As Inflation Rises, Fewer Will Pay More for Sustainability

As inflation reshuffles budgets, the nice-to-haves tend to land on the chopping block. And for about a third of U.S. consumers, that includes the sustainable products that cost a little bit more, according to a report from market research company Savanta. The report, which surveyed more than 12,000 adults from the U.S., U.K. and Canada between April 11-28, sorts shoppers into seven groups. It shows that despite a universal concern about cost of living, about one-quarter (24%) of respondents are still shopping exclusively with brands they perceive as "ethical" and committed to making a positive impact. "Economists generally refer to sustainable products as luxury goods, at least in a country like the U.S.," explained Dirk Mateer, economics professor at the University of Texas at Austin. "So you're going to cut back on those luxury purchases. There's just there's no other way around it that these are bad times for sustainable companies." Some of this is to be expected, economists told Adweek. But it doesn't mean brands should also cut sustainability initiatives or product lines. In the long run, those business practices are likely to pay off, experts said—especially as younger generations gain spending power. "It's easy to look at this report and say, 'Wow, people don't really care that much,'" Nikki Lavoie, evp of global experience strategy at Savanta, told Adweek. "But it's actually the reverse. It's the fact that times are so tough, and people are still willing to boycott brands or focus their entire shopping budget solely on sustainable brands—to me says a lot." Should Brands Be Allowed at the World's Biggest Climate Talks? Retrenching toward core customers As shoppers opt for cheaper alternatives, some companies will focus less on accessibility and more on their core consumer: that subset of dedicated, sustainability-minded shoppers who either have more money to spend or will prioritize the climate-friendly options. Sustainable brands "would definitely retrench" toward their core customer base, Mateer explained, sometimes making the category less accessible to lower-income shoppers. Savanta's segmentation plots consumers along a graph that aims to visualize the "say-do gap"—which highlights the difference between what consumers say they value and where they actually put their money—for brands to understand more about the core cohorts to focus their efforts on. When buying food and groceries, 62% of survey respondents reported that value for money is a top concern, alongside quality and low prices. In the “lifestyle” category, which includes tech, furniture, clothing and personal care, 76% of consumers buy from a variety of retailers to meet their needs—of which value ranks highest. About one-fourth (24%) buy exclusively from those they see as having a positive impact. At one end of the spectrum are the "committed changemakers" and the "empowered individualists," who are most likely to choose sustainable options in terms of lifestyle, energy use, transportation, money and labor, the report says. At the other end of the spectrum are the "defiantly disengaged"—the only group that really doesn't care at all about sustainable living. In the middle are the "progressive campaigners," "conscientious traditionalists," "sidelined strivers" and "cautious observers." Each of those groups cares about sustainable living but has different levels of constraints that can become barriers to action. The real trickle-down economy Even if the economic conditions of the moment mean sustainable products become less accessible to lower-income shoppers in the short term, that can still turn into overall progress in the long run. Luc Wathieu, marketing professor at Georgetown University, points to what Tesla has done for electric cars as an example of how demand for more sustainable products can be catalyzed by the rich and become more accessible as the category grows and develops. Consumers have been calling for a green revolution that has not materialized.Nicole Corbett, vp of thought leadership at NielsenIQ "It's interesting that we try to sell that 'sustainability advantage' to the rich as something that is [available] for those ones who can afford it," Wathieu explained. "There is some kind of elite concern for it, and that will trickle down. That's maybe the real trickle-down economy." Some of this can be seen in Savanta's report data: 87% of the committed changemakers, who tend to be more affluent, would consider or have already purchased an electric vehicle. Among cautious observers and sidelined strivers, who tend to have lower incomes, that stat is between 52% and 68%. A growing demand for sustainable products And despite the economic downturn, there's evidence that consumers' focus on sustainability continues to grow. NielsenIQ's 2023 Sustainability Report, out this week, shows that 42% of respondents consider the sustainability or environmentally friendly claims of a product to be "much more important" than two years ago. Another 27% see them as "a little more important." It also notes that while the economy may be tight now, we're only beginning to see the impacts of climate change. "Consumers have been calling for a green revolution that has not materialized," Nicole Corbett, vp of thought leadership at NielsenIQ, said in a statement. "Greenwashing and inaction from brands and retailers has left consumers with varying levels of trust in these parties to deliver." Laundry Pods and Sheets Are Exploding in Popularity. But Are They Safe? Younger people, in particular, report a higher concern for sustainability and climate issues. In Savanta's survey, climate change ranked as a top three concern among younger respondents, but behind cost-of-living and mental health. Notably, though, these younger consumers are the most likely (22%) to have participated in a boycott of a brand or product because of sustainability issues. "What we've seen in the last couple of years is a lot less brand loyalty, particularly among the younger generation—so the Gen Zs ... let's see what the alphas do when they've got their spending power," Lavoie said. "If you are not playing the sustainability game, pretty soon you're not even gonna be in the running," she added.

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