Amy Lewis

Written by:

Amy Lewis

Associate Director

Going green goes mainstream: Opportunities (and challenges) lie ahead for ethical consumer businesses

  • June 2019
  • 5 minutes

Heading to my local high street this Saturday, canvas bag in-hand, I went about my weekly food shop at the local greengrocers and butchers, then on the way home made a stop at our newly opened re-fill store to buy some household items. When I got home, I uploaded my energy data with my new provider that only provides energy from renewable sources. 

As a keen traveller, I wouldn’t consider myself to be an ethical consumer. I am far in excess of the Green Party’s recommended one flight a year policy which formed a part of their recent European election campaign. This is of course just my story, but it highlights that ethical consumer decisions are no longer only being made by a niche group of customers.

Commercial and regulatory changes in the consumer landscape

We know from RSMs 2019 Consumer Survey that over a third of the 2,000 people surveyed believe that a company’s policies on single use plastics; their position on fair trade and stance on social issues are important when purchasing products or experiences. A recent YouGov article also published that, according to data by Morning Consult, 42 per cent of millennials base their purchasing decisions on a company’s ‘ethical and moral standards.’

Ethical trading has the might of the government behind it too. We’ve seen the government introduce disposable carrier bag charges resulting in usage at the seven largest supermarkets fall by 86 per cent since 2015. More recently headlines have been made by the governments ban on plastic straws, cotton-buds, and stirrers. 

As pressure on the government increases to act on climate change issues, and with the potential for a change in office on the horizon, what other new policies might we see? Perhaps there could be subsidies for clothing retailers using natural fabrics instead of plastic fibres, a tax on frequent flyers, or requirements for companies to do more to protect the rights of workers in their supply chain.

Adapting to a changing environment

The sustainable brand is no longer a standalone operator. With mounting pressures from both consumers and regulators the high street heavy-hitters are starting to react. H&M, are responding with sustainable clothing lines and are challenging the first two tiers of their supply chain to be carbon neutral by 2030; and Marks and Spencer introduced a line of vegan footwear earlier this year. The major supermarkets have also pledged to halve annual food waste by 2030 and have signed up to the UK Plastics Pact, which aims to tackle plastic waste.

However, large scale change within multi-national brands can take time and financial resource, so implementing significant changes must be a long-term play. 

This, alongside decreasing brand loyalty, presents an opportunity to new players in the market. 60 per cent of consumers surveyed in our 2019 Consumer Survey no longer see brand as an important factor when making purchase decisions. As an increasing number of consumers desire to go green, a lack of brand loyalty makes entry to market simpler for ethically minded entrepreneurs with agile business models. My Facebook feed is full of adverts for new brands with where its ethical position is a significant part of their strategy, whether this be the cruelty free body care products of Soap Co or the vegan bags of Matt & Nat. 

Challenges and the future of ethical consumer businesses

There is undoubtedly an opportunity for new ethically minded companies to make an impact. Not only is there consumer demand, but also a desire by investors to invest in ethical consumer businesses. For example, shares of vegan burger maker Beyond Meat rose in value by 163 per cent on the first day of trading on the Nasdaq, valuing the business at $3.8 billion - and it hasn’t even delivered a profit yet! 

Yet just like with all business, challenges exist. The changing demands of consumers are mirrored by their spending habits and ethical businesses need to price products competitively to help aid this change in spending pattern. Businesses must manage costs to remain profitable, otherwise investor interest will subside. 

Ethical businesses must also be mindful of intention versus output, and whether they can truly categorise themselves as “ethical”. For example, if a business produces products from recycled materials, but the energy required to produce the product is higher than the original non-recycled material, can this company truly claim to be more “ethical”? Different consumers are likely to take a different view; it will depend on what is important to them. Just like with more established consumer businesses, the key to success for new businesses will be to know who you’re targeting, focus on what is important to your buyer and do this consistently. 

Despite the challenge’s entrepreneurs in the market face, this is undoubtedly a time of change which is ripe with opportunity. If done well, where (and who) we spend our money with could soon look very different.

For more information or to discuss this further, please contact Amy Lewis.