Sustainability Column | How much premium are consumers willing to pay for sustainable products?

Green Premium is a concept proposed by Bill Gates in his new book "Climate Economy and the Future of Mankind" advocating zero emissions, which refers to the additional cost paid by consumers to buy fuels or technologies that can reduce greenhouse gas emissions, which is usually positive, that is, the cost of zero-carbon emission products is higher than that of traditional products.

However, this is obviously contrary to the natural choice logic of consumers, and if the green premium cannot be thinned or even smoothed, it may be doomed to an elitist niche revolution.

A number of reports at home and abroad have tried to outline the price code of consumers based on their psychology and behavioral habits: how much are consumers willing to pay extra in order to participate in climate action?

The maximum value of the green premium also provides a terminal "lighthouse" for the progress path of carbon neutrality-related technologies.

10%

PwC's latest 2024 Consumer Voice Survey shows that while one-third (31%) of consumers see inflation as the number one risk in their country or region, more than four-fifths (80%) still say they are willing to spend an average of 9.7% more on sustainably produced or sourced goods, including those sourced locally, made from recycled or eco-friendly materials and produced in supply chains with a lower carbon footprint.

Nearly nine in ten (85%) said they had experienced first-hand the impact of devastating environmental climate change on their daily lives, so prioritizing consumption that integrates sustainability-focused practices.

The survey collected the views of more than 20,000 consumers from 31 countries and regions. Sabine Durand-Hayes, PwC France's Global Consumer Markets Leader, said that in the coming year, companies will have to strike a delicate balance between consumer affordability and environmental impact if they want to attract and retain consumers.

The report also shows that 46% of consumers say they are buying more sustainable products to reduce their environmental impact. Consumers said they took personal actions such as making more thoughtful purchases to reduce overall consumption (43%), eating different foods (32%), traveling less or differently (31%), or buying or planning to buy an electric vehicle (24%).

Consumers also tend to evaluate producers' sustainability practices through tangible attributes, including: production methods and recycling (40%), eco-friendly packaging (38%), and positive impact on nature and water conservation (34%).

Bain & Company also conducted a joint analysis and ethnographic study of 23,000 consumers around the world to understand a wide range of sustainability issues, including their concerns and purchasing behaviors. It was found that 50% of consumers said sustainability was one of their top four purchasing criteria, and global respondents said they were willing to pay an average premium of 12% to minimize their environmental impact.

It can be seen that from the perspective of consumers, a green premium of about 10% can be widely accepted. However, the survey also found that companies charge an average premium of up to 28% for more sustainable products, well above what consumers are willing to pay, with nearly half of consumers in developed markets and more than a third in fast-growing markets saying the cost of sustainable living is too high.

Emerging markets are on the rise

Contrary to popular belief, the report shows that Asian consumers, especially in emerging countries, are becoming increasingly sensitive to environmental issues.

A report commissioned by Alibaba from British consulting firm Yonder Consulting shows that consumers have a deep-rooted desire to take action to protect the planet. Nearly three-quarters (73%) of a sample of more than 14,000 consumers surveyed in Europe, the Middle East and Asia said they want to adopt a more sustainable lifestyle. In emerging Asia, the share rises to 87 percent.

In the regions surveyed, Asians showed the greatest motivation and interest in finding information to make their consumption patterns more sustainable. Consumers in the Philippines (93%) and Indonesia (91%) are the most likely to welcome more information about sustainability. More than anywhere else, people in emerging markets in Asia are eager to know how to shop more sustainably online (88% in Europe vs. 66% in Europe).

While the majority of consumers in almost every market are concerned about environmental sustainability, consumers in fast-growing markets also appear to be more concerned than in developed countries, such as 85% in India, 81% in Brazil, and 73% in China, expressing very or extreme concern, compared to 53% in the US, 54% in Germany, and 56% in the UK.

Through questionnaire surveys and experimental studies in China, it is also found that environmental awareness is the leading factor of green purchasing behavior under the given macro reality (such as production technology, natural resource endowment, culture, industrial structure, climate change, etc.), which significantly affects consumers' green and low-carbon consumption behavior, and the degree of influence continues to strengthen over time.

Wang Mingxi, a professor at the University of Foreign Trade and Economics and Business, believes that the proposal and promotion of the dual carbon goal has strengthened the public's awareness of green and low-carbon environmental protection, reshaped people's consumption values, and promoted carbon footprint to become an important measurement indicator for consumers' purchase decisions.

The trap of greenwashing

However, the barriers to consumers buying more sustainable products are the same in Europe and Asia, with greenwashing being a major problem. Some 38% of consumers globally question the credibility of brands that market sustainable products, with 56% of Thais, 48% of French and 47% of Singaporeans skeptical of the true motives of such companies, arguing that a company's environmental claims are another way to justify selling more expensive products.

Pricing is also another area where Asia and Europe find common ground. For 45% of consumers globally, sustainable products are too expensive. It's hard to be a more responsible consumer when everyday products are so expensive – it's a common view all over the world.

Thirty-three percent of consumers in this large sample show that it would be easier to make choices that would be in line with protecting the planet if sustainable products were more affordable. The current cost of sustainable sourcing is still too high for 84% of Thais, as are 41% of respondents in the United Arab Emirates and 37% of Spaniards.

Another factor influencing consumers' ability to purchase more sustainable products is the inability to discern which products are more sustainable despite relying on labelling and certification, the report reveals. For example, when asked to determine which of the two products produces more carbon emissions, about 75% of consumers are unable to make the right choice.

There is also a disconnect between sustainability definitions and standards between consumers and businesses, with most companies focusing on how products are made, such as the sustainability of ingredients and production methods, but about half of consumers are concerned about how products are used sustainably, with more emphasis on aspects such as reusability, durability and waste minimization.

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