GCC Consumers Prioritise Sustainability, Willing to Pay Premium: Bain Study
Bain & Company finds more than 60% of businesses are off track to meeting their sustainability goals, an increasingly conscious base of consumers and employees may be able to help
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In light of growing environmental concerns driven by extreme weather, new research from Bain & Company shows more than 60% of businesses in the GCC region are currently off track to achieve their sustainability goals. 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 businesses towards their sustainability targets.
Bain & Company published in November a major new study exploring the top sustainability concerns for business leaders, their customers, and their employees.
“With the upcoming global focus on the region with COP 28 and the potential implications from this critical gathering, the CEOs 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 navigate 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 extreme weather first prompted their concern.
Surprising truths about consumers
Bain’s research reveals several surprising truths about consumers, dispelling common misperceptions. Among them are 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 unclear. For example, 72% of Gen Z consumers and 68% of boomers globally are very concerned about the environment, but boomers are more concerned in countries as diverse as India, France, and Japan.
- 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 faster than many companies anticipate, with external factors such as government regulation heavily influencing the market. China began offering financial incentives for electric vehicles in 2009; 19% of Chinese consumers report driving an electric car, compared with 8% of consumers globally. In England, single-use supermarket plastic bags have 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 usage, showcasing government initiatives’ significant impact on shaping consumer behaviour.
- There needs to be more clarity between what consumers want and what most companies sell. Worldwide, 48% of consumers consider how products are used when considering 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 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 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 could not 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 has 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, innovate products, and design propositions that appeal to different segments— local markets, consumers with different definitions of sustainability, and consumers with various 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 consistent with their values.
- Get out in front of regulations. As we’ve seen worldwide, government policy inevitably significantly contributes to changing consumer behaviour. 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 that 75% of business leaders believe they need to embed sustainability well into their business. The instinct of many CEOs is to prioritise external hiring to address all skill gaps, including sustainability. Bain advocates for addressing sustainability’s challenges through smart upskilling and cultivating a learning mindset.
A new Bain survey of 4,700 people found that 63% felt different skills and behaviours would be required for their company to execute its ESG ambition or strategy. Yet only 45% of nonmanagers said their employer offers 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 finding a better opportunity outside their company is easier 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. Its consultants have completed over 17,000 hours of ESG training through the program.
