Consumers vs Corporations
In a rush? Key takeaways:
- A market led by consumer demand won’t shift quickly enough, and places responsibility back on the consumer.
- Everything boils down to unit economics, eventually.
- With mass production comes the opportunity for efficiency at scale.
- Products matter more than ever.
I discussed this on Twitter briefly a while ago, but I’m keen to dig into the interesting dynamics between consumption and production, consumers and corporations. Both parts of a complex system of environmental impact, and both pivotal players in our transition to a low carbon economy.
We have to acknowledge the role of consumers in this transition, both in terms of influence and consumption. Rising consumer expectations are making brands feel the heat, if you will. Nearly 1 in 3 consumers claim to have stopped purchasing certain goods or products because they had certain ethical or sustainability related concerns about them (Deloitte, 2021). However, market pressure and the risk of reputational damage is a strong (dis)incentive for businesses to go sustainable, and appears to place the responsibility back on consumers by default. Additionally, if the market is led solely by margins of consumer demand, will the shift to more sustainable production happen quick enough? Where consumers can change is their personal habits on transportation, home, diet and more. However, habits themselves heavily rely on what’s available and affordable. Deloitte found that whilst consumers are willing to take more responsibility, their number one ask is for better schemes to reduce plastic and packaging from businesses themselves (Deloitte, 2021).
Responsibility also rests on businesses. The impact of business decisions, most of which will never be visible to the consumer, are undeniable. I think it’s a fair point to raise that consumption changes sometimes seem futile, as 70% of the world’s greenhouse gas emissions can be traced back to 100 companies, according to CDP’s 2017 “Carbon Majors Report”. Additionally, research published this week by Tug reported that 67% of UK consumers plan to pay attention to the environmental efforts of retail brands during Black Friday, Cyber Monday and Christmas shopping (FashionUnited, 2021). Here, brands still have a responsibility — to avoid greenwashing. Consumers perceptions of any environmental efforts by retail brands relies heavily on the brands marketing and communications.
So, should businesses be empowering consumers, or should customer incentives and disincentives be driving low carbon business? Ultimately, there is rising expectation from both consumers and corporations that the other is responsible for how much waste ends up in landfill, for example.
Is it consumption driving production or production driving consumption?
Consumer goods businesses will still need to make products to make a profit. The question is how the process of making products can be done better.
It comes down to unit economics. We can’t shame or shy away from people making ‘bad’ product choices because it’s the less costly choice — consumers and corporate employees alike. Instead, we need to focus on the power of aggregating demand for better quality materials, for example. There needs to be a clear business case to invest in new innovative materials, which have a better impact than existing material choices. This relies on us being able to forecast, cost, compare and communicate impact of, for example, material choices within a company. Then, cost parity will be clear, production and investment can be shifted in a controlled and managed way, and resilience can be built into the business model. We still need to be priming the pump of these new technologies in advance, to get them into supply chains quicker. In my view, that’s where investors can leverage their power the most, but companies still have a role. As Bill Gates points out in How to Avoid a Climate Disaster, ‘Companies can use the fact that they buy a lot of products to speed up the adoption of new technologies’ (Gates, 2021). Burberry is a good example of an apparel company altering their product development methodology and investing in sustainable materials to create less impactful products, whilst also encouraging industry and consumer behaviour shifts at the same time (The Independent, 2018).
Fundamentally, it’s always got to work for the companies making the products. If it doesn’t, we lose the tool of mass production and any efficiency with scale that it brings. However, if we don’t do a good job of making big companies move quickly, then we lose this opportunity to create impact quickly, and at scale, too.
In summary, how businesses design products matters more than ever.
Have any thoughts? Let me know by leaving them below!
