More Demand for
Sustainable Products
Preference for sustainable products works its way back up the value chain

Demand

Consumers are becoming more aware of the environmental challenges, and are also starting to realize that they can reduce their ‘footprint’ by choosing one product over another. When it comes to attitudes towards sustainability, consumers can be segmented into four categories, based on whether 1) they care about the environment, 2) they know about environmental challenges and how to act to make a difference, and 3) they actually take action, e.g. by buying sustainable alternatives or actively reducing energy consumption.

Green customer segmentation

The Committed care strongly about the environment and are prepared to pay more for sustainable products. In most countries, this segment amounts to 10-15% of consumers, and is growing. The Conflicted and Confused categories of consumers want more information on the environmental impact of products, and will be inclined to buy the more sustainable alternative if quality and price are comparable. The Cynical are unlikely to be persuaded by the environmental merits of a product.

Preference for more sustainable products among end consumers works its way back up the value chain. Driven by changing consumer preferences, many B2B customers are trying to improve their environmental performance, and turn to their suppliers for assistance. Usually, the first step is to request information from suppliers on greenhouse gas emissions and other environmental impacts, to understand and report the total footprint of its products. A well-known example is Walmart’s sustainability index, an initiative aimed at assessing the sustainability performance of its 100,000 suppliers. This example has been followed by various other companies, including Proctor & Gamble and Ford.

The next step is to include sustainability performance as one of the criteria in supplier selection. A good example in the Netherlands is the CO2 performance ladder ('CO2 prestatieladder'), a ranking system for suppliers in the construction industry. A higher score on the CO2 performance ladder improves the chance of success in tender processes. In a similar vein, governments also realize that they can use their substantial spending power to reduce environmental impact, and are developing sustainability criteria that will benefit ‘clean’ suppliers.

To successfully respond to the trend towards sustainability, companies have to:

  • Measure the environmental impact of their products, and be ready to provide consumers and B2B customers with this information, either proactively or reactively
  • Adapt the product portfolio by redesigning products and improving the environmental performance of production processes