The modern-day Canadian consumer’s concern for the environment has steadily increased over the past decade, pushing companies to not only comply with high ethical standards and show that their products and services take a sustainable approach, but also going far beyond simple “greenwashing”. A report released last week by the Business Development Bank of Canada (BDC), coinciding with Small Business Week, showed that statistically over half of global consumers take “green” factors into account when making purchasing decisions.
Image: BDC
With info on unethical business and sourcing practices being readily available, consumers influence companies to adopt more responsible practices with their purchasing habits. Closer to six in 10 Canadians consider themselves ethical consumers, and in a 2011 study, approximately three-quarters of consumers claimed they would pay more for products from socially responsible companies with ethical production practices, such as child-free labour. With surprising numbers, the BDC report continues that three in 10 would pay a 15% premium for ethically fabricated products, and three out of five would pay 5% or more. Two-thirds of Canadian consumers also claimed to have “made an effort” to buy local or Canadian-made products in the past year.
This environmental and social awareness has predictably had on impact on trends such as buying locally sourced products,
Daily Eco-Friendly Actions
Most consumers already integrate environmentally conscious decisions into their daily routines, and increasing numbers want to know more about the direct environmental impact of their purchases. One in four Americans say they already systematically take steps to make their homes or lifestyles greener, such as recycling, weatherproofing their homes, using eco-friendly products or driving energy-efficient vehicles, with only a very small minority saying that they never do so. Similarly, and according to a 2011 survey, Canadians, arguably due to widespread municipal policies, have become the biggest recycling advocates in the world, with nearly nine out of 10 citizens stating that they recycle at home.
Environmental considerations drive purchasing decisions
In a recent independent survey, Ipsos asked consumers which features in food and beverage packaging they would be most willing to pay more for. In Canada, the top choices, in order, were features that are environmentally friendly, keep food fresh longer, permit packaging reuse, make the product easier to use, and prevent messes and spills. People around the world like ecological packaging, with consumers consistently selecting this option as one of the top two features they would be most likely to pay extra for.
Consumers want to buy locally and Canadian
The recent BDC-Ipsos survey also showed that buying locally and Canadian lets consumers translate concerns over the environment and social responsibility into action. Most consumers have decided to buy local produce for economic reasons: 97% of canadians do it to support the local economy, 96% do it to support local farmers and 93% do it to create local jobs, while 87% think it is better for the environment.
Not surprisingly, consumers tend to support their local food products. For instance, Albertans more frequently purchase local beef. Ontario residents support local wine. British Columbia and Ontario tend to buy locally grown fruits more often. Atlantic Canadians are most likely to buy local fish. And Quebec residents are most likely to purchase locally made cheese.
After recent international food safety incidents, consumer concerns about food safety in Canada edged higher. A great majority of Canadians consider food from Canada to be safer than food from abroad, and say they try to buy locally produced food. Furthermore, close to two out of three Canadian consumers believe that importing food from all over the world is bad for the environment.
Along those same lines, product labelling plays an even bigger roll in how consumers purchase, with “locally sourced” food labels taking top spot, followed by “organic” and natural”. The report noted that most Canadians also believe locally produced food is both fresher and tastier.
Public scrutiny of ethical and unethical practices is increasing
With a proliferation of information sources and social media outlets at our disposal, consumers have become far more aware of companies’ actions. Nearly one-third of consumers surveyed say that they have researched a company’s business, social or environmental practices in the past 12 months, and half have told friends or family about a company’s corporate responsibility efforts. Unethical business practices can quickly come to light, spreading like wild fire, and destroying the reputation of any business.
False and misleading environmental marketing claims fuel consumer scepticism
In an attempt to proactively protect their reputation against the prying eyes of the consumer, companies have increased in their usage of “greenwashing” or claims of environmentally sustainable products. In rebuttal however, consumers have becoming increasingly more sceptical of these same products. Though labelling has increased, and is widely considered to be via the honour system, trust in those same labels has declined in recent years. This is largely in part due to companies hijacking terms such as “green,” “natural,” “eco-friendly” or “organic” to profit from the rise in environmentally friendly product consumption.
Currently, only one-third or less of consumers believe the labels “natural,” “fair trade” or “free range.” Other labels – such as “biodegradable,” “non-toxic” or “low-voc” – are also now on consumers’ radar.
The impact of misleading consumers should not be underestimated. As reported in a 2013 survey, 90% of consumers stated they would stop buying products from a company if they learned it was using deceptive or irresponsible business practices, and over half claimed they had in fact stopped buying a product or service in the past 12 months because of such behaviour.
Consumers want result-driven policies, not mission statements
Consumers have gotten smarter – more educated. They are no longer satisfied with vague promises about environmental or ethical responsibility. Demands for tangible results are now made, and this means that companies must integrate socially and environmentally conscious behaviour into all of their functions.
More than four out of five consumers say they would be more likely to purchase a product from a company that reports results of its environmental and socially responsible policies than one that simply has a mission statement. Similarly, over nine in 10 canadian consumers want to hear about tangible Corporate Social Responsibility (CSR) efforts and results. Interestingly, one-quarter of Canadians want to see this information displayed on products’ packaging or labels. To be truly effective, however, communication should be integrated across multiple channels.
Although they want to hear about social responsibility, nearly three-quarters of Canadians feel confused when researching a company’s CSR activities. It seems that most companies are not adequately explaining, displaying or communicating their CSR actions. An effective CSR strategy should help consumers easily recognize the concrete actions a company has taken.
The same moral concerns that led coffee and chocolate companies to adopt fair trade practices in recent years are now affecting other industries. smes that support ethical and sustainable production practices – and highlight concrete results – will gain a competitive advantage and tap into an increasingly valuable market segment.
Strategies for SMEs
More than ever, consumers’ social and environmental consciousness is pushing companies to adopt and promote csr strategies. Small and Medium-sized Enterprises need to discuss their supply chain transparently, honestly and precisely, as well as showcase the local characteristics of their products. For the majority of Canadians, CSR is no longer a differentiator. It has become a prerequisite for all companies, whatever their size or scope.
Highlight the local characteristics of products
Even if their products are not made locally, SMEs can impress customers by emphasizing other local features of the value chain, such as research and development, or product design or assembly. SMEs should creatively highlight their local economic impact, such as jobs created, local partners involved in their processes – farmers, designers, etc – or the local impacts of a specific product purchase.
Incorporate the CSR strategy in the value chain and marketing efforts
To be truly effective, a company should integrate its CSR strategy throughout its value chain, not just into support activities, such as recycling. For example, it could use an ethical supply chain, make products sustainably, reduce the environmental impact of production processes and plan for end-of-life product management. These tactics would allow a business to make a credible statement based on measurable results rather than general CSR messages.
Communication with clients is crucial. Successful marketing efforts will focus on concrete results of CSR actions and target the broadest spectrum of consumers. Although a multi-channel approach is vital, some studies have shown that placing these messages directly on the product packaging is the most effective way to gain a customer’s attention.
Clearly demonstrate the ethical aspects of your supply chain
A fully integrated, socially and environmentally conscious supply chain has become a differentiating factor for SMEs. It is especially important in B2B relationships, as companies can gain a marketing advantage if they use ethical suppliers. It is equally important for SMEs to minimize the full environmental impact of each product’s lifecycle.
Reassess the relevance of labels and certifications
SMEs should carefully consider the use of certain labels and certifications. These labels can be prohibitively costly for SMEs and may not even generate the desired financial return, given consumers’ widespread mistrust of some of them.
SMEs that pursue this strategy should ensure their target clientele truly values the selected labels. In certain cases, the benefits of products can be communicated much more effectively (and affordably) by simply giving examples of the results of the company’s CSR actions. This transparent, fact-driven approach can create a similar or higher level of trust among consumers than traditional labels.
Stay locked to Vancity Buzz for our continued, week-long coverage of BDC Small Business Week, and the five consumer trends shaping the future of Canadian business.
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