Market News

 November 30, 2006
The Rising Power of Green Spending

 Vancouver, Canada (GLOBE-Net) -- Green spending is on the rise and is changing everything in our daily lives. Environmentally conscious and well informed consumers are driving the demand for sustainable products and services, and the power of their spending choices is changing not only the way companies operate, but also what they bring to the marketplace.

Canadians are more concerned about the state of the environment than they have been at any point in the last 15 years, according to a recent poll by Ipsos Reid. Concerns about climate change, air pollution, water quality, and what is being put into our food have changed public spending behaviour. The environment is now one of the top three issues in public polls -- surpassing even healthcare as a matter of concern.

This translates into a growing demand for more environmentally-friendly products. A 2005 survey conducted by POLLARA, one of Canada's largest marketing research firms, found 88 percent of Canadians would spend more for consumer electronics that were energy efficient, less wasteful, or made of recycled materials. Almost all respondents (96%) stated they prefer products that can be recycled or which are manufactured using environmentally conscious processes.

Consumers also want to know what went into the products they are buying, and where they will end up. Given the choice, many will select clothing produced using earth-friendly materials such as organic cotton and foods produced without the use of harmful pesticides that pollute waterways. Organic foods and 'green' household goods used to be considered niche products, but have now become staples in mainstream markets.

Ethical concerns, such as labour practices and community development, also factor into purchasing decisions. Consumers now turn over labels on clothes and other products to determine where a product was manufactured. Some consumer advocates go so far as to research the third-world practices of companies.

Awareness leading to action

Green consumerism began to pick up steam in the early 1990s, just when the term 'sustainable development' was gaining currency and global environmental issues moved to the front pages of newspapers around the world. The number of products made from recycled or recyclable content began to rise and 'organic' or 'natural' became buzzwords in local supermarkets.

Since then green consumerism has evolved, both in niche and mainstream markets. When given the choice, consumers will take environmental issues into account in making their purchasing decisions.

But buying green is more than purchasing environmentally friendly products. Green consumers are also concerned about the values these products represent. In effect, they are buying what went into the product and everything that will result from its use.

They are sensitive to ethical and social issues, such as the treatment of those who grow the food or make the product being offered. They are concerned about possible effects on the natural environment from the point of manufacture through to eventual disposal.

They ask questions like: Was this produced in a developing country using poorly paid labour? Were old growth forests destroyed to make this product? Will this end up in a landfill and poison nearby waterways? Is this energy efficient?

To respond to these issues, many firms have changed their products and are providing their customers with better information. Many companies have made this shift. Cotton Ginny has launched a line of organic cotton clothing; Home Depot provides a number of 'Eco Options' which are energy or water efficient or use sustainably certified wood products; Wal-Mart has undertaken a mission to bring environmentally-friendly products such as compact fluorescent light bulbs to the mainstream.

Shades of Green

Studies have shown that there are several levels to green consumerism. Some consumers will decide based on certain principles, such as buying recycled paper towels or biodegradable cleaners. They may not consider the environment when purchasing items such as clothing, appliances or a car. Others will go out of their way to make green choices in all areas, even paying a higher price if required.

While most people say they would prefer environmentally friendly products, this generally applies only when price, accessibility and attributes of the products are similar. When environmentally friendly products are more expensive, harder to find, or perceived as inferior, actual purchasing behaviour suggests that environmental concerns can be overlooked.

The availability of "believable" information on the environmental attributes of different products also influences consumer choices. The terms 'organic' or 'natural' have been adopted by product manufacturers. Unless there is a credible standard behind the terms, most consumers remain skeptical. Canada has no national standard for organic foods, and the certification of food products is guided by a variety of third-party organizations. The Canadian Food Inspection Agency has proposed a "Canada Organic" labelling standard, which could help improve consumer awareness.

Even so, while green products may be clearly identified as such, many consumers prefer buying brand names they recognize. Unless the manufacturer has decided to add environmental benefits to their marketing strategies, these may not be communicated to consumers even if present for fear of damaging brand loyalty. Certification marks such as the Government of Canada's EcoLogo help buyers know when they are making an ethical purchase. The rising number of such identifiers is another indication that the marketplace is undergoing a major transformation to meet the demands of green consumers.

Greening the Boardroom

An important but often overlooked aspect of green consumerism is corporate procurement. Increasingly, business managers and those in charge of procuring goods will evaluate products and services on their environmental attributes in addition to such considerations as cost.

Terra Choice Environmental Marketing, which administers the Government of Canada's EcoLogo environmental certification program, gauges corporate green purchasing attitudes in its annual EcoMarkets survey. The results show a surprisingly high desire among corporate procurers to buy green.

According to the survey:
  • Approximately 30% of professional purchasers are subject to green purchasing policies and/or programs;
  • More than 90% of professional purchasers consider environmental factors at least "some of the time;" and
  • More than 60% of purchasing professionals work for companies with sustainability policies.
Among those organizations that consider themselves environmentally-minded, human health effects is the most frequently cited environmental factor influencing purchasing decisions. Energy efficiency, climate change impacts, recyclability, recycled content, and water usage are also considered relevant.

Government procurers are also taking these factors into consideration, and the combined purchasing power of governments and corporations is a major driver in shifts in the marketplace. The ethical purchasing demonstrated by a growing number of these organizations is adding fuel to the fire caused by green consumers.

Room for growth

The 'green' marketplace is expanding rapidly but there is still much room for growth. Seventh Generation, the leading brand of non-toxic household products, holds over a ninety percent share of the green market for most of its biodegradable cleaning products. However, that translates into less than one percent of the overall cleaning products market, but the segment is expanding. Aided by the expansion of Whole Foods, Seventh Generation's sales are approaching $100 million and growing fast. The demand for organic foods, currently representing around 2.5 percent of the total food market, is outstripping available supply as more and more consumers are being influenced by environmental and health concerns. Consumers are using the power of their wallets to change the way food is being produced and marketed.

Similarly, the demand for environmentally friendly products and services is far from being fulfilled and that excess demand is motivating more companies to adapt their product lines to service this growing market.

Green consumers are changing the way products and services are marketed, and as this trend continues environmental and social concerns will become so embedded in the marketplace they will be part of every purchasing decision. The impacts of this green shift will be widespread, lowering the environmental impacts of many products and encouraging an entire generation of consumers to consider the ethical and environmental aspects of their purchasing decisions.