As the recession takes hold, the focus has moved from the ethical agenda to managing costs. But have shoppers really stopped caring? Charlotte Hardie investigates, and asks whether retailers can afford to drop this issue.
For the first time in its short history, the growth of ethical consumerism has hit a stumbling block.
Ask anyone on the street about their number one concern at the moment and you can pretty much guarantee their answer. More than likely, it will be about their job security or making ends meet. For most it is not going to be the environment.
For years, the green agenda’s popularity with consumers has grown apace, and retailers have responded accordingly with grand plans to boost their CSR credentials. But as the recession deepens, discussions abound about whether people really do still care about green issues and whether retailers are losing their focus.
While consumers may say truthfully they do still care about the environment, caring is not the same as spending. Sales of products – or indeed at entire companies, such as the organic vegetable box schemes – that require people to spend more will undoubtedly suffer. As PricewaterhouseCoopers director for sustainability and climate change Teresa Fabian says: “Even pre-credit crunch, people stated price was the biggest barrier to buying green or ethical products. Consumers are tightening their belts and those products that are a significant premium will be
Retail Week investigated consumer opinion in its ICM poll this week (see box opposite) and findings were far from encouraging. More than half of respondents said that at the moment, green and ethical considerations are of little or no importance when deciding which products they buy. The reasons they gave were largely financial – 70 per cent said the biggest problem with choosing these products is that they are too expensive. Moreover, only 7 per cent
said they currently rate the environment as a priority in their lives – nearly three quarters said either the
cost of living or unemployment was their most pressing concern.
Widespread preoccupation with personal finances at the expense of ethical products is reflected in retail sales across the sector. At the beginning of October, it emerged that sales of Tesco’s Finest and Organics ranges had stopped growing as shoppers rein in their spending. Chief executive Sir Terry Leahy said that while customers still wanted to buy the products,
“they don’t feel they can with the economic pressures”.
Only 33 per cent of people they are willing to pay more for ethically produced clothing and footwear, according to a TNS survey of 7,000 consumers. TNS Worldpanel Fashion research manager Elaine Giles says: “This survey is very attitudinal. People will say green and environmental issues are important, particularly because there has been so much publicity about them, but fewer will actually buy ethically produced fashion goods.”
Stephen Phillips, managing director of Spring Research, which analyses consumer decision-making, agrees. “We have always found – apart from a dedicated few – that green and environmental issues are a nice-to-have when feeling good. Clearly things aren’t feeling good and we expect these issues to fall away,” he says.
Green by default
But although many consumers are far more preoccupied by immediate worries such as losing their job and the falling value of their property than they are with doing their bit to save the planet, they are also becoming more environmentally friendly by default, because going green can save them cash.
Co-operative Group ethical policies manager Barry Clavin says: “In a time of economic prosperity it has been difficult to engage many consumers on the most basic of energy-efficiency measures. Two thirds of people still boil more water in the kettle than is needed.” But he believes an economic downturn could “refocus consumer minds and spark off the sustainability agenda in many unexpected ways”.
There is still significant scope to drive sales of environmentally friendly products. B&Q for one
is reaping the benefits. During October, the retailer sold enough loft insulation to insulate 46,000
homes. Marketing and customer proposition director Jo Kenrick says: “Products such as this are very
much capturing people’s attention as they try to save on fuel bills.”
Crucial to this is clear customer communication. Consumers need to be told exactly why products are environmentally friendly. Fabian says: “Retailers have to be clear about the benefits. There is confusion among shoppers about who is benefiting – is it the suppliers or the environment? What contribution is it making towards a better world?” And if they save customers money, retailers need to tell them explicitly.
As Tesco corporate and legal affairs director Lucy Neville-Rolfe pointed out at the IGD conference earlier this year: “Going green has to be affordable.” For that reason, Tesco is running offers on energy-saving light bulbs and awarding Clubcard points to shoppers who bring their own shopping bags. So while some of these green initiatives may require investment, the money it can save shoppers can help generate customer loyalty and, in turn, sales.
B&Q offers a personal calculator on its home page that enables shoppers to calculate their eco-footprint and carbon emissions. It also gives various pieces of green advice, including how to choose energy-efficient appliances. For its One Planet Home programme, the retailer has developed about 2,000 products that can help customers be more environmentally friendly, each of which has been verified by sustainability charity BioRegional. The benefits of each product are clearly explained on store signage and online.
Aside from the potential to boost sales in certain ranges, another reason why retailers cannot afford to relax the CSR agenda is the fact that it creates a vital means of differentiation from competitors. Phillips says: “We’re already seeing people less likely to think these issues are their responsibility and more likely to expect the Government or business to be their conscience for them,” he says.
As people feel less able – rightly or wrongly – to continue to be green when times are tough, they will look to others to do it for them. Those businesses that can do that are likely to remain more attractive to customers and talented employees.
In a report on trends in corporate responsibility released last month by CSR consultancy Salterbaxter, David Grayson, director at Cranfield University’s Doughty Centre for Corporate Responsibility, writes: “Of course, those companies that do not take their commitment seriously and have just paid lip service and treated it as a ‘launch, a lunch, and not a logo’ – a bolt-on to business operations and not built in to business purpose and strategy – these companies will probably peel off.”
He adds: “They will be no loss. On the contrary, it will sharpen the gap between the committed and the others.” For the committed, Grayson believes it will speed up the process of innovation and enable them to find more cost-effective and creative ways of improving sustainability.
Those who lose focus on the green agenda also run the risk of eroding consumer trust. If they suddenly try to pick it up again when the economic climate improves, they could lose all credibility. Home Retail Group head of corporate responsibility Rosi Watson says: “Green issues may be lower than before on [customers’] list of priorities but it will still be very damaging to our relationship with them if we don’t continue to deliver on our responsibilities.”
Fabian says that while retailers will certainly need to look at the costs related to present CSR strategies and scrutinise new investments, “it would be very dangerous grounds to pull out of commitments you have already made”.
In the more immediate term, maintaining a focus on the green agenda saves businesses money – an issue that is more pressing than it has ever been.
Morrisons, for instance, has reduced its energy usage by 25 per cent over two years through refrigeration improvements, satellite tracking and training people in energy saving. The grocer is setting long-term goals – an indication of its continued commitment to the CSR agenda. These targets include reducing its carbon footprint by 36 per cent by 2010 and reducing group energy use by 8 per cent per square metre by 2010 – based on 2005 commitments.
Good business sense
Morrisons marketing director Angus Maciver says that, broadly speaking, its customers don’t view the green agenda as a driver of choice. “For 50 per cent, it’s a background priority,” he says. However, he adds: “Where we’re really interested is where sustainability and advantage to the business come together. We’re looking to add value to Morrisons as well as value to the planet.” Kenrick agrees: “It is possible to find ways to be green that benefit consumers and businesses at the same time.”
Foreseeing the true effect of the recession on consumer attitudes towards green issues is difficult. As Clavin says: “It’s not a situation we’ve had to deal with before. In the last recession in the early 1990s, ethical consumerism as a market was wholly insignificant.”
But the concept of going green has gathered rapid pace in recent years and that won’t disappear overnight. As Watson says: “The credit crunch may have eclipsed climate change at the moment, but as a business we are still focusing on positioning ourselves for the long term.
Retailers’ CSR teams will be under increasing pressure from finance teams to prove their worth and for many, it would be easy to step away from it. But consumers want brands they can trust and those who hold their own will emerge stronger after this recession. For those who fail to stick to their principles, it could prove fatal.