Powering Sustainable Consumption through Compliance and Traceability
When consumers are asked whether they care about buying environmentally and ethically sustainable products, it’s clear that green is mainstream in consumers’ minds and their habits follow. In 2020, McKinsey polled consumers, and 60% said they’d pay more for a product with sustainable packaging. In 2023, a NielsenIQ study found that consumers report that having a “sustainable lifestyle” is important. BCG data claims that as many as 96% of US consumers say trying to behave, at least some of the time, in ways that protect the planet, its people, and its resources.
Green is mainstream, but brands struggle to connect their companies’ environmental, social and governance (ESG) initiatives to consumer demand and trust. How can brands make green mainstream in ways that support sustainable consumption while also continuing their own business and revenue growth?
Understanding consumer response to ESG and green claims
A recent McKinsey-Nielsen IQ report examined brands’ social and environmental claims, and more importantly, how consumers respond to these claims. The study looked at five years of sales data on a variety of factors related to the marketing and sale of products labeled with “green claims”. A few of the conclusions the study reached include:
Consumers are spending on products with ESG and green-related claims
Products making ESG-related claims 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.
Large and small brands alike see growth in products making ESG-related claims
In 59% of all categories studied, the smallest brands making such claims achieved disproportionate growth. The same holds true for the largest brands making these claims in 50% of categories.
Multiple ESG claims boost growth and perception of authenticity
Products making multiple claims across ESG classification categories grew about twice as fast as products that made only one. In 80% of the categories, there was a positive correlation between the growth rate and the number of distinct types of ESG-related product claims.
Inspiring mainstream green: Compliance and Traceability
Consumer will is already mainstream green. Brands, though, need to catch up to consumer expectations. What will this mean? According to McKinsey, CPG brands – above all else – must “prioritize and invest in ESG-related actions that deliver the greatest advancement of their overall ESG commitments and, second, to inform customers of those actions, including information conveyed through product label claims.”
Being able to prove claims and build consumer trust, though, is more challenging than just slapping a few ESG buzzwords on a package. As they become more savvy and sustainability-focused, consumers demand verifiable claims.
Brands must step up their game in a number of ways. One is through compliance efforts. For example, the European Commission has launched a “Consumer Package” of consumer protection legislation, addressing green claims as well as sustainability and circularity through the right-to-repair initiative.
Traceability: Powering mainstream green
Making green choices real and verifiable means introducing traceability into the equation. Traceability underpins sustainable and circular business models by following products and materials through their complete supply chain journey, from sourcing to disposal. By implementing traceability systems, brands can ensure transparency, accountability, and responsible practices at every stage – verifiably, which feeds into consumer-friendly ESG claims.
Traceability, when used this way, fuels claims and detailed information on everything from product origin, manufacturing process, environmental impact, and so on. This transparency and verifiability is what consumers crave in aligning purchases with their values.
Brands also gain. Traceability enables brands to identify inefficiencies, optimize processes, and reduce waste, all of which contribute to better ESG credentials and the development of circular business models, where resources are kept in circulation for as long as possible through recycling, repair, and repurposing.
With the EU legal framework mentioned above, and the introduction of digital product passports (DPP), brands must adopt some form of traceability to provide the information required for reporting and use in DPPs.
Brands that successfully integrate connected products and traceability can differentiate themselves in the market, satisfy consumer demand, and contribute to a more circular economy, taking green mainstream.
Find out 6 steps for DPP readiness in your bid for compliance and transparency.