EY Future Consumer Index: when talk turns into action, be set for change

Climate change is becoming a growing reality for people around the world, and disrupting ingrained consumption habits.

In brief

• Many consumers have already been forced to change how they live and what they buy because of the impact of climate change, according to EY global research.
• People are increasingly willing to pick sustainable products and to pay more for them, although this is still a growing minority view.
• Consumers are worried about the health of the planet and expect companies to show more leadership to reduce negative impact and increase positive impact.

We're living in a decade defined by change, uncertainty and instability, but also by resilience. Through the economic and geopolitical disruption that followed the global COVID-19 pandemic, people have shown time and again they have an extraordinary ability to adapt. The best companies have shown this too. Over the last few years, they’ve worked hard to stay relevant as consumer needs, behaviors and budgets have changed, and in many ways transformed.

By choice or necessity, consumption habits are changing

Consumer products companies and retailers can’t ignore the large percentages of consumers who are thinking about changing their lifestyles and consumption habits in response to climate change, which have now reached significant levels. Some consumers have already made changes out of necessity, and more are likely to follow.

For example, 42% are thinking of changing the food they eat because climate change has pushed up prices or limited availability, and 29% have been forced to make new choices already. The proportion that has already started to buy products that protect them from a changing climate is also high, at 25%. 

Awareness of climate impact is growing fast

While consumers say — understandably — that the state of their finances and the wider economy are front of mind, they’re increasingly worried about climate change.

Because of their financial concerns, they’re spending more time at home and 74% say they plan to buy less in future. For 73%, that’s an effort to save money, and 49% feel they don’t need those items anyway. But 39% are trying to buy less to help the environment.

Analysis of consumer conversations in English on social media shows growing discussion about weather and climate change, with significant peaks during summertime in the northern hemisphere. 

This greater awareness of the impact of climate change is influencing consumer priorities and driving new buying behaviors. Globally, consumers are feeling the impact on their wallets, but also on their mental and physical well-being.

Not surprisingly, the effect that climate change is having on them personally is reflected in what they perceive to be the most important sustainability issues to solve. Their priorities are combating climate change, good health and wellbeing for all and affordable clean energy. 

Different generations favor different responses

It’s often assumed that younger generations will drive a shift to more sustainable consumption, and the Index shows they are thinking about making dramatic changes in response to climate change. For example, 44% of consumers aged 18-42 (Gen Z and Millennials) have relocated or are thinking about relocating to an area with a milder climate and 58% have adapted or are thinking about adapting their homes.

But the Index also suggests people of every generation want to do something. When it comes to behaviors like using less plastic, recycling more or conserving water, it’s older consumers who are leading the way. Younger consumers are more focused on buying better quality, checking the sustainability of brands, and telling their friends what to buy.

Overall, consumers are planning to buy less and buy better. Many want to switch to products that align with their new values, priorities, and lifestyles and some will pay extra for that if necessary. This is especially true for younger consumers.

Quality and value for money remain the most important reasons for switching to a different product. But 44% say they will choose a more sustainable alternative if they can, and the percentage of consumers willing to pay a premium for sustainable products and services has steadily increased, from 24% in February 2022 to 32%.

Consumer products companies are responding by creating new products or reformulating existing ones to make them healthier and more sustainable, so they can protect their profitability and the brand experience. Here trust is a critical factor.

Over the last 18 months, the percentage of consumers who would pay more to buy a brand they trust has increased significantly. People are more informed now about what sustainability means and they have better access to information to assess whether a brand is living up to its promises. Younger consumers are far more active when it comes to checking what companies are doing and saying in this area.

Whether they get that information from the brand itself, from their friends, or from influencers on social media, it’s having an impact on their perceptions and choices. Nearly a third (31%) of Gen Z consumers, for example, have stopped buying from a brand or bought less from it because it wasn’t doing enough to help the environment.

Who will lead and who will follow?

The growing desire to live and consume more sustainably reflects people’s deeper worries about the environment. Sixty-seven percent say they’re concerned about the fragility of the planet, and only 34% say their government is taking enough action. But how committed are consumers to making a difference?

Many (59%) say they are interested in sustainability actions that save them money or don’t cost them anything. So, they will comply with government or corporate interventions designed to encourage sustainable behavior — like recycling initiatives — as long as these actions don’t require too much thought or effort.

While 56% believe consumers should be pushing companies to achieve better social and environmental outcomes, i.e., consumer pressure is needed to make change happen, 77% say it’s down to government and 73% say companies need to lead the change. Consumers want to see companies use of renewable energy and more efficient, or reduced, use of water.

There’s an important gap in expectations here, as separate EY research (CEO Outlook Pulse, July 2023) shows that 60% of consumer CEOs believe sustainability and ESG risks will impact their business performance over the next 12 months, but they are not able to prioritize the climate crisis over other risks. When it comes to allocating capital, most are giving sustainability the same level of priority as any other business initiative. Only 15% are dedicating substantial resources to sustainability initiatives, with 9% saying they are not a priority.

This might be understandable. In a difficult economic and geopolitical context, business leaders are focused on challenges that can feel more immediate, according to World Economic Forum research. This suggests CEOs are as worried about geopolitical conflict, market volatility, regulatory risk and technology risk as they are about sustainability.

But the climate challenge is unavoidable. That same WEF research shows business leaders expect climate change to be the most severe global risk over the next decade, followed by extreme weather and biodiversity loss. Moreover, they believe that in the second half of the decade the top five risks will all be related to climate change, environmental damage or biodiversity loss.

Other risks may pass, but sustainability will only grow as a priority

The disruptive impact of economic or political cycles comes and goes. But the impact and importance of climate change will only grow in prominence, especially as people feel the tangible impact of climate change and the regulatory need to mitigate it becomes more urgent. Here are some insights and imperatives to consider:

• Change the way you do business
  Companies planning for climate mitigation are doing so to prevent a future catastrophe, but change is happening now and it will impact the way you do business. From supply chain disruption to worker safety, the failure to take measures to adapt your business to the reality of climate change will cost more if you don’t invest now. Simply put, invest now or invest more later.
• Change what you sell
  Consumers are increasingly looking to products and services that can help them adapt to the changes they are seeing, from smaller things like sunscreen to bigger spending like flood and storm protection. Companies will need to think about which products will become more, or less, relevant as our environment changes.
• Adapt while you mitigate
  You can’t choose between adaption and mitigation but must manage both at the same time. Adapting for climate change while not seeking to mitigate it will only drive more need for adaptation and accelerate the pace of change. Companies must balance action to slow, or reverse, the pace of change alongside adapting to the impact of climate change.
• Be bold — look beyond tomorrow
  Playing it safe will not create long-term sustainable value. Companies that don’t make longer-term plans will be doing too little too late when the time for action becomes acute. But almost half (49%) of consumer products CEOs (from the July EY CEO Outlook Pulse) plan to optimize key parts of their business and operating model instead of implementing fundamental changes. Adapting to climate change will require leaders to pursue new ways of creating products and services to deliver value for consumers, stakeholders and investors. 

Special thanks to the following individuals who contributed greatly to the development of the EY Future Consumer Index – the survey, analysis and insights: Marie Bos, EY Global Consumer Senior Analyst;  Andreas Waelchli, EY Global Consumer Analyst; Rebecca Edwards, Global Consumer Marketing Leader.