How Much Value Do Customers Place on Green Companies?

More and more customers are becoming aware of the sustainability problems we face due to human impact on the environment. This increased awareness has changed many people’s values and purchasing criteria.

Good products are no longer what customers look for when shopping; nowadays, consumers go beyond quality and prefer to buy goods or brands that align with their ethics. But how much are customers actually willing to pay for green companies’ products?

What Are Green Companies?

A green company is a business that operates in a way that minimizes environmental damage and instead has a positive impact on the local or global environment, community, or wider society.

To successfully ‘go green’, a company needs to establish best sustainability practices for product purchasing, manufacturing, development, and distribution.

Green companies are preferred by many as they have several benefits, including:

• A positive impact on marine life.
• Environmental sustainability.
• Protecting endangered plants and animal species from becoming extinct.
• Avoiding air pollution from unchecked carbon dioxide emissions from companies. These uncontrolled carbon dioxide emissions can increase temperatures and raise sea levels, which can result in catastrophic weather events.
• Reduction in global emissions and waste, leading to a livable planet. Studies show that 71% of global emissions come from companies. So, if companies can go green, there’s likely to be a 60% emissions reduction by 2030.

Tips for Going Green in Your Company

Sustainability branding refers to solidifying a company as socially, economically, and environmentally responsible. This involves the companies going for more sustainable brand strategies like:

 icon-angle-right Using Both Less and Sustainable Energy

Efficiently using sustainable forms of energy may be the first step green companies can use to build their brand. Doing so requires companies to divest from fossil fuels and promote more affordable and sustainable sources.

In fact, many have already done so, as seen in this graph by Compare the Market Energy Aus. Doing away with unsustainable energy forms like fossil fuels (e.g. coal, natural gas, and petroleum) is also crucial.

Using fossil fuels as energy forms negatively impacts the environment. When you burn fossil fuels for energy, you produce particles that can pollute the air, land, or water.

Fossils fuels also contain carbon which, when combusted, can increase carbon dioxide gas in the air, leading to the increased greenhouse effect and consequently a rise in temperatures.

For this reason, customers and companies need to divest from fossil fuels. Fossil fuel divestment aims to stigmatize fossil fuels and increase uncertainty on their continued use, reducing financial preferences towards fossil assets.

Businesses can do this by avoiding investing or promoting fossil fuel companies, which reduces capital and market demands.

Reduction in capital and demand would result in financial losses for the fossil fuel business, leading to them being uneconomical and eventual closure.

Look at the growth of institutions committed to divestment and total assets’ growth of divesting institutions for an idea of how greener choices can hurt fossil fuel wallets.

 icon-angle-right Disposing Waste Using Sustainable Methods

Companies generate lots of waste during manufacturing and packaging their goods, harming the environment in the process.

Managing waste sustainably involves collecting, transporting, and disposing of waste so that it can’t affect the environment, humans’ health, or future generations.

Green companies need to protect their brand name by proper waste disposal methods, like:

• Incineration (burning waste).
• Reducing waste by going paperless.
• Reusing waste, preventing garbage bins from filling up.
• Recycling to save energy and provide raw materials for new products.
• Composting biodegradable waste.
• Anaerobic waste digestion (the burning of waste in the absence of oxygen).

 icon-angle-right Buying Green Products, Equipment, and Services

Greener purchasing is another excellent way of branding green companies. This type of purchasing involves procuring products and services that have a reduced impact on the environment and human health.

Buying green equipment, products, or services can improve health, prevent pollution, and reduce climate impact.

 icon-angle-right Adhering to Environmental Regulations, Laws, and Best Practices

Although some companies are subject to environmental regulation more than others, all companies should adhere to best environmental practices and principles, since green practices increase productivity.

There are different laws governing ecological aspects. For instance, the Clean Air, Clean Water, and Endangered Species Act mandates companies to operate so that they:

• Control air emissions.
• Don’t operate near wetlands or pollute water.
• Don’t threaten endangered species.

The Resource Conservation and Recovery Act requires companies to regulate the generation, treatment, transportation, and disposal of hazardous waste.

Value of Green Companies

Lately, consumers have placed greater value on green companies compared to their counterparts. A company’s brand can influence customers’ behavior, attitude, and purchasing power.

According to a 2021 study conducted by global sustainability and pricing consultancy Simon-Kucher and Partners, there has been a significant change in the way customers view sustainability and their willingness to pay for sustainable products and services.

The study suggested that over three quarters of people worldwide (85%) have changed their buying behavior to be more sustainable in the last five years, with most of them accepting an average of 25% premium. Young people lead in choosing sustainable goods or services (42%) followed by Generation Z (39%), Generation X (31%), and then Baby Boomers (26%).

How much are these generations willing to pay in sustainable premiums? Millennials (31% premium) and Generation Z (32% premium) are ready to pay more than twice and a third more than what Baby Boomers (14% premium) and Generation X (21%) would pay for sustainable products.

In terms of countries, people in the United States (42%) are more willing to pay for sustainable goods and services than other countries. Out of this 42%, the highest average premium they are willing to pay is 37%. Austria is also at 42%, followed by Italy (41%), Spain (35%), and then Germany (34%).

Besides the age factor and country, industry type also determines how much value customers place on green companies. Consumer goods have the highest customer willingness for sustainable goods (38%), unlike utilities/energy (31%).

Interestingly, the premium amount is usually low for consumer goods (averaging 22% premium) and highest for financial services (averaging 27% premium).

This Global Sustainability Study reveals that many customers prefer green companies’ products and services and are willing to pay more over the same.

Consumers not only care about the price or quality when buying goods and services but also the impact their purchasing power has on the environment. So, companies should consider going the greenway and improving their brand image and reputation. This may lead to more customer loyalty and a positive impact on the environment!