Consumers care, but only if they and the companies they shop can afford to. In its September report, global consulting firm Simon-Kucher & Partners revealed the bottom-line impact of becoming a sustainable business.
According to the report, which details the responses of over 750 consumers across demographics, sustainability is a top concern. While the initial risk and investment is daunting for businesses aiming to transform themselves, the study finds it will pay off.
Citing the combined revenue of $327 billion, which comprises the Fashion Pact signatories and nearly 30 percent of the global fashion industry, Simon-Kucher believes sustainability has become “the new standard” and an opportunity for new business growth.
But as assumed, sustainability may be a generational concern. Half of the Millennials and higher-income consumers surveyed are the ones that primarily seek out corporate social initiatives, while Baby Boomers professed little intent in actively researching such initiatives. A majority or 80 percent of Gen Z consumers are willing to pay a premium for sustainable apparel, despite newly entering the workforce.
Across apparel categories and consumer groups, the report found the hypothetical premium paid to be 15 to 30 percent more for mission-driven brands and 5 to 20 percent more for profit-driven companies that incorporate sustainable practices. Its findings echo a report from McKinsey & Co.
The researchers at Simon-Kucher found that “corporate social responsibility trends positively with higher-income consumers.”
Perhaps it’s not that lower-income consumers don’t care about sustainability; it’s rather that they can’t afford it if premiums exceed their feasible spending. Paying a premium for sustainable products (be it food or fashion) may be a luxury few can afford.
“To make sustainable apparel from the production process or raw materials it’s perceived to be more expensive. That’s why the cost of sustainable apparel for the consumer is more expensive,” said Shikha Jain, senior director at Simon-Kucher & Partners, who led the research.
Although sustainability has been “trending” for the past five to 10 years, Jain believes the “consumer demands need to be at the forefront,” for those costs to come down. “Take something that is deemed a trend and make it table-stakes,” reiterated Jain. “Consumers will reward you for that,” she said.
After price, comfort and quality being the premier drivers to purchases, certain values are integral to the consumer today. And while sustainability and ethics are closely aligned, fair labor and trade practices still slightly supersede that of sustainable materials and processes, by about 43 percent to 38 percent.
Consumers don’t want perfection, but brands have to give them something. According to the study, only 12 percent of consumers agree that products “must be made of 100 percent sustainable materials.”
The report also notes that while the initial investment will be high, the long-term investments pay off. Mission-driven companies (e.g., Allbirds, Rothy’s) are positioned for greater reward with profit-driven companies tailing closely (e.g., H&M, Zara).
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