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12 Oct 2021

Econ Digest

Consumers are willing to pay for eco-friendly products and services


  • UN issues “Code Red for Humanity” warning, highlighting risk to the billions of lives around the world.
  • Measures to reduce greenhouse gas emissions in all sectors are urgently needed to mitigate the global environmental crisis.
  • Consumers are aware of and are changing their consumption behaviors to help reduce environmental problems, and also have higher expectations of environmental standards from businesses.
  • Consumers with purchasing power and who understand environmental issues are willing to pay 20% more than the regular price to be environmentally friendly.
  • Businesses need to adapt to the New Normal of environmentally responsible products, services and production.

Code Red for Humanity… The global environment is approaching an irreversible point.

        The global environment is undergoing unavoidable status quo changes, including a global average temperature rise close to 1.5℃, a faster-than-expected melting of polar ice, and a dramatic increase in the frequency and severity of assorted natural disasters over the past 20 years (1999-2019).

        The impact of more severe natural disasters such as floods, storms or heat waves caused by climate change puts billions of the world’s population at risk, along with financial losses totaling more than USD3.6 trillion from 1970-2019 (World Meteorological Organization, 2021). Looking ahead, more than 2 million people in Thailand could be affected by floods between 2035-2044 (World Bank Group, 2021). Despite the international community’s efforts to reduce greenhouse gas emissions under the Paris Agreement, the business sector also sees the importance of adapting to a green economy, for instance by increasing the use of renewable energy to replace fossil fuels, setting goals for using electric vehicles, developing biodegradable packaging, etc.

        However, global environmental problems are showing signs of continuing escalation, prompting the UN to issue a “Code Red for Humanity” warning and to stating that the world is at a critical juncture in taking more rigorous, concrete measures and urgent action to tackle environmental issues. It is important to follow the 26th UN Climate Change Conference of the Parties (COP26) in November 2021, where it is expected that key member states such as the United Kingdom, the European Union, the United States of America, and France, may take more intensive measures to mitigate the global environmental crisis.

Consumers want to take part in reducing environmental problems…willing to pay 20% more than regular priced products to save the environment

        KResearch’s survey of consumers' views and behaviors on environmental issues found that more than 50% of the respondents were aware of the urgency of environmental issues. They believe that daily life is more affected by garbage, post-consumer waste, water pollution, and air pollution, especially the PM 2.5 dust problem that has become more severe in recent years during February-March. The PM2.5 issue affects health and has led to an increase in consumer health expenses, such as for protective equipment, medical expenses for respiratory diseases, etc.

        Therefore, most consumers are aware of and want to be involved in reducing environmental problems, especially the young generation and commuters aged 20-35 years who are interested in buying greener products and services, including a shift to reusable packaging, products made from biodegradable raw materials, etc. In addition, consumer perspective has shifted from minimizing post-consumer impacts to purchasing products from manufacturers/sellers that demonstrate environmental management standards throughout the process, from the sourcing of raw materials, the manufacturing process, packaging and transportation to post-consumer waste management.

        Therefore, these consumers are willing to pay for the environmental fees for goods and services that genuinely reduce their environmental impact. Over 55% of the respondents are willing to pay 20% more than regular price, and 20% of the respondents are willing to pay 40% more than the regular price . Respondents who are willing to pay more have an average monthly income of THB45,000 or more, have a bachelor's degree or higher, understand environmental issues, and most live in Bangkok and its vicinity. Consumers view that eco-friendly products are more expensive than traditional products, because in the early stages the business may have incurred a cost of developing products and improving production processes. It is expected that in the next phase, the price difference between eco-friendly products and traditional products should decline, as all businesses must adapt to the market trend of Bio-Circular-Green (BCG) Economy, and businesses should be able to manage overhead costs in the long run.

        Although consumers are willing to pay a higher price than ordinary products, when setting the actual selling price, entrepreneurs must also consider factors other than cost, including strategies to expand the market, competition, customer base behavior, and the fragile purchasing power due to the impact of COVID-19, causing consumers to be cautious about spending during this period. Therefore, the main target group is likely to be those who still have purchasing power and who usually buy products at prices similar to those of eco-friendly products. During this period, businesses may consider additional marketing strategies such as promotional measures, campaigns to incentivize consumers to switch to eco-friendly products, etc.

        The survey results also show that in addition to the price factor, 88% of respondents cited incentives and promotions as the most influential factor in decision-making; for example, the cost of eco-friendly products being deductible against personal taxable income. Meanwhile, the traceability of products to reduce the environmental impact and the reliability of manufacturers’ environmental standards influenced 83% and 64% of respondents’ purchase decisions, respectively.

Businesses need to adapt to the New Normal of environmentally responsible products, services and production.

        Supporting factors at the national level such as BCG economic promotion policies, measures to reduce greenhouse gas emissions, and clean energy development, as well as growing consumer demand to reduce environmental problems, are driving the need for businesses to accelerate their adaptation to environmental requirements. The survey on consumer perspectives shows that the categories of FMCG (Fast Moving Consumer Goods), food and beverages and electrical appliances are among the first products chosen by consumers, if the products are labelled as environmental responsible and the price is not notably different from regular products. This is because they are products that consumers use in their daily lives, are easily accessible, and can show concrete benefits for the environment. For example, cleaning products in refill form, biodegradable cotton swabs/sanitary napkins, food and beverages made from alternative proteins (meat production emits more greenhouse gas than crop production), goods in recyclable packaging, energy-saving appliances, etc.

        There are many examples of overseas businesses incentivizing consumers to choose more eco-friendly products. These include offering a partial refund when packaging is returned after use, to encourage consumer participation in waste management, providing consumer goods in reusable packaging on a monthly basis to facilitate purchases, and giving consumers ownership of products to reduce environmental impact throughout the process before the product reaches the consumer.

        KResearch believes that while in the early stages businesses will be faced with the cost of adapting to environmental standards, businesses that can adapt in the next phase can use their eco-friendly selling point to attract environmentally conscious consumers and to create an advantage in a highly competitive market. However, in the long term, all businesses will have to switch to new normal of eco-friendly products to replace less eco-friendly products. In addition, eco-friendly products will also bring business opportunities to expand export markets, as such products to meet the needs of the world's major economies focusing on environmental sustainability.

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