The growing influence of sustainability on the global consumer market has led to a shift in behavior as consumers increasingly seek eco-friendly alternatives. Our most recent Global Sustainability Study examines regional differences in willingness to pay for sustainable options and their impact on the consumer goods sector.
The interest from global consumers in sustainability and eco-friendly alternatives is undeniable. Our most recent Global Sustainability study shows that approximately one-third (37 percent) of global respondents are willing to pay more for sustainable goods with associated premiums for eco-friendly alternatives between 24 percent to 37 percent on average. On the flipside, two-thirds (63 percent) of global consumers are not willing to pay more for environmentally friendly products and services.
Our research found that there is a negative correlation between the importance of sustainability and the average premium global consumers are willing to pay. For example, in categories that have the highest importance for sustainability in a consumer’s daily life – such as electricity, heating, groceries, and local transportation – the premium consumers are willing to pay is roughly between 22 percent to 27 percent compared to other categories where it is higher.
The reduction in willingness to pay for sustainability stems from a wider availability of sustainable alternatives. As businesses in a market introduce more options, there is heightened competition. As a result, consumers get more variety, and sustainability evolves to become the norm rather than the exception, reducing the green premium. Businesses that benefit from first-mover advantages will likely experience monetization potential eroding over time as sustainability becomes the expectation.
Willingness to pay across regions
Our study uncovered a notable dispersion in the willingness to pay for eco-friendly alternatives among consumers in the Asia-Pacific (APAC) region compared to Europe and North America. Consumers in the APAC region are significantly more inclined to pay a premium for eco-friendly alternatives when compared to European and North American consumers. Specifically, within consumer goods and services categories, APAC respondents are willing to pay approximately 55 percent more for sustainable options compared to 36 percent from North America and 32 percent from Europe.
Inflationary pressures on sustainability
Despite regional differences in willingness to pay for sustainable products, the adverse impact of inflation on consumer purchasing behavior is relatively consistent across the globe. As the price of goods and services rises, it negatively influences affordability and how much share of wallet consumers have for sustainable alternatives. Only 10 percent of APAC and North American respondents compared to 15 percent of European respondents cited that higher prices and inflation do not impact their decision-making regarding sustainable goods.
Utilizing circular business models
More and more, circular economies are opportunities for driving sustainability in certain categories. Circularity also provides monetization potential for businesses through secondary revenue streams that come from re-commerce and resale. For example, globally, 62 percent of Gen Z reported to have pre-owned furniture compared to 44 percent of Baby Boomers. There are limited differences by region for pre-owned furniture (APAC 58 percent, Europe 56 percent, North America 54 percent) which allows global companies to take a universal approach to circularity in furniture. However, for apparel, there is regional distribution in acceptance of secondhand items (APAC 53 percent, Europe 46 percent, North America 38 percent), which means that global apparel brands will need to take a differentiated approach region by region.
Your next move
Now is the time to engage in sustainability initiatives that also capture the regional differences when it comes to willingness to pay, inflationary effects, and acceptance of circularity models. Although it may seem overwhelming at first and achieving sustainability goals may appear to be challenging, the investment is worth it in the long run. Our experts can help you navigate this transition.
Join the growing number of businesses that are already working on their corporate sustainability and business goals. Your actions today will affect your long-term business prospects.
To learn more, watch our recent on-demand webinar ‘Growing with the sustainable future’.