Retail Corporate Responsibility

Retailers as Choice Editors
European Retail Digest - Oxford Institute of Retail Management
Issue 56 (Winter 2007-08) by Michael Sadowski and Frances Buckingham

Author's Note: Our first observation of this specific term ("Retailers as Choice Editors") came from a report from the UK Sustainable Development Unit.

Don’t Count on Consumers

As an organisation founded by people thinking and writing about green consumers – SustainAbility’s founders John Elkington and Julia Hailes wrote The Green Consumer Guide in 1988 – we would like nothing more than for consumers to take the lead on sustainability issues. However, while consumers are increasingly aware and interested in sustainability issues, we have yet to see this translate into buying habits amongst the majority of consumers – particularly when the more sustainable products currently carry a price premium.

A recent blog title from environmental pundit Joel Makower sums up the state of these surveys well: “News Flash: 110 percent of Consumers Shop Green!”. Consider the following survey findings:

• Nearly 90 percent of Americans say the words ‘conscious consumer’ describe them well, and are more likely to buy from companies that manufacture energy efficient products, promote health and safety benefits, support fair labour and trade practices, and commit to environmentally-friendly practices, according to the BBMG Conscious Consumer Report.
  
• According to a Cone survey, more than half of Americans (54 percent) say they would be willing to pay more for a holiday gift or product if it is environmentally responsible.
• An Edelman study of consumers in nine countries, including Brazil and China, found 70 percent are willing to pay more for a brand that supports a good cause, and 73 percent are willing to pay more for environmentally-friendly products.

These figures mirror those we have seen in a host of surveys across countries – that a majority of consumers care about how their products are produced and how companies behave, and that many are willing to pay more for sustainable goods. Certainly, consumers have translated their interest into action for certain products and services: The success of organic food in the US and fair trade products in the UK are evidence of demand for more sustainable products.

In our view, sustainable products have done well when they deliver on other customer needs in addition to sustainability needs, for example perceived health benefits for them (organic food) or status (Toyota Prius). They rarely do well without these additional benefits, and are more expensive than the non-sustainable option.

In general however, spending data and our personal observations do not support a broad consumer movement to buy sustainable good and services. Consider these data points:

• In a recent GlobeScan survey of sustainability experts, just 14 percent of these experts believe that the consumers in their countries were willing to make personal sacrifices so that the country can become more sustainable, while 51 percent of the experts believe that consumers are unwilling to do so.
  
• According to the 2007 Ethical Consumer Report, just six percent of the UK adult population shop for ethical products and services on a weekly basis, while 11 percent shop for such products and services on a monthly basis.
  
• Despite the heightened awareness in the UK about climate change, a survey by MORI Research found that only 10 percent of flyers were willing to add an extra USD 3 to an airline ticket to offset the carbon used during the trip.
  
• Wal-Mart’s “Live Better Index Report” reports that consumer uptake of green products is slow (e.g. the adoption of products such as compact fluorescent light bulbs, organic milk, reduced packaging detergent, and organic baby food) and is more in-line with surveys that show the committed group of consumers to be in the 20 percent range of all consumers.

241 Grams of What?

While the majority of consumers are not yet willing to pay more for sustainable products, the core group of ethical consumers face a growing number of sustainability criteria, which are meant to help but are coming to confuse their buying decisions.

Innocent Drinks, the UK-based smoothie company has partnered with Carbon Trust, a UK government organisation, and a university to calculate the carbon footprint of its business (which it admits is a big and complicated exercise), and in turn the emissions associated with each of its recipes (for example, a strawberry and banana smoothie accounts for 241 grams of carbon). It has added carbon labels to some of its products, and has taken steps to reduce its footprint. Other brands and retailers have embarked on a similar path. Walker’s worked with the same group to calculate the carbon footprint of a standard packet of Walkers Cheese & Onion Crisps (75 grams). Retailers are also undertaking similar exercises. Boots was one of the first companies to measure and report on the carbon footprint of one of its shampoo brands, and Tesco has announced an ambitious plan to carbon label each of its 70,000 products – an enormous challenge for the retailer, which sells a quarter of all groceries in the UK.

Consumer Understanding

We certainly see the value in such exercises and labels: Innocent’s measurement efforts have set the baseline from which it can take steps to reduce its carbon footprint, and Innocent reports that one step – using a 100 percent recycled plastic bottle – has trimmed the bottle’s footprint by 55 percent. However, we cannot yet see how consumers will digest such information and use it to influence their buying decisions based on three primary barriers to success.

First, carbon foot-printing (and life cycle assessment, the tool underlying such calculations) is an incredibly complicated exercise, one that can confuse even experts in the field. Indeed, the results of a carbon footprint calculation are entirely driven by assumptions (e.g. What was the energy mix of the processing plant? Did the consumer recycle the bottle?) that can dramatically change the answers. Organisations in the UK are working on a standard for the measurement of embodied carbon emissions, though the process remains complicated.

Second, while the general public’s awareness of climate change is on the rise, carbon labels will not mean much to a vast majority of people (including highly committed consumers) without greater information, context and interpretation.

For example, is 241g of carbon a lot or a little? How does this compare with an alternate food choice?

Third, consumers are now faced with a variety of sustainability criteria to ‘aid’ their buying decision. A recent trip to Whole Foods found the following labels: natural, organic, fair trade, locally grown, Whole Trade (TM), non-GMO, MSC certified, and Animal Compassionate. Even for the most discerning consumers, these labels can be confusing and seemingly contradictory.

A recent study of the environmental costs of buying roses shipped to England from Holland and of those exported (and shipped by air) from Kenya by the Natural Resources Department of Cranfield University demonstrates this complexity. The researchers examined the complete life-cycle of roses for sale in February, and found that the carbon footprint of the roses from Holland (where roses are mostly grown in heated greenhouses) had six times the footprint of those shipped from Kenya (despite the higher emissions from air shipment). The roses from Kenya also have the added benefit of contributing to sustainable livelihoods and economic development. Add sustainability criteria to the mix of existing product attributes (e.g. price and quality) and it is easy to see how consumers can be overwhelmed.

Retailers Take the Lead

In light of the heightened consumer awareness of sustainability issues (though not yet mass buying habits) and the array of complex choices facing consumers, we believe that retailers need to take the lead and act as ‘choice editors’, editing out unsustainable choices and putting more affordable sustainable choices on the shelves.

While consumers are not yet buying sustainable product en masse, the majority are coming to expect that retailers offer sustainable products as a normal course of business. Given the limited time and many distractions facing today’s consumers, they do not have time or capacity to absorb label information – they want to walk into a store, choose any product, and trust that the retailer has taken care of all the sustainability issues across the product’s value chain. They want the retailer to sift through the complexity and identify the most sustainable choices for them, and they do not want to pay a premium for these products. This trust is becoming part of the brand contract or promise, and consumer loyalty can be impaired when this contract is breached.

We see many examples of companies acting as choice editors. One oft-cited example is retailer B&Q, which moved in advance of consumer demand by committing to ‘edit out’ nonsustainable wood from its stock, thus helping to create a market for Forest Stewardship Council (FSC) wood. We also see Whole Foods and its Whole Trade (TM) programme, which takes a broader view on issues than standards such as organic or fair trade, and Marks & Spencer with its Look Behind the Label campaign and Plan A. The Coopin the UK has also begun to revise its product portfolio following a survey of over 100,000 members and customers, and is now banning the sale of eggs from caged hens, converting its entire own-brand hot beverage range to Fairtrade, reducing the weight of its wine packaging and adding dozens of additional pesticides to its prohibited list.

We also see many examples of companies where this contract has been breached. Indeed, a decade after its initial supply chain problems and sgnificant spending on compliance programmes, Nike is now widely considered a leader on sustainability issues – but it is still associated with poor labour practices. Indeed, in a recent mining of the Internet, including the blogosphere, Nielson BuzzMetrics compiled a brand association map that showed that consumers still associate Nike with sweatshops, perhaps even more so than with terms such as ‘sneakers’ and ‘Just Do It’.

Retailers must also take the lead because they sit at a position where they can greatly influence the performance of their supply chains and the habits of consumers. In the US, we see the enormous ripple effects of Wal-Mart’s recent sustainability initiatives: Suppliers (and their suppliers) are racing to keep up with Wal-Mart’s standards such as those it has imposed on packaging. On the other end, we also see the tremendous impact Wal-Mart could have if it is able to engage the mainstream consumer.

Ways Forward

Corporations are not typically at the top of the public’s list of most trustworthy institutions, so why should consumers place their trust in retailers? Consumers should be cautious in placing their trust, and retailers can take several steps to build this trust.

First, retailers need to gain a much more robust understanding of the value chain impacts of their products and services, and then take decisive and transparent steps to minimise these impacts. One of our favourite examples is a Marks & Spencer study of the life cycle environmental impacts of cotton apparel, in which they found that the vast majority of the garment’s energy and greenhouse gas burden (near 80 percent) lies in the consumer use phase (i.e. the washing and drying). While one might say this is outside of M&S control, this is also where the greatest energy reductions can be found. M&S has taken steps to reduce this burden – it develops clothes that can be washed at lower temperatures and encourages its customers to wash and dry clothes on lower temperatures. Similarly, this value chain thinking requires retailers to consider how their products will be used and disposed: It does little good to advertise the recyclability of a certain material in a city that does not recycle such a material. So, yes plastic bags are recyclable (which would reduce their burden relative to that of paper bags), but many cities do not have the ability to recycle them. This reality has pushed companies to stop offering (e.g. Whole Foods) or charge for (e.g. Marks & Spencers and Ikea) plastic bags.

Second, retailers need to be much more creative in telling their sustainability stories to consumers. After years of reading corporate responsibility reports and visiting the retail sites of our clients, we have found few companies that have effectively engaged consumers and told compelling stories. One example we like comes from Patagonia, whose Footprint Chronicles (TM) graphically allows the consumer to track the impact of five products from design to delivery. One reason for this could be the fact that most corporate responsibility information comes from corporate responsibility or communications teams, and not marketers. One major caveat to our belief that consumers have yet to turn sustainable en masse is that we have not seen many examples of major retailers putting significant marketing dollars to their green efforts. Marks & Spencer and its ‘Look Behind the Label’ campaign is a notable exception.

Lastly, we recommend that retailers engage external experts such as academics and nongovernmental organisations (NGOs). While such engagement can take many forms, from ad hoc conversations to formal advisory panels, the common thread is that this engagement brings expertise, diverse perspectives, insight into emerging issues, and credibility. For example, to explore how consumer information initiatives such as carbon labelling and recycling information will work, Tesco invested GBP25 million to establish the Sustainable Consumption Institute at the University of Manchester, while Unilever has committed to source its entire tea supply from sustainable sources, starting with certification of suppliers in Africa to Rainforest Alliance standards.

While a majority of consumers are not yet willing to spend more for sustainable products, consumer interest is rising, and they are coming to expect that retailers weed through the complexity and make the right choice for them. We believe that this is becoming part of the brand contract or promise, which retailers must treat as sacrosanct. To build and maintain consumer trust, retailers need to better understand the sustainable impacts across their value chains, communicate more effectively with consumers, and engage external experts. And they need to do this as the way they do business without expecting the consumers solely to drive the agenda.

Download Full Article (pdf)