Millions of products have started to claim a variety of eco-friendly statements in the past decades, but does this have an effect on sales? A new survey produced by McKinsey and NielsenIQ examined sales growth for companies with sustainable practices, and claims that these statements do in fact have an effect on consumer demand. More than 60% of survey responses state that they would pay more money for a product with sustainable packaging, and 78% of US consumers state that sustainability is important to them in their lifestyles. Companies wanting to make these changes express the difficulty of generating enough consumer demand to make it worth-while. Research analyzing 600,000 product skews over a 5 year period (2017- June 2022) was conducted by the same group in order to analyze growth for products with sustainable labels vs. none. Four conclusions were made from the study.
- Consumers were trending towards purchasing more products with Environmental, societal and governance (ESG) related claims. Research showed a growth of 6.4% over the 5 years with ESG claims versus 4.7% growth from products without such claims. Overall when comparing products with ESG claims and those without, while some products trended down compared to their non-ESG counterparts, people of all age ranges and walks of life were buying products with ESG labels with an average plus/minus 15% standard deviation between demographic groups. This suggests that environmentally friendly products aren't as niche to a certain group as it may seem.
- Growth amongst different sized companies making ESG related claims were disproportionate. Smaller companies saw a 59% disproportionate growth while large private corporations saw 88% disproportionate growth. It is hypothesized that people may expect larger companies to make such statements and therefore does not impact their sales quite as much. Smaller companies may also have more credibility to their statements due to the nature of distrust in large organizations
- There is no ESG related product claim that produces better results than another, but less common claims produced larger effects. Companies that made claims such as “environmentally sustainable” only achieved a growth of 2% more than their peers without ESG claims. However, statements such as “carbon zero” or “vegan” saw an 8.5% growth over their non-ESG counterparts. This suggests that claims with a deeper connection to its consumers bared better results than generic terminology.
- The number of ESG related claims on one product increased the sales growth of the product. It is not suggested that companies can place many arbitrary claims on their packaging and expect growth. However, if these claims are backed by genuine impact, consumers correlate multiple statements as more authentic. Companies should be wary of greenwashing and not produce false claims.
Overall, trends towards products with ESG related claims have shown higher growth in recent years compared to products without them. This trend makes headway for the environmental movement in hopes to show companies that people won't always mind paying the extra buck for it to be produced sustainably. CIRT’s goal is not only to help consumers know how to be more environmentally sustainable, but also to help companies transition to more sustainable packaging. Studies like this show companies that consumers will support notions of sustainability, and with CIRT’s geospatial database companies can get an inside look at the recyclability of their products nationally.
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