Climate change vs consumer expectations
Source: https://www.tehrantimes.com/news/475265/The-key-role-of-nature-based-solutions-in-adapting-to-climate
Environmental degradation has recently become one of the most concerning challenges that humans face, due to pollution and emissions from manufacturers and factories deriving from the growing demand for consumerism. Therefore, customers advocate and place more emphasis on protecting the environment. This means that consumers will prioritize brands that meet this demand for implementing effective sustainable practices, encouraging companies to come up with environmentally friendly measures to meet this rising requirement, including strategies to capture loyal customers. We will take a look at how these approaches affect the sustainability practices of firms and their market dynamics. (Dahlhoff, 2022)
Transparency is key
Since climate change has been the main driving factor for consumption for recent decades, brands have competed to include environmental protection measures in their operations, spanning from supply chain, manufacturing, and material outsourcing. Not only do these firms incorporate these environmentally friendly approaches, but they also market them on social media, and websites and publish annual green reports. The move is to increase transparency of information. Customers these days like to identify themselves with the environmental and ethical values of “green” companies, thus pushing their sales and brand loyalty. (Chhatwal, 2023)
Be careful of unethical rivalry
As discussed, consumers will prioritize brands that put sustainability at the core of their day-to-day operations. These buyers will become loyal and consistently purchase from those brands as long as these firms stay ahead in the “green” competition and are transparent and committed to their sustainable intention. These customers will spread positive feedback and recommendations to their social circle, significantly improving the brand’s reputation. The market shares gained from these customers tend to be solid and last long-term. However, due to the rising customer expectations and the potential profits earned from moving to a climate-friendly production, it may encourage unhealthy motives. The term “greenwashing” refers to brands that exaggerate and often make up their efforts toward protecting the environment. This will erode the confidence that consumers put in the brand in the first place if they find out the misleading sustainability claims. (Scheeringa, n.d.)
Market dynamics
Most brands seek to differentiate their products from others by taking sustainability into account. Each company has its approach to solving environmental issues and creating a signature identity on the market, thus improving its competitiveness. For instance, consumers are always ready to pay a large premium for eco-friendly items because they perceive it as a “fair” value for their enhanced quality. (BusinessDasher, 2022)
Ultimately, it is a virtuous cycle. By incorporating sustainability initiatives, companies can increase customer retention rates. As a result, they can expand market shares, reaching a wider audience and increasing profitability. The new revenue gained can be used to fund other sustainable plans. The cycle creates long-term and sustainable growth for the economy if every firm applies the same principle and consumers are driven to purchase these “green” products.
References
BusinessDasher. (2022). 29+ Business Sustainability Statistics Must Know in 2024. [online] Available at: https://www.businessdasher.com/business-sustainability-statistics/ [Accessed 1 Aug. 2024].
Chhatwal, G. (2023). From Obscurity to Clarity: How Transparency Revolutionizes Sustainability Reporting. [online] Kadence. Available at: https://kadence.com/en-us/from-obscurity-to-clarity-how-transparency-revolutionizes-sustainability-reporting/ [Accessed 28 Jul. 2024].
Dahlhoff, D. (2022). Changes in Consumers’ Habits Related to Climate Change May Require New Marketing and Business Models. [online] The Conference Board. Available at: https://www.conference-board.org/topics/consumers-attitudes-sustainability/changes-in-consumer-habits-related-to-climate-change [Accessed 27 Jul. 2024].
Scheeringa, D. (n.d.). The Influence of Rivalry on Sustainable decision-making in the Supply chain: Exploring the Role of Psychological Factors. [online] Available at: https://essay.utwente.nl/96880/1/Scheeringa_BA_BMS.pdf [Accessed 1 Aug. 2024].