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Sustainability redefines good business

Are customers willing to pay more for sustainable packaging?

Brands obsess over their ability to anticipate consumer needs, so the science of interpreting intentions is indispensable. But when it comes to sustainability, the calculations are not clear cut.

In this era of conscious consumerism, many of us might say we seek products or services that align with our attitudes. But there’s often a gap between what we say and what we are willing to do.

“The vast majority of consumers don’t want to compromise their habits. They do not want to compromise on the performance of products,” says Loukia Tzekaki, Corporate Communications & Sustainability Associate Director, Procter & Gamble (P&G) Europe. “They don’t want to change what they do if it means adding more complexity or paying more.

”Sustainable propositions that come with extra charges still appeal to only a very niche segment of consumers.

This behaviour can be partly explained by two factors: cost and communication.

Priced out?

New research commissioned by Smurfit Kappa and conducted by Longitude finds that nearly three-quarters (72%) of businesses say consumers are willing to pay more for brands with sustainable practices. Talk to consumers, however, and half (52%) say that cost is their main challenge when buying products that are regarded as more sustainable.

Could that discrepancy be down to how new sustainability is as a product differentiator? According to Arco Berkenbosch, Vice President of Innovation and Development at Smurfit Kappa, sustainability functions in the same way as any other new trend before it hits the mainstream. Many consumers aren’t pricing it in – yet.

“The question is often how much does the consumer want to pay for quality?” he says. “I think sustainability has to be seen in the same way – it will be linked to the value proposition. As with innovation, the early adopters are willing to pay a premium.

“We as a society determine what we mean by ‘standard’. That should apply here: what basic sustainability values do we think products or supply chains should have?”

Until that happens with sustainability, and it’s priced in by consumers, other factors will hold sway over buying decisions. According to the research, price is consumers’ most important factor when purchasing everyday items (65%), followed by quality of materials (62%) and convenience (55%). Sustainable packaging and product design is down in fourth place at 37%. And ask consumers about how to pay for sustainability, and four in 10 say brands are responsible for covering additional costs incurred as a result of making a product or service more sustainable.

Off message

None of this is helped by a lack of information. More than two-thirds of consumers (69%) say they find it hard to know which brands have adopted sustainability practices. A similar number (62%) say that brands have been poor at communicating their sustainability credentials.

This failure to tell customers about materials or environmental impact could be one of engagement not substance. “Consumers don't want to be overloaded with sustainability information,” says Tzekaki. “They want to be reassured about companies following the right environmental practices in a simple way.”

P&G is trying to meet that need by sharing information on its digital platforms and through its ‘in-pack’ augmented reality communication, which is enabled with digital watermarks.

Other brands have looked at ways to increase the transparency of their operations and processes. Multinational brewery and pub chain BrewDog, for example, open-sourced its brewing process, offering customers a stake in the company in return for used beer cans.

These kinds of commitments are powerful and have the potential to shape consumer decision-making. But the trade-offs on sustainability work both ways: for the gap to close between price and principle, consumers will have to consider changing lifelong habits.

Download the full report here

Free Research Report

Smurfit Kappa has worked with the Financial Times to conduct a piece of research to answer some of the most pressing sustainability questions. Find out how the sustainability effect is reshaping businesses for the better and explore new business must-haves.

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Sustainability Survey