The consumer's impact on sustainability and the economy

The consumer's impact on sustainability and the economy

Consumer preferences change from generation to generation. These preferences are dependent on a number of things — family values, cultural relevancy and personal experiences.

That’s why studies focusing on Generation Z, people born after 1995, and millennials, people born between 1981 and 1995, have been so important for the future of business. Younger generations have a higher level of social consciousness, studies show, especially about the environment. Those views have factored into their purchasing decisions as well.

“The social consciousness of the group coming out of high school and millennials appears to be a little higher,” said Alicia Rosburg (Economics ‘06), professor of economics and UNI’s provost fellow for sustainability. “They want to do good. They want to give back. It’s one of their priorities, in particular environmentalism.”

According to a 2018 Global Web Index survey, half of digital consumers say environmental concerns influence their purchasing decisions. Millennials, sometimes named the Green Generation, and Generation Z are leading the way. About 61% of millennials would pay more for eco-friendly products, and 58% of Gen Zers. Much of that behavior is driven by the increasing conversations about being better stewards of the Earth, Rosburg said.

These preferences have important implications for businesses. As millennials continue to rise in their careers and members of Generation Z enter the workforce in large numbers, businesses are attempting to shift their focus to more sustainable and environmentally friendly products and services.

“If [a person from a younger generation] is looking at two products, and there is marketing telling them it’s greener for the environment, they might be willing to pay more for that product,” Rosburg said. “That might not have happened 20 years ago.”

Laurie Watje, associate director of the UNI John Pappajohn Entrepreneurial Center, has seen this on an anecdotal scale as well. She often tells stories of growing up in the 1960s, before the age of recycling and large-scale environmental policy, when people would freely throw trash out their windows.

Students can hardly believe it, she said. Many of her students care about the environment and are cognizant of being better citizens of the globe. They feel a call to action.

“We’ve come a long way, and the students in my class are amazed to hear my stories,” Watje said. “There is a paradigm shift that has happened, and the young generations don’t even think twice about it. It’s just a natural decision for them to be environmentally friendly in their decisions.”

This change in behavior is already starting to have an effect on industries. According to the 2019 Retail and Sustainability Survey from CGS, a global provider of business applications, enterprise learning and outsourcing services, more than one-third of respondents would pay at least 25% more for sustainable products.

About 20% of millennials and Gen Zers buy organic food “all the time,” according to this year’s Annual Organic & Other Lifestyle Choices survey. According to a report this year by Autolist, a new and used car sales website, Telsa, which notably produces electric vehicles and is on the forefront of the sustainability movement in transportation, is among the top 10 “coolest” brands for Generation Z. A simple search of environmentally friendly companies yields millions of results.

It’s clear young generations are influencing how businesses produce and market themselves, and the trend will only continue as Generation Z gains purchasing and political power in the future.

“I do see it continuing for a while,” Rosburg said. “There are cycles, but I see more companies push that they are environmentally friendly. Many of the efforts are targeting the younger demographic. That’s who they are trying to target.”

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To know where you need to go, you have to know where you are. Collect data, and look at where you can improve. You might find low-hanging fruit or areas where a small investment or change in practice will provide long-run profits.

How can companies meet demand?

For companies to meet demand for environmentally friendly products and services, Rosburg said it’s essential to create a benchmark. Businesses should determine how much energy and water they are using. They should evaluate their products as well.

For smaller businesses, Rosburg said there are a lot of organizations that help businesses along the sustainability path. UNI’s Iowa Waste Reduction Center is one, and it assists companies in determining incentives and how investments can actually boost profits.

“To know where you need to go, you have to know where you are,” Rosburg said. “Collect data, and look at where you can improve. You might find low-hanging fruit or areas where a small investment or change in practice
will provide long-run profits.”

Going green also doesn’t necessarily mean changing your product. It could be something as simple as making a process more efficient or putting solar panels on the outside of an office building. LED lights are another common way businesses can be sustainable and decrease expenses at the same time.​

Watje said businesses can reduce environmental impact by being intentional about what vendors they work with. Companies can steer their supply chain toward an environmentally friendly mission. Watje sees this with many of the entrepreneurs in the UNI John Pappajohn Entrepreneurial Center, who want a stronger social impact but can’t necessarily afford the upfront cost of solar panels or lights.

“There are ways to change without changing the material or product,” Rosburg said. “A lot of sustainability changes can happen in the background without affecting or touching your actual product.”

Marketing efforts should also reflect sustainability within a business. Gunwoo Yoo, an assistant professor of marketing who focuses on consumer behavior, recently visited a number of large advertising and marketing agencies in Chicago. They all said clients are spending more time and money online.

That’s especially important considering Generation Z was raised with widely available internet and social media. Generation Z is very active online, and they freely communicate with brands. According to CivilScience, a consumer and marketing intelligence company, 53% of Gen Zers are most influenced by social media comments.

“The younger generations don’t hesitate to express their personal issues online,” Yoo said. “Many times, these social issues are very controversial, divisive, and younger generations don’t have any fear to express themselves. That includes environmental issues.”

Yoo said companies are spending more on cause marketing — promotional campaigns that focus on bettering society — rather than traditional marketing, which usually focuses on information about products. A 2019 study by IEG Sponsorship, a global sponsorship consulting and valuation company, said cause sponsorship will increase 4.6% in 2019 and reach $2.23 billion in investment.

As one example of cause marketing, Etsy, the online retail store, has an entire webpage dedicated to its achievement of becoming the first major online shopping destination to offset 100% of carbon emissions from shipping. They also have pages dedicated to economic, ecological and social impact.

The trends are all pointing toward even more sustainability and environmentally friendly business practices down the road. In a decade, Watje said most businesses will have such practices worked into their business models as Gen Zers and millennials become more influential.

“I think [being environmentally friendly] is going to be second nature 10 years from now. We’re not even going to think about it anymore,” Watje said. “We’re in that disruption period, but soon it will just be a part of our routine.”

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