Tough climate: can businesses be green and fight inflation?

Consumers are finding it harder to shop ethically as inflation surges – companies must adapt to stay relevant


Promoted by GfK

Sustainability is a growing priority for millions of consumers around the world, but as inflation surges and the cost of living crisis intensifies, shoppers are finding it increasingly hard to be as ethical as they’d like.

According to research by GfK, some 80% of consumers globally say that sustainability remains important to them. Yet more than 30% of Europeans say they will put their own economic security and wellbeing before environmental problems this year, with that rising to over 40% in the US and 50% in developing Asia.

This is forcing fast-moving consumer goods companies (FMCG) and tech and durables businesses to rethink their operating models – from the design of their products to the way they engage with customers and stakeholders. Both sectors are major carbon emitters and the lifecycle environmental impact of their products is significant. Consumers expect them to take action no matter what the economic climate is like.

FMCG companies have been responsive when it comes to embracing sustainable business practices, from cutting back on single-use plastics to using more sustainable materials in their products. It’s paid off, with the global eco-consumer market now worth $800bn each year – a huge rise from a decade ago and a figure projected to increase to $1tn in 2030. The tech and durables sector has been slower off the mark but ‘eco-active’ revenue is still expected to exceed $700bn in 2030.

Rethinking green business models

These firms must continue to develop their sustainability agendas as shopping habits change, says Jutta Langer, vice president consulting at GfK. “During the pandemic, many consumers had more time to think about their consumption habits and the spare cash to spend on ethical goods. Now, we are seeing a higher cost consciousness when it comes to these products,” she says.

Customers are still buying green, Lenneke Schils, global insights director at GfK, adds, but many premium lifestyle brands in FMCG are losing market share as shoppers move to more affordable store own-label ranges.

“What sustainable looks like is also changing,” Langer adds. “It is becoming less about ‘cleaning up’ and more about ‘saving’, be that using less energy or water, reducing wasteful consumption or recycling more. The trend is not new but is being turbocharged by the cost of living crisis.”

Companies are already changing their practices. Appliance manufacturers are making products easier to repair or refurbish to prolong their lifespans. The trend of leasing as opposed to selling goods is also gathering pace, reflecting consumer desires to save money while cutting waste.

Brands like Bosch, BlueMovement, Decathlon and Ikea are just a few big names starting to adopt the rental model. Meanwhile in the FMCG sector, the success of the Too Good To Go app – which lets shops sell goods nearing their expiry dates at a discount – proves there is true consumer value in curbing food waste.

As household budgets are squeezed, companies might be tempted to hold back on product innovation, but that would be a mistake. FMCG and tech and durables companies should continue to take the lead, not wait for consumers or legal measures to force them.

That may make shopping slightly less convenient initially – as happened when New York State banned single-use plastic bags in shops, or the EU banned plastic straws – but consumers will ultimately adapt and respect the brand more for sticking to its principles. This is especially true when embedded in the right communications campaign.

Get your messaging right

The messaging around sustainability is, of course, key and companies will have to rethink their marketing as consumer trends change. Greenwashing – when a brand exaggerates its green credentials – is a growing problem as more companies adopt environmental policies under pressure from campaigners and shareholders.

According to GfK’s research, more than 60% of European shoppers distrust what companies tell them about their sustainability practices. When you consider that one in four has doubts about the proper functionality of green products, it seems this trust issue could become a real dealbreaker for brands.

“If companies are making a huge effort to change their business model and products and consumers don’t ‘buy it’, it’s a key challenge,” says Schils. “Trust is vital and transformational marketing will play a big role here.”

FMCG companies must use clear and compelling communication to help products stand out, empowering green consumers who want to find sustainable products. There’s also a need for better guidance and classification of products at the point of sale. Shopping involves thousands of small decisions and people don’t always have time to process what is printed on packaging or written in online product descriptions.

“One in four people globally have never even seen zero carbon labels on products, which is a huge shortfall,” says Schils. “Closing this implementation gap is key to keeping customers on board.”

A massive opportunity

It may seem like a tricky balance to strike, but companies have the market behind them. Last year, some 52% of shoppers globally said that sustainability had become more or much more important to them because of the pandemic. Meanwhile, consumers who prioritise environmental concerns when they shop accounted for 28% of the European population in 2021, up from 18% in 2019.

This year, the cost of living crisis will cause a – temporary – dent in this growth path, as shoppers are forced to deal with short-term worries. Putting ethical goods within the reach of many should be a key priority for companies and retailers alike. But in the longer term, the large-scale shift in consumer attitudes presents a huge opportunity for businesses bold enough to take it.

GfK provides key insights on global sustainability trends and factual behaviour change, enables effective consumer targeting and supports clients in their sustainable growth strategy. The organisation has found an observable disconnect between how consumers want to buy and how they actually buy.

Overcoming this gap will be key to capitalising on all that untapped potential, Langer says. “More than half of consumers globally could fall into the eco-active category by 2029. But only brands that understand how to remove the barriers to sustainable retail behaviour will capitalise on this huge growth,” she says.

“To do so they must increase the perceived value of sustainable products, ensure their effectiveness and use and compelling communication to create trust and to drive their message home.”

Want to learn more? Join GfK’s free webinar ‘Green ambitions, golden opportunities: Sustainability in times of instability’ on September 27th. Sign up today at gfk.com/fmcgsustainability


Promoted by GfK