Bridgepoint | The Point | May 2020 | Issue 37
Viewpoint
Hidden virtues
In today’s world, most stakeholders would expect businesses of every hue to highlight their environmental credentials. But the truth is rather different.
Consumers and investors often suspect companies of overstating their ecological merits – a process known as greenwashing. But a growing number of companies have been doing the very opposite, choosing to hide their ecological achievements from customers. “We see car makers who use recycled materials without telling customers, winemakers who have gone organic and refused to put this on their labels, clothing companies that massively cut water usage and omit this fact from their marketing,” explains professor Steve Evans, director of research at the University of Cambridge’s Institute for Manufacturing. “Sustainability on the sly is far more prevalent than most people suspect.”
Companies have differing reasons for this false modesty. For business to business firms, a degree of sustainability is valued by customers, since many are under pressure to disclose the ecological impact of their full supply chain. However, you can have too much of a good thing, argues Evans. “For business to business, when a supplier goes above and beyond in sustainability, the customer tend to assume that somebody is paying for this ecological zeal – and it’s probably them,” he says. The implicit mental model is that sustainability only comes with a price. As a result, companies want a level playing field among their suppliers rather than standout performance. “At best, big sustainability improvements send a signal that the full focus of management is not being placed on cost and quality,” Evans adds.
Under the radar
He says there is another reason business to business firms might refrain from placing too much stress on large efficiency savings: “If a supplier finds a really cheap way of producing something that reduces material costs by, say, 10 per cent or more, the buyer may well say, ‘I’ll take 80 per cent of your saving.’” The bottom line is that quite a lot of ecological innovations from business to business companies fly under the radar.
The logic for consumer-facing businesses is equally counter-intuitive. “Our experience suggests that many consumers see a trade-off between being green versus price, quality and performance,” says Steve Hope, general manager of environmental affairs and corporate citizenship at Toyota Motor Europe. “We found some car companies in the late 1990s and 2000s made a big deal to consumers about using recycled materials and got a lot of kickback. The customer response was that I’m paying for a premium product and so I deserve the best quality, which means virgin materials rather than inferior recycled stuff.”
Consumers see a trade-off between being green versus price, quality, and performance
Top performance
Partly based on such insights, Toyota today tends not to highlight where it uses recycled materials. More generally, it adopts a coy approach to what experts consider a pretty stellar ecological record. Industry data shows that compared with the industry average for Europe, the Toyota production process uses 48 per cent of the amount of energy to make a car, 47 per cent less water and 61 per cent less waste overall. In total, that results in a 62 per cent reduction in CO2 emissions.
Hope attributes this focus on cutting waste to Toyota’s origins and the post-war period of austerity, when materials and energy were scarce and efficiency was essential. Yet while Toyota is eager to highlight these achievements to investors and employees, this is not a focus of marketing to consumers.
“Most consumers don’t want a car that screams eco-warrior and they are not terribly concerned with the details of how the car is produced. Instead, they focus on the way in which it performs for them,” says Hope. “Investors care because they want companies to stay one step ahead of government regulation and keep risks low. Employees care because they want to work for a company that is socially positive. But an ecological focus in marketing to consumers can backfire.”
A range of other mainstream consumer brands have reached a similar conclusion about green marketing. Nike’s FlyKnit line of trainers, for example, is produced with recycled polyethylene terephthalate (PET) materials, which cuts down on waste by around a third compared with traditional sports shoes. Despite this, the company has chosen not to use green cues for consumers, focusing instead purely on the shoes’ sports performance.
Perceived deficiencies
Along similar lines, outdoor clothing maker Patagonia uses drinks bottles and recycled fabric in its fleece products and jackets, without trumpeting this to consumers. Even Procter & Gamble, widely admired among business academics for its savvy marketing, generally avoids overt green labelling, despite signing a five-year agreement to buy recycled material for its Ariel laundry product range – with the goal of using 50 per cent recycled material bottles in Europe by the end of the year. In a recent statement, the firm said: “We don’t talk much about the sustainability behind our brands,” adding that it would rather focus “on the white of your laundry, the comfort of your family”.
The wisdom of this approach for mainstream consumer brands is backed up by an increasing volume of academic marketing research. One study found that 41 per cent of consumers believed green or environmentally friendly products are less effective than regular products. Similar results were revealed in Double Standard: The Role of Environmental Consciousness in Green Product Usage, a report by academics Ying-Ching Lin and Chiu-chi Angela Chang. They found that consumers tend to use more of a “green” product – such as detergent – to compensate for its perceived deficiencies.
When a supplier goes above and beyond in sustainability, businesses tend to assume that somebody is paying for this ecological zeal – and it’s probably them
Green cues hamper sales
And more recently, business professors Stacy Wood, Stefanie Robinson and Morgan Poor conducted a survey of 565 consumers to determine their choice between three pesticide brands and whether an ecologically friendly label – in this case an earth image – would sway the decision. While around two-thirds of the participants said they prioritised environmental friendliness in buying decisions, the results suggested otherwise. When participants were shown standard packaging, or one with a safety cue, the choice share was similar at 43.6 and 43.4 per cent. But when the package had a green cue label, the choice share dropped to 33 per cent.
“Our research showed that for mainstream brands, customers may perceive being green with lower performance,” says Robinson. The study also cites a real-world example to support the conclusion. The Clorox Company, which makes cleaning products, launched a Green Works line of natural products in 2008, only to suffer declining sales. By 2012, Clorox revamped its branding to remove the green cues, stressing instead the effectiveness of the products.
This does not mean that companies cannot tap the green consumer. But to take full advantage of green sentiment among consumers, Robinson suggests that companies need to go “all in” and develop ecologically focused niche brands. “Niche green brands may be seen as more authentically able to focus on environmental friendliness and thus to be the better option when green motives are salient for consumers,” her report concludes.
Shifting attitudes
This approach is epitomised by brands such as Ben & Jerry’s, which has been associated with ecological causes since it was founded in 1978. Originally a homespun outfit, Ben & Jerry’s was acquired by Unilever in 2000, but the Anglo-Dutch conglomerate pledged to carry on the ice-cream maker’s tradition of engaging with social and ecological issues. The brand managed to lose none of its lustre following the takeover and has become the top-ranked ice-cream brand in the US, with about $680 million of sales for the year to November 2019.
Investors care because they want companies to stay one step ahead of government regulation and keep risks low. Employees care because they want to work for a company that is socially positive. But an ecological focus in marketing to consumers can backfire
Nascent trend
More broadly, there are signs that consumer attitudes may be shifting. Recent marketing of the Fiat 500 highlighted the use of recovered marine plastics for the car’s seat covers. “Consumer attitudes are not set in stone, and there is sign of movement from some consumer segments,” says Hope at Toyota. The move among some consumers away from ownership towards renting may contribute to this nascent trend, he argues. “If you are renting a car, or using a car-sharing scheme, you’re less concerned at having what you see as premium plastics or leather,” he adds. “It is conceivable that green marketing will become more beneficial for mainstream brands over the coming years.”
Evans hopes that this will be the case. “It is great that more companies are making innovations that reduce emissions and waste – even if they don’t make a song and dance about it in their marketing,” he says. “The downside is that this kind of secret sustainability does nothing to challenge the still pervasive view among consumers and businesses that being eco-friendly comes at a cost – either in terms of price or effectiveness. The more companies that give the lie to this notion, the better.” n