December 7, 2011
Consumers are willing to pay more for both economically and environmentally sustainable products according to researchers at the University of Northern British Columbia (UNBC). The findings by UNBC Business professors Sungchul Choi and Alex Ng will be published in this month’s issue of the Journal of Business Ethics. This represents the first time marketing researchers have studied environmental and economic perceptions as separate dimensions of sustainability.
“It’s common practice for companies to offer higher priced products that are ‘green’ or ‘sustainable’ in response to the environmental concerns of consumers,” says Dr. Choi. “We found that, not only do consumers respond favorably to products offering environmental sustainability, but also to those perceived to help the local economy. Customers are hesitant to pay even a low price for a product from a company with a poor record of sustainability in either respect.”
Drs. Ng and Choi had test subjects for their study shop for floor tiles. The participants were told that a particular company made a high quality product and had either the best or worst environmental record in the industry, the best or worst economic sustainability practices, and the highest or lowest price. Consumers turned out to be averse to buying products when the firm had a poor sustainability record in either dimension. For this study, the tiles labeled as sustainable were sold by a company in Prince George B.C. and made of a product known as “beetle-crete,” which was created at UNBC out of the remnants of locally-sourced trees killed by the mountain pine beetle.
“The research shows that when the environmental and economic sustainability ratings are low, shoppers evaluate a company unfavorably on both of those dimensions, but when both aspects are high, consumers only evaluate the firm's environmental sustainability higher than normal,” says Dr. Choi. “Still, consumers have a greater intention to make a purchase if they evaluate a firm as being better in either aspect.”
The findings also show that consumers are more sensitive to statements of a company’s sustainability shortcomings than to a company’s sustainability virtues.
Dr. Choi adds that firms cannot make amends for low sustainability ratings simply by offering lower prices. “The research demonstrates the importance of genuinely sustainable practices and indicates that managers must establish policies and processes towards that end. It’s our view that consumers see a social and community dimension of sustainability.”
The study was funded by Social Sciences and Humanities Research Council of Canada, Western Economic Diversification, Northern Development Initiative Trust, and UNBC.