One of the important next steps for business leadership to take on climate change, especially in the wake of COP26, is to think through how to engage their customers on climate. Climate action costs money, so pioneers risk being disadvantaged — unless they can learn how to create value from their climate leadership. Unlocking this value is not just a commercial business opportunity; it is a vital enabler of climate action at scale.
For companies serving corporate customers, the routes to commercial value are relatively clear. Corporate customers are pursuing their own climate transition efforts, creating opportunities to help them through differentiated products that decarbonize their supply chain — through joint problem-solving efforts that deepen the customer relationship or through playing new roles as value migrates along the chain.
This is not a failure of individuals; this is a failure of companies to figure out how climate leadership translates into value.
Companies serving consumers have found the challenge much harder. The opportunity looks attractive: Research consistently shows that as individuals, we care a lot about climate change, and we say that we are happy to pay more for sustainable options. Yet many companies have stories of climate-friendly products and services they have launched that have had next to no take-up. And consumers remain mostly unaware, and unengaged, with the climate efforts companies are making.
This is not a failure of individuals; this is a failure of companies to figure out how climate leadership translates into value.
Plenty of interest, little value
Climate change has become a mainstream concern. Today, 26 percent of people in the United States are “alarmed” by climate change and strongly support immediate action to address it — up from 11 percent just eight years ago, according to the Yale Program on Climate Change Communication. Across the globe, people want to be part of the solution and say they are willing to pay more for it, we found in a recent survey (Chart 1).
Chart 1: Stated willingness to pay
A substantial majority of people across countries say they are willing to pay for sustainability
“Are you willing to pay a premium for sustainable products and services? If yes, how much?”
Source: Oliver Wyman Forum 2021. N = 3,500.
Early attempts to turn this interest into value followed a “build it and they will come” logic. Banks built “green mortgages,” energy companies offered “green tariffs,” travel came with an option to offset. Most of these attempts failed to scale. One airline, for example, found that three years after launch, only 3 percent of passengers chose to pay the $2.70 to offset their flight emissions.
Today, companies are shifting their efforts from the product level to the brand and company level, recognizing that consumers expect brands to commit without them having to pay for it. The World Business Council for Sustainable Development’s (WBCSD) Vision 2050 report “Time to transform” describes this as “making all choices good choices.” It takes a proactive effort. As Roberta Barbieri, vice president of global sustainability at PepsiCo, puts it: “We can’t simply rely on consumer behavior to dictate how fast the industry evolves — it’s on corporations like ours to drive these changes.”
The brand-level approach can work — for consumer, company and climate. Customers connect with brands that they see acting on climate, and love them for it, as we have shown in our Brand Aperture research. The correlation between people believing that a brand is doing everything it should on climate change, and saying they love that brand, is consistently high: 65 percent in the United States, 63 percent in the U.K., 58 percent in China, in our research covering 300 brands across the three markets.
Chart 2: Climate action and brand connection
High correlation between “I believe that this brand is doing everything they should to help fight climate change” and “I love this brand”
Source: Lippincott Brand Aperture 2021
The challenge companies face is in getting consumers to recognize, connect with and value their efforts. We offer three tactics that we see achieving this in our work.
Tactic 1: Make sustainability core to your brand
Many brands are talking sustainability; few cut through. Less than 15 percent of United Kingdom consumers say they know what their favorite brands are doing on sustainability, and this includes some real leaders. At a time when so many companies are taking action and wanting to be seen doing so, the bar for recognition is high.
DPDgroup, the European parcel delivery company, is advanced both in the ambition of its climate targets and in its real-world progress. In 2020, DPD delivered more than 10 million parcels with electric vehicles, for example, up from 1 million the previous year. The company is recognized as a sustainability leader by sustainability ratings company EcoVadis and the environmental disclosure nonprofit CDP. Yet in our research, only 5 percent of consumers using DPD say they know what the brand is doing to fight climate change and only 3 percent see it as a leader in this space.
In fact, in the U.K., we found only one brand (out of 100 tested) for whom most of its consumers said they know what the brand is doing to fight climate change: Tesla.
Tactic 2: Make it about me, not you
When brands talk sustainability, it is often about what the company is doing. When people talk sustainability, it is all about what we should be doing. Rationally, we could have the most impact by using our collective purchasing power and voting power to influence the actions of corporations and governments at scale. But what consumers are looking for is something more personal and direct, focused on reducing their own carbon footprint. We call this the “Me” bias (Chart 3).
Chart 3: The “Me” bias
“The biggest contribution I can make on sustainability is to reduce my own carbon footprint.”
Source: Lippincott Brand Aperture 2021
This “Me” bias drives customers to discount companies’ sustainability efforts. It’s not that they don’t care; they just don’t see the relevance to their day-to-day lives.
Microsoft has one of the world’s boldest emissions reduction efforts and commitments, using internal carbon pricing that directly costs their operating businesses and uniquely committing to remove all historical carbon emissions by 2050. There is no role for the customer in their announcement, it’s simply a thing Microsoft is doing about Microsoft’s emissions. Yet only 14 percent of their U.S. consumers in our research see them leading their industry in fighting climate change.
Ant Group, by contrast, focuses on the personal carbon footprint. Their Ant Forest initiative, launched in 2016, allows consumers to collect green energy points from choosing sustainable options and convert them into planting trees. Research shows 57 percent of their consumers in China see them as a climate leader.
Tactic 3: Focus on now, not the future
Climate action is famously urgent, yet the timeframes of companies’ climate commitments are extraordinarily long. In what other context do companies make projections for 2050 or talk of 2030 as an interim milestone? With frequent news stories of how the world is not on track in its emissions reductions, it is no surprise if consumers are skeptical. The result is that consumers under-value commitments for the future — which are the bulk of most companies’ climate efforts — and over-value action today. We call this the “Now” bias (Chart 4):
Chart 4: The “Now” bias
“I don’t trust the ‘commitments’ that companies make about climate change; what matters is what they are doing now.”
Source: Lippincott Brand Aperture 2021
The combination of the “Me” and “Now” biases drives some potentially unhelpful results. We tested three climate narratives that a bank could tell, using actual language from banks’ websites: a net-zero commitment, focusing on defunding fossil fuels; a transition-finance commitment, at the scale of $1 trillion; and offering non-plastic, eco-friendly bank cards. What people most valued were the eco-friendly cards.
Our point is not to focus on tokenistic crowd-pleasers. It is that to cut through to consumers and work with their “Me” and “Now” biases, the key is to show them how they themselves can do something more sustainably, today. With Tesla, I can drive more sustainably today. With Alipay, I can shop more sustainably today. Brands that can channel their climate actions into a meaningful customer-centered proposition like that, can deliver for the consumer, the company and the climate.
Source: GreenBiz
