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How to beat the consumer trust gap for a greener wallet and world

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10 minute read 14 Jul 2023
Related topics
Generational Dynamics

EY survey highlights lack of consumer trust and perceived affordability in sustainability as challenges to advancing sustainability success.

In brief
  • Widespread adoption of green products and services has been slowed by a perceived lack of convenience and higher costs, which gives companies and consumers pause.
  • A growing lack of trust in the US is causing consumers to seek proof of a company’s claimed “good deeds."
  • Companies that demonstrate effort and progress in sustainability efforts can authentically win consumer confidence, which creates brand trust over time. 

Many US consumers are increasingly seeking to buy products and offerings that are sourced sustainably. In fact, a recent survey by Ernst & Young LLP (EY US) found that more than half of all consumers said they want to purchase goods and services from businesses that align with their own values. This sentiment tracked even higher among high-income (74%), millennial (65%) and Gen Z (58%) consumers.

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On the surface this seems like an easy ask: understand what the consumer wants and find a way to deliver against it. But anyone who has spent time leading in retail or consumer products organizations — attempting to deliver against consumers’ elevated expectations — will tell you it is no easy task. EY research found two critical gaps causing a barrier between desire and action. The first is a struggle with perceived affordability on both the part of consumers and businesses, particularly the small to medium-sized businesses surveyed in this study. Second is a growing lack of trust in the US, with consumers seeking proof of a company’s claimed “good deeds.” While the business challenges are real, so are the potential risks of waiting until it is too late to act. Letting others lead and trying to catch up will cost far more. Additionally, there is opportunity in the gap. Businesses can gain competitive advantage by understanding consumers’ emerging and latent unmet needs and finding innovative ways to meet them.

While most businesses surveyed say they lack the resources needed to engage in a comprehensive effort to overcome the lack of trust, it is certainly possible to take steps to improve consumer understanding of businesses’ sustainability initiatives. This starts with a thorough understanding of where businesses are falling short with consumers. To help, EY US conducted a survey of 5,000 consumers and 400 businesses in summer 2022 to inform business leaders of how they can better meet consumer expectations. All the businesses surveyed were considered small to medium-sized and employed fewer than 1,500 employees, with nearly half employing fewer than 100 people and most in business between six and 15 years. The majority also reported selling a mix of virtual and physical products or services. 

Key takeaways from the survey include:

  1. Given the perceived higher costs, buying sustainable products is viewed as a privilege for affluent consumers and the businesses that serve that market.
  2. Moving beyond the industrial revolution will require tremendous effort, commitment and capital.
  3. Reaching mass consumer adoption will be difficult without systemic shifts to reduce barriers to purchasing sustainable goods and services.

While many larger companies are already taking steps to provide more sustainable products to consumers, it’s now time for smaller businesses to take a more proactive role in engaging consumers with their brand and sustainability values.

Sustainable purchasing is a privilege

Cost remains a barrier to wider adoption of sustainable products for many consumers. While many say they feel personally responsible for making the world a more socially and environmentally sustainable place, their ability to act on that desire is limited to those with more means to pay.

Three-quarters, or 76%, of high-income consumers say they care about purchasing goods from businesses that align with their values. And 74% prefer to shop with companies that align with their values around environmental and social issues. And while still high, this number drops significantly when lower-income groups are included. Among lower-income consumers — those families earning less than $100,000 per year — 54% responded that they care about buying from businesses that fit with their values, while 53% of the same group make purchases based on sustainability considerations.

Trust also represents a barrier to sustainable purchasing. While the majority of affluent, urban and millennial consumers say they trust businesses to do what they say, companies face a significant gap in reaching both lower-income and rural consumers. While 68% of high-income respondents say they trust companies to keep their word, only 33% of lower-income consumers do. And 31% of rural consumers say they would not trust a company to keep its word. New strategies and tactics are required to reach these lower-income and rural consumers.

Consumer trust in companies
of consumers tend to have more trust for companies that publicly share long-term sustainability and corporate social responsibility goals

How EY can help

When it comes to trust, however, businesses have some quick-turn options that could resonate with consumers. More than half, or 52%, of all consumers said they tend to have more trust for companies that publicly share long-term sustainability and corporate social responsibility goals. Consumers surveyed said the places they turn to most often for information on a company’s values include people they know, the company’s website, product page and product packaging. This means that companies that share their sustainability goals on a macro and micro level, along with the progress they have made toward achieving them, have a strong opportunity to improve their brand in this space with consumers.

 

Half of the consumers surveyed also said they struggled with the availability and convenience of finding products and services that align with their values. Businesses can counter this by providing greater transparency on how their products are sourced and distributed.

 

Affordability of sustainable production remains a business challenge

 

The fossil fuels that powered the industrial revolution and, by extension, modern capitalism, won’t be around in another century. Climate scientists, governments and most businesses recognize that society needs to adopt green, renewable sources of energy to build a more sustainable future. But the widespread adoption of green energy has been slowed by a perceived lack of convenience and higher costs that give both companies and consumers pause.

 

In the survey, businesses cited affordability as the most significant barrier to offering more environmentally friendly products, with some 40% saying the cost of capital was a key difficulty in adopting sustainable business values and associated practices. To recoup the cost of sustainable production, 46% of all small to medium-sized businesses surveyed said they would increase the sales volume of all products; and another 43% said they would increase sales price over all products to cover the cost of shifting to more sustainable production. This will only continue to exacerbate the cost barrier for consumers.

 

While most consumers, especially high-income, millennial and Gen Z consumers, said they care about buying sustainable products, they also cited transparency and affordability as major barriers. Consumers noted they would typically make sustainable purchases only if those goods first meet their practical expectations of low price and high quality. In fact, 35% of consumers state that they buy ethical and sustainable products because they believe those products offer better quality. At the same time, one-third said that they tend to buy products they consider ethical or sustainable because of good price points.

 

Echoing consumers, affordability and transparency remain major barriers for businesses seeking to engage in sustainable practices. And despite the obstacles, companies are making the effort to change. Some 46% of the businesses surveyed said they are engaging or would engage in sustainability and value-driven efforts because it improves the world we live in and results in better customer trust. At the same time, only 19% said they would consider absorbing the cost of sustainable shipping options. There is still much work to be done, and financial institutions have a unique role to play in supporting small to medium-sized businesses get access to the capital needed to support their transition to sustainability, without needing to pass the cost onto customers.

 

Building credibility through consumer education and measurement

 

The lack of affordability for consumers, along with the reality that businesses would prefer not to pass their costs along, presents a major conundrum for businesses and consumers. While an increasing number of businesses recognize that offering high-quality sustainable products helps them build trust with consumers in certain segments, they also need additional systemic support and tools to make the transition to more sustainable products.

 

In the survey, businesses said they would support several steps to improve their outreach to consumers, especially by improving consumer access to sustainability-related knowledge. For example, when presented with the concept of a hypothetical platform that would help businesses adopt better sustainability practices, businesses were most interested in features that can educate consumers about the impact of sustainable practices to help businesses better target efforts to the right consumers.

 

Businesses are eager to better understand and learn more about their own sustainability impact as well. Some 61% of businesses surveyed said they would be willing to pay for a third party to publicly quantify their business’s sustainability impact, especially if it provided the ability to embed the impact score into product pages on their website.

 

Consumers are also seeking knowledge about their personal sustainability footprint, with the survey finding that more than 50% would like to understand the overall environmental impact of their purchases. This aligns with 57% of small to medium-sized businesses who state they would be willing to pay for a dashboard that could provide an overall impact score using third-party metrics.

 

Key action items for businesses

Individual contributions of one business or one consumer to overall sustainability goals might seem futile or relatively small, but collectively consumers and businesses, through their commitments, actions and the right partnerships, can make a huge difference in helping the US – and the world – lower overall climate impact and credibly fight climate change.

Summary 

Affordability and lack of consumer trust are barriers to advancing sustainability success. But businesses can gain competitive advantage by understanding consumers’ needs and finding innovative ways to meet them.

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Related topics
Generational Dynamics

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