The research finds that to capitalise on sustainability, retail and consumer goods businesses need to bring more sustainable products to the shelves at a lower or zero premium to standard items and/or to better justify the premiums that do exist.

 

Consumers have reached the point where they increasingly expect sustainable attributes to be an inherent part of the products and services they buy.

Today's consumers know even more, and care even more about what they buy, how it is made, what it is made from, how far it travels and how it is packaged.

 

The issue has become more acute as consumers are feeling economic pressure in food, fuel and utility prices and seeing increased volatility in global and local weather patterns. Awareness has also been influenced by the explosion of media coverage, with the number of articles on sustainability appearing in the mainstream national UK press increasing ten-fold over the past decade.

Consumers' buying decisions are reflecting their awareness. According to a PwC survey of 4000 consumers, Fairtrade food penetration has grown from 20% of shoppers 3 years ago to 50% now, and organic food buying has increased from 22% to 43%.

 

While purchase penetration across the population may have grown rapidly and the desire to buy more sustainable products clearly exists, the share of today's ethical or environmentally friendly products remains small. PwC estimates that these products accounted for less than 4% of total consumer expenditure on retail goods in 2007.

Mark Hudson, UK retail and consumer leader, PricewaterhouseCoopers LLP, explains more: "Sustainability is a now business imperative for retail and consumer goods companies. This is about securing business for the future. Unlocking the demand – and the willingness to pay a premium – will require innovation, improved communication, bold strategic moves and greater clarity.

"The best run companies will become the most sustainable, and ultimately the most successful. Those moving first and fastest are creating resilient models for the long term, changing the rules of the game and generating commercial advantage."

Price is the number one inhibitor preventing consumers from buying more products that are better for the planet or the people who make them, according to our research.

 

A comparison shop of 75 items at the top six UK grocers resulted in an average price premium of around 45% for environmentally and ethically friendly products.

 

Yet almost 50% of consumers are either unwilling or unable to pay the premium associated with more sustainable goods - respondents said they are only willing to pay a premium of around 20%.

Availability of alternative products is another key barrier, with 20% of consumers saying it is a key reason for not buying more sustainable goods. Nearly 60% of respondents buy less than they would like.

 

Sustainable alternatives do not currently exist for all product categories, particularly alternatives that address the issues consumers care most about – climate change and packaging.

 

PwC research indicates that 60% of basic grocery products have sustainable alternatives available in store, although this percentage decreases to 40% for some grocery sub-categories. In clothing and non-food, availability of alternatives is considerably lower. In some cases ranges with sustainable attributes do not extend much further than 'token' items.

Consumers want to make sustainable choices, but are hampered by unclear messages. Confusion, coupled with high prices, leads to a lack of trust among shoppers. Only 9%-16% said they trust retailers and consumer goods companies in the area of sustainability. Yet over 50% stated they trust Non-Governmental Organisations (NGOs), such as Greenpeace. Nearly 20% of consumers say they are confused about the social and environmental trade-offs of their purchases.

At the same time consumers are looking to retailers for action and information. More than 6 in 10 think that reducing the amount of packaging on products is the most important action retailers or consumer goods companies could take to help the environment.

 

Nearly 40% think retailers should stop providing plastic bags and 24% feel they should encourage people to waste less and recycle more.

 

Consumers make it clear they are unlikely to tolerate unethical or environmentally unfriendly products: 79% of consumers feel it is the company's responsibility to remove environmentally damaging products from their offers.

The price premium for sustainable products is likely to come down. Environmental sustainability should not come at a premium. The cost savings associated with well-managed carbon, packaging, resource and waste reduction strategies means these attributes can be added to mainstream products, whilst reducing the retail price.

 

This turns the perception of sustainable products on its head, and as consumer understanding of this develops, expectations will change. Consumer goods companies and retailers will need to ensure their products take on these environmentally sustainable attributes or be superseded by others that do.

 

Consumers are now at the point where they increasingly expect sustainable attributes to be an inherent part of the products and services they buy. The best companies are investigating which technology investments can reduce their cost and regulatory exposure.

Erica Hauver, Leader of PricewaterhouseCoopers sustainability and climate change practice, concluded: "The emerging combination of consumer empowerment and awareness, pressure on resources and government action are set to transform the retail and consumer environment. The drive for sustainability is a game changing trend - companies who do not invest and act at an early stage will have to play catch up.

"The greatest opportunity lies in using sustainability as a route to defendable competitive advantage, differentiation, brand value, customer loyalty and higher top-line and margin growth in an increasingly commoditised environment. The leaders are making interventions that have consequences for us all."