Influencing Sustainable Change in the Transition to a Regenerative Business Model

“Made from recycled materials,” “100% vegan,” “sustainably sourced”—these claims have taken over social media ads in today’s scroll-and-swipe e-commerce climate, which is primarily designed to increase click-through rates and sales conversions. Data generated between February 2019 and February 2020 and analyzed by the fashion shopping platform Lyst shows that searches for sustainability-related keywords increased by 37% year-over-year, while searches for “upcycled fashion” grew by 42%.

How can consumers authenticate these sustainability claims? In 2021, the Changing Markets Foundation determined that about 60% of the statements made by high street fashion brands including H&M, Asos and M&S were “unsubstantiated or misleading.” According to its study, “H&M’s Conscious Collection not only uses more synthetic materials than its main collection, but also one in five of the items were found to be made entirely of synthetic materials derived from fossil fuels.”

In 2022, the Impakter Index published a sustainability report indicating that H&M had certainly reacted and taken measures, including pledging to become fully transparent about its environmental impact in 2023 by publishing a list of suppliers and disclosing the impact of each product. It remains to be seen how effective these measures will be and whether management follows through on their commitments—and how such companies can regain trust at a time when consumers are more than willing to vote with their wallets.

Most consumers are concerned about how their purchases may affect the environment, and they are getting better educated, says Angela Hultberg, Kearney’s Global Sustainability Director. Brands can no longer justify a green premium if they’re only doing the bare minimum. “Consumers are assuming and expecting that whatever they buy is not hazardous to the planet. If I buy detergent, I’m assuming it’s not killing fish. If I buy clothes, I’m assuming there was no child labor used. So, you don’t get to charge extra for just doing what many consumers think is the bare minimum. It is not a unique selling point,” she says.

If you ask consumers if they want to shop more sustainably or live a more sustainable life, they’ll most likely say yes. “But they’re also quite conscious of convenience and price,” Hultberg says. “At the end of the day, the conscious consumer is here to stay, and they will multiply, but they’re not a majority yet. To some extent, convenience and costs will prevail for most consumers today. But it is quickly changing, so I think if you want to stay relevant, you probably don’t want to react to that after the fact.”

Why consumer behavior matters

To be successful and sustainable in a changing world, businesses need to be regenerative, developing solutions for systemic challenges. However, consumer behavior has always been very hard to shift. A 2020 Kearney study revealed that 78% of consumers believed companies could be doing more to help them make decisions that improve environmental outcomes. At a time when greenwashing claims have made huge dents in many large businesses’ bottom lines, organizations are being held accountable as 40% of consumers remain skeptical of corporate green claims.

Consumers play a critical role in a circular economy as they drive demand for products and services. By adopting circular consumption behaviors, consumers can help reduce waste, conserve resources and minimize their environmental impact. Every year, consumers claim that sustainability influences their purchasing decisions. However, their buying habits frequently contradict their intentions for sustainability. Kearney Consumer Institute’s research calls this phenomenon the “consumer aspiration gap,”—the discrepancy between consumers’ claimed ambitions to make more environmentally friendly purchases and their actual actions. This research uncovered a need for businesses to reframe how they approach consumers and sustainability, and the “say-do” gap.

Regenerative business models can help resolve this gap by changing the relationship between a consumer and the products it uses, where the focus on sustainability becomes a new determinant of value in consumer’s eyes, on a par with price and product characteristics. “Getting this right will move mainstream consumers towards more sustainable choices while strengthening brand loyalty in the process,” says Katie Thomas, Lead of Kearney Consumer Institute.

“There’s a lot of harsh language around the fact that consumers are ‘demanding sustainability.’ Companies then feel the pressure to do something they deem sustainable, for which consumers may not be willing to pay more,” says Katie Thomas, Lead of Kearney Consumer Institute. “We put the onus on the consumer to either have to pay more for sustainable products or to be inconvenienced to recycle it—to sacrifice some quality or functionality. That’s not really what they’re asking for. We have to learn how to work with them, as we think about helping them be more sustainable.”

“Forced choice”: Is it right for your business?

While Thomas and Hultberg suggest that consumers need to change their mindset and behavior regarding consumption to fully embrace a circular economy, proponents of “forced choice” suggest that making sustainable options the onlyoption may make the shift to circularity smoother.

“A lot of companies start by just trying to make their existing products with slightly more recyclable materials, which may cost brands a bit more. They then try to pass that cost to the consumer. When consumers aren’t willing to pay more for these products, these brands assume that consumers don’t want to be sustainable. It’s so much more complex than that,” Thomas explains. “It's hard to think about eliminating products that are on the market. We are very habitual people. Consumer behavior doesn’t change easily, so you do have to be really thoughtful in your approach of how to start to remove those bad choices.”

One example of using forced choice as a marketing tactic was global food company Kraft’s 2016 move to change its iconic mac-and-cheese recipe. In addition to removing all artificial preservatives, the company replaced artificial dyes with a combination of paprika, annatto and turmeric—but the company didn’t market the product as “new and improved” or “healthy.” It simply switched out the products and updated the ingredients label, and as a result, sold over 50 million boxes during the year of its launch with barely anyone noticing, in what the company calls “the largest blind taste test ever.”

“It's an interesting example because it tries to avoid consumer backlash and complaints that the new healthier alternative tastes different, when it probably doesn’t really,” Hultberg observes.

Forced choice can be controversial, but Thomas and Hultberg believe it helps consumers and brands align on purpose and values in the long term. “Part of the issue with all of this is we’re all so paralyzed with all the decisions and choices we have to make on any given day,” says Thomas. “Sustainability is a challenge because there are just some families where all they can worry about is putting food on the table. It goes back to the basics in many ways. Brands need to ask, ‘How do we make things as easy as possible for people? What are the right options and ways we can help them be more sustainable and help the greater good, and help them feel like they’re really having an impact over time?’”

In 2011, Swedish furniture retailer IKEA decided to phase out sales of all lightbulbs other than LEDs in a decision that CEO Jesper Brodin called a “leap of faith.” In an interview on Bloomberg TV, he explained that the energy-efficient bulbs cost around £17 each at the time, compared with less than £1 today; “When the decision was made, it looked really bad from a business perspective.” IKEA’s early adoption of the technology turned out to be an “amazing business opportunity,” according to Brodin, and one that took less sustainable alternatives out of the buying equation entirely.

“The worst thing in the world would be if sustainable products became only for the chosen elite to show how good a person they are. That’s the nightmare—to have that being a privilege to be able to live a sustainable life,” says Hultberg. “Sustainability and cost reduction actually go hand-in-hand. I think for companies, it’s also a matter of assigning a cost to inaction. What’s the true overall value of sustainability, and what’s the cost of not changing your approach? Then, make your business case and see how that comes out.”