For some time now, we have written about the potential business risk associated with developing sustainability programs for some companies. Just recently, an article was published in the Journal of Marketing that provides empirical evidence of negative consumer perceptions (and therefore reduced sales) of certain products labeled as “sustainable” or “environmentally friendly”.
The article is titled The Sustainability Liability: Potential Negative Effects of Ethicality on Product Preference, written by Michael G. Luchs, Rebecca Walker Naylor, Julie R. Irwin, and Rajagopal Raghunathan. The authors are all professors of marketing at William & Mary, Ohio State and The University of Texas at Austin.
The article reviews various hypotheses and empirical studies conducted by the authors around the concept about how buyers perceive the attribute of sustainability or environmentally friendly (they use the term “ethicality” to encompass those attributes) in certain product categories.
INTERESTING NOTE HERE – there is a fair amount of overlap between the product categories within the scope of the study and those that are included in the Walmart Supplier GHG Innovation Program Guidance Document. If you are a supplier who is involved in WalMart’s GHG Innovation Program, you may want to read The Sustainability Liability.
The first several pages explore various aspects of social and buying behaviors, along with the accompanying traditional expectations of product performance. Afterwards, the authors relate the background information to their point.
… research streams that suggest that the presence of a desirable attribute can have a negative effect on the perception of other product attributes. Consumers are aware that manufacturers operate under budgetary, product development, and manufacturing constraints. Given the behavioral implications of efficient markets (Chernev and Carpenter 2001), consumers may infer that products that are superior on one attribute will be relatively inferior on other attributes. This prior research implies that the presence of a positive ethical attribute would result in the expectation of decreased performance on other attributes. [emphasis added]
We propose a new factor that also influences consumers’ preference for sustainable products, but that results in a more complex relationship between sustainability and preference: the type of benefit sought from the product. We argue that ethicality is positively associated with some types of benefits and negatively associated with other types of benefits.
The study uses the term “strength” to mean something like the ability of a product to perform its expected function in conditions/uses that are harsh. So if the “benefit sought” by the customer is related to its “strength”, then (the authors hypothesized) the increased sustainability attribute would cause customers to feel that strength was therefore reduced. Examples used in the study include detergents, hand sanitizers and tires.
… marketers might logically ask how they can overcome potential negative associations between ethicality and product strength. Our prior discussion of the association between ethicality and lack of strength suggests a possible solution. Managers may be able to overcome the sustainability liability by providing explicit information about product strength, mitigating consumers’ reliance on a default inference about a negative relationship between sustainability and strength.
The article reviews five studies carefully planned, executed and statistically analyzed by the authors. The fifth study summed it all up – and added an extra twist:
Study 5 shows, in a non-laboratory decision with actual choices, that sustainability is a liability for product choice when strength is especially valued. It also shows that people are not as likely to reveal this preference when they feel that their choices are being observed, providing additional evidence for our contention that projective techniques (which allow respondents to reveal their choices without feeling personally observed) are useful for helping to reveal actual preference in the domain of ethical decision making.
So before your company’s marketing gurus start a PR campaign about the sustainability attributes of your products, they would do well to understand the potential business risk of doing so.