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Consumer research snapshot: Consumers shift dollars to CPGs with ESG-related claims

Higher-priced sustainable products can turn sustainability into a luxury for consumers forced to make tradeoffs between living sustainably and how they spend their limited budget.
Elizabeth Christenson
Editor, Retail Leader Pro
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When U.S. consumers were asked if they cared about purchasing environmentally and ethically sustainable products, more than 60% said they’d pay more for a product with sustainable packaging, according to a McKinsey survey. A study by NielsenIQ found that 78% of U.S. consumers said a sustainable lifestyle was important to them. Additionally, NielsenIQ reported younger consumers are still very concerned about sustainability, and their buying power will only continue to grow.

Despite consumers’ desires to make eco-friendly choices, does consumer demand exist for sustainable products? During the past five years, products making environmental, social and governance (ESG)-related claims, including terms such as cage free, vegan, eco-friendly and biodegradable, accounted for 56% of all growth — about 18% more than would have been expected given their standing at the beginning of the five-year period, NielsenIQ reports. Retail sales compound annual growth rate (CAGR) of ESG products was 6.4% from 2018 to 2022, McKinsey reported. In comparison, products that made no social or sustainability claims increased by a smaller 4.7% within the same time frame.

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Although consumers indicate they prefer purchasing sustainable products, they still face impediments in living up to their sustainability aspirations. Half of respondents to a May 2022 survey from MarketingCharts said that the cost of sustainable products prevented them from purchasing them.

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The Kearney Consumer Institute suggests the gap between what consumers say and do in regard to eco-purchasing is not unbridgeable. Retailers and brands often ask consumers to pay more for sustainable products or choose between more- and less-sustainable options. For consumers forced to make tradeoffs between living sustainably and how they spend their limited budgets, this can lead to guilt and frustration and turn sustainability into a luxury, Kearney said. As category assortment studies show, fewer, more-sustainable products could be good for inventory management, margins and increase sustainable product sales, Kearney said.