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Akram Alami

GCC consumers ‘prioritise sustainability, willing to pay premium’

DUBAI, November 21, 2023

Bain & Company finds more than 60% of businesses are off track to meet their sustainability goals, an increasingly conscious base of consumers and employees may be able to help
 
Dubai: More than 60% of businesses in the GCC region are currently on track to achieve their sustainability goals in light of growing environmental concern driven by extreme weather, a new research by Bain & Company shows. 
 
The study emphasises the pivotal role of technology, policy, and behaviour change in achieving sustainable practices. An increasingly environmentally conscious base of consumers and employees in the GCC may prove instrumental in steering business towards their sustainability targets.
 
Visionary Pragmatism
“With the upcoming global focus on the region with COP28 and the potential implications from this critical gathering, it is critical the CEO’s and Sustainability Plans in the corporate sector take centre stage in the next phase of the world’s transition. Our global report on the topic is grounded on the philosophy of Visionary Pragmatism in this path for executives to adopt as they are navigating taking the global ambitions and translating them into the day-to-day functioning of their respective companies” said Akram Alami, Middle East Partner at Bain & Company.
 
To get a broad sense of environmental concerns around the world, Bain surveyed 23,000 consumers. The results underscore the growing urgency of sustainability topics. Some 64% of people reported high levels of concern about sustainability. Most said their worries have intensified over the past two years and that their concern was first prompted by extreme weather. 
 
Surprising truths about consumers
Bain’s research reveals several surprising truths about consumers, dispelling some common misperceptions. Among them, the ideas that consumers won’t pay more for sustainable products and that consumer behaviour is fixed.
 
Baby boomers are often just as concerned as Gen Z: Many companies have long viewed younger consumers as more focused on sustainability than their older counterparts, but the reality is not as clear-cut. For example, 72% of Gen Z consumers and 68% of boomers globally are very or extremely concerned about the environment, but in countries as diverse as India, France, and Japan, boomers are more concerned.
 
Consumers are recommending brands if they are supporting social causes: As concerns grow, consumers are looking to make environmentally sound choices - 82% of consumers in Europe, the Middle East, and Africa are likely to recommend a brand after learning that it supports a social cause. 
 
Consumer behaviour can change more quickly than many companies anticipate, with external factors such as government regulation heavily influencing the market: China began offering financial incentives on electric vehicles in 2009; now 19% of Chinese consumers report driving an electric car, compared with 8% of consumers globally. In England, the use of single-use supermarket plastic bags has fallen 98% since the government began requiring retailers to charge for them in 2015. Similarly, in the UAE, the recent imposition of charges on plastic bags in supermarkets has swiftly prompted a notable reduction in their usage, showcasing the significant impact of government initiatives on shaping consumer behaviour.
 
There is a disconnect between what consumers want and what most companies sell: Worldwide, 48% of consumers consider how products are used when thinking about sustainability. These consumers are more concerned about how a product can be reused, its durability, and how it will minimise waste. In contrast, most companies sell sustainable goods based on factors such as how they are made, their natural ingredients, and the farming practices deployed. These factors cause many consumers to conflate “sustainable” with “premium.” One result of this disconnect: Nearly half of all developed-market consumers believe that living sustainably is too expensive. By comparison, roughly 35% of consumers in fast-growing markets believe this.
 
Consumers struggle to identify sustainable products and don’t trust corporations to make them: In Bain’s survey, 50% of consumers said sustainability is one of their top four key purchase criteria when shopping. Yet they may be making decisions based on misconceptions. When asked to determine which of two given products generated higher carbon emissions, consumers were wrong or didn’t know about 75% of the time. 
 
Consumers say they rely most on labels and certifications to identify sustainable products, yet most were unable to accurately describe the meaning behind common sustainability logos, such as organic production or Fairtrade. A lack of trust in corporations compounds the issue. Bain found only 28% of consumers trust large corporations to create genuinely sustainable products, compared to 45% who trust small, independent businesses.
 
Four critical areas of focus for companies
The momentum behind sustainability and dynamic shifts in consumer behaviour have profound implications for any company. Bain sees four critical areas of focus. 
Devise a future-proof and flexible strategy: Few companies plan beyond the typical 3-year strategic planning window, and even those that do look out 5 to 10 years tend to focus on expectations for technology adoption. These plans fail to fully consider two other factors that move just as rapidly and with as big an impact: regulations and consumer behaviour. 
 
Acknowledge a fragmented consumer base: Companies need to deaverage consumers and innovate products and design propositions that appeal to different segments— local markets, consumers with different definitions of sustainability, and consumers with a range of purchasing motivations.
 
Test and learn to determine what works—and repeat: In such a fluid environment, companies can lean aggressively on marketing experimentation, using digital tools to quickly test the sustainability messages that resonate with different segments and adapt accordingly. It’s a way to help consumers gain enough clarity to make decisions that are consistent with their values.
 
Get out in front of regulations: As it is seen throughout the world, government policy inevitably becomes a huge contributor to changing consumer behavioir. Across all industries, companies need to be at the forefront of helping to shape the regulations affecting their business. A company’s ability to anticipate policy shifts and build future-proof portfolios will help determine whether it can outpace competitors.
 
Upskilling employees to rise to the challenge
Bain found 75% of business leaders believe they have not embedded sustainability well into their business. The instinct of many CEOs is to prioritise external hiring to address all skill gaps, including in sustainability. Bain advocates for addressing sustainability’s challenges through a combination of smart upskilling and cultivating a learning mindset.
 
A new Bain survey of 4,700 people found 63% felt different skills and behaviours would be required for their company to execute on its ESG ambition or strategy. Yet only 45% of nonmanagers said their employer offers the reskilling and upskilling opportunities that would enable internal mobility. 
 
Despite almost every CEO saying they have a talent problem, few companies have defined what it means to be a great employer. In Bain’s recent survey, 44% of respondents said it is easier to find a better opportunity outside of their company than within it. 
 
Bain is leading by example on this cause. The firm has committed to cultivating a growth mindset in its team, partnering with 12 world-class universities—including MIT, HEC Paris, and Melbourne Business School—to upskill its employees on ESG. To date, its consultants have completed over 17,000 hours of ESG training through the programme.--TradeArabia News Service
 



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