it as the norm now,” says Mr Barry.
Richard Gillies, Kingfisher’s group sustainability director, says: “The majority of people do care, but most fall into the ‘make it easy for me’ camp, who say: ‘I do care, but I don’t really want to pay more for it, and I don’t really want the performance of the product to be compromised as a result.’
“[Consumers say]: ‘I still want a great price, I still want a great product, I still want it to work, but it would be really great if it could do the sustainability bit for me.’”
The exception is if there is an additional benefit to the sustainable product for which customers are prepared to pay more.
For example, in France, Kingfisher has introduced a kitchen worktop made from the company’s own waste. It is slightly more expensive than ordinary worktops but is lighter and more water-resistant, so customers are getting a benefit.
But Mr Copestake says: “Companies are walking a very fine line. They recognise consumers want this, but they recognise there is continued price sensitivity. You don’t see Aldi and Lidl coming out with sustainability initiatives, but their market share is increasing.
“At the end of the day, consumers are still much more price-oriented.”
Green profits: M&S’s Plan A pays off
Marks and Spencer, the UK retailer, has been a leader in sustainability – and it is making a profit from being green.
In 2006, Sir Stuart Rose, then M&S chief executive, launched Plan A, which made 100 environmental commitments. He decided the company needed to go beyond traditional corporate social responsibility, in which M&S had a rich heritage.
Environmental issues were coming to the fore, while customers were becoming sceptical about the claims big businesses were making.
To stay one step ahead of customer demands, Sir Stuart believed M&S should become a green business.
Plan A – since extended to 180 commitments – produced a net benefit to M&S of £135m in the 2012-13 financial year.
Rather than being specifically about labelling, M&S’s approach is for each of its products to have at least one sustainable or ethical attribute.
This could be the use of cotton from the Better Cotton Initiative or the use of Fairtrade, recycled or organic materials.
In 2012-13, some 45 per cent of M&S products had a Plan A attribute.
Mike Barry, M&S director of sustainable business, says consumers can be put off by too much information on labels and don’t want “PhD labelling at point of sale”.
There are some labels that customers are comfortable with, such as Fairtrade. All M&S’s tea and coffee is Fairtrade, while it has led the way on Fairtrade green beans from Kenya.
But highlighting environmental issues surrounding palm oil, for example, might be too much for customers at the point of sale.
In contrast, in some areas customers are willing for M&S to promote sustainability, such as its “Shwopping” campaign.
Fronted by actress Joanna Lumley, the initiative urges the 21m customers passing through M&S’s doors each week to swap old clothes for new using Oxfam donation bins in its shops.
“We have a conscious [approach of] not trying to shrink everything down to an eco-label,” says Mr Barry.
While Plan A has produced savings on energy and packaging, it has had other less easily measurable benefits, such as a motivated, contented workforce and high levels of trust in the M&S brand. “The label [customers] are buying is the M&S label,” says Mr Barry.
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