Words: Natasha Burroughs
The Conduit’s Director of Business Development, Natasha Burroughs, examines the consumer motivations behind a rise in more conscious purchasing decisions and shares how brands, investors and governments can encourage the trend to become a permanent reality.
Electric vehicles. Meatless hamburgers. Zero-waste shops. Leather-free trainers.
We live in an age of unprecedented ‘conscious consumption’. Now more than ever, the need to protect our planet is influencing the way we shop, eat, travel, invest and even protest.
‘Consciousness’ is a growing trend that extends beyond wealthy individuals and the Western world. One of the most surprising findings in private banking group Julius Baer’s Global Wealth and Lifestyle report 2020 is that consumers in Asia and Latin America are the most likely to choose a product based on whether it is fair-trade labelled or environmentally friendly. This counterintuitive behaviour is worth further study, but one could argue that this is due to developing countries’ first-hand experience of climate change.
Galvanising green behaviour
As we enter the ‘decade of delivery’ to achieve the UN Sustainable Development Goals by 2030, a number of developments are driving consumers to engage in the economy with more awareness of how their behaviour impacts society and the environment.
Technology and social media have created greater interconnectedness, allowing ‘conscious consumption’ to bridge generational divides. Initially a millennial trend, it has now spread to ‘Alphas’ (children under 10), whose lives will be dominated by sustainability issues over the next 70 years; to Gen Z, who base career choices on purpose, not profit; and to baby boomers, whose investment decisions are influenced by their children’s demands for a better world.
We have witnessed a rise in consumers buying more ethical products but also signs of a microtrend towards people leading a more minimalist lifestyle. While total ethical spending in the UK has increased almost four-fold over the past 20 years (according to a report by retailer The Co-op) a small but potentially growing group of consumers are choosing to buy less. The reducetarian movement, founded relatively recently in 2015, advocates a reduction in meat intake, as well as consuming fewer dairy and egg products. In the fashion industry, the demand for second-hand and vintage clothing, clothes-sharing apps and rental services is on the rise. Big brands would do well to pay attention to this group of consumers wanting to combine newness with both sustainability and affordability.
Brands with purpose have proven they can grow into multi-billion-dollar companies, spurring greater innovation and consumer choice in the ethical and sustainable goods market. Last year, Beyond Meat became the first solely plant-based company to go public, launching one of the most successful IPOs in history. Granted, its shares have been volatile since the IPO but as of early February, they are now hovering around $116 per share, more than quadruple its IPO price. The company’s rise is indicative of the wider industry. Barclays analysts predict that the ‘meatless meat’ business could reach 140 billion dollars over the next decade, capturing about 10% of the 1.4 trillion global meat industry.
Turning conscious consumption mainstream
Despite the strong trends driving conscious consumption, how do we accelerate its transition from a potential temporary fad to mainstream behaviour at global scale? Of course, making sustainable products more affordable and accessible through disruptive technologies like AI remains key, but what other solutions can we consider?
1. Help investors allocate more capital to the green economy
There is money to be made in the transition to a low carbon economy. A 2019 report by Bloomberg New Energy Finance claims that renewables – solar, wind and batteries – will attract 10 trillion dollars of investment by 2050. The private wealth and banking industries in particular can play the part of ‘educators’, showcasing these alternative investment opportunities to clients and supporting them to look at impact deals that also reap healthy returns. It’s not just big green infrastructure projects that can benefit. By becoming more knowledgeable about cutting-edge impact technologies and innovations, advisors can also help direct more angel capital into promising social entrepreneurs. Looking to the ‘next generation’ and the changing nature of how inheritance is conceived, wealth managers will also need to consider new investment products and solutions to cater for a generation increasingly interested in purpose-led investment and philanthropy.
2. Make sustainability simple
Today’s language of sustainability is complex and confusing. We do not have agreed meanings for buzzwords such as ‘organic’, ‘plant-based’ or ‘fair trade’, nor a standardised way of measuring our individual or companies’ carbon footprints. There are some notable examples of trust marks to steer consumers in the right direction, such as B Corp, a private certification issued to for-profit companies by B Lab, a global non-profit organisation. Certified B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose. However, these only cover a small proportion of companies across various sectors. A wider, all-encompassing toolkit could be developed to help consumers navigate ‘conscious consumption’ in a more holistic way.
3. Establish clearer ESG methodology
For investors and asset managers, the tools to assess and inform responsible investment are equally opaque. Let’s look at Environmental, Social and Governance (ESG). There is no doubt that ESG has become an increasingly important part of good investment management in recent years. Analysing how corporations respond to climate change, run their supply chains and manage natural resources such as energy and water are critical for financial valuation. The emergence of the UN-backed Principles for Responsible Investment (PRI), a thriving global initiative representing 70 trillion dollars of assets under management, is further advancing the integration of ESG into analysis and decision-making through better guidance and tools. However, the fact remains that we still need a global consensus on ESG methodology to support investors and wealth managers to drive wider adoption of impact investment.
4. Educate employees on the climate crisis
While many firms have comprehensive corporate responsibility strategies or compelling sustainable products and services, these are toothless without a strong employee engagement programme on climate. Companies need to immerse teams across all business functions in the science so that they understand the latest thinking. Not only will this help staff converse with stakeholders with gravitas and authority, it will also help to drive sustainable purchasing and investment decisions. Evidence suggests an ostensible commitment to leading with purpose will also support employee loyalty, motivation and retention. Some companies are going one step further by actively seeking out millennials to join their boards and inject new ways of thinking that inspire more responsible business strategies.
5. Foster green innovation through legislation
Legislative action can have a gigantic effect, even when focused on the most inconspicuous instruments. In 2007, California became the first US state to phase out the use of incandescent light bulbs by 2018. The move triggered a US-wide bulb revolution; over the past decade, the shift to energy-efficient lighting has driven down electricity demand in American homes, saving consumers money and cutting greenhouse gas emissions. New laws have allowed entrepreneurs to enter the lighting market at pace, boosting competition and driving cheaper, improved products for consumers. Clearly, government still has an important role to play in stimulating demand for sustainable goods and services.
6. Make ‘ethical’ a status symbol
Ultimately, government legislation needs to be coupled with consumer demand. If we want to inspire the ‘Alphas’ and Gen Z to buy sustainable products exclusively, big brands need to play their part and change their vocabulary. Companies’ global marketing strategies should elevate green goods to status symbols, associating ‘ethical’ with ‘luxury’ and ‘cool’. This is already happening across a range of disruptive brands including Allbirds, a company that uses merino wool, eucalyptus tree fibre and sugar cane to produce its shoes. They wouldn’t have been deemed the fastest growing sustainable shoe company in the world if they weren’t also chic.
Can ‘conscious consumption’ ever be truly sustainable?
While greater societal awareness and meaningful action by corporates, government and other stakeholders is critical, will it be enough to drive change at the speed and depth required to tackle the climate crisis? With natural resources depleting at a frightening rate, do we need to be more realistic and prepare consumers for a world of fewer choices, devoid of the everyday items we currently take for granted? It will be the collective responsibility of business, finance, government, consumers and entrepreneurs to think about the dual imperative of guaranteeing citizens around the world with basic human rights – food, water, safety, energy – and protecting our planet.
Rethinking consumption will require new paradigms for ‘essential items’, fair distribution of goods and services, new forms of collaboration, new financial products, new business models and new leaders across the private and public sectors with an appetite for radical change. Yes, the task may seem Herculean, but at a time of unprecedented human, technological and financial capital committed to finding sustainable solutions, there are reasons to remain optimistic.
For more information on trends in ‘conscious consumption’, read Julius Baer’s Global Wealth and Lifestyle report 2020.
For more information on how your company can partner with The Conduit to drive meaningful change, please contact firstname.lastname@example.org.