The Good Business of Doing Good: The New Responsibility Imperative

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Eco-products. 100% organic. Ecologically friendly. All-natural. Fair trade. Locally grown. Green. Labels like these that indicate the commitment of a company, brand, or product to social responsibility are rampant. Although the meaning of these labels is not always formally defined, or even entirely clear, a broad and growing base of consumers now looks for — and buys — products that proclaim their virtue.

In June 2014, the Boston Consulting Group (BCG) published “An Imperative for Consumer Companies to Go Green,” an article that addressed growing consumer concerns about responsible consumption. In it, BCG details how products labeled organic, natural, ecological, or fair trade have moved beyond niche markets into the mainstream — and how the growth in responsible consumption (RC) products now accounts for the bulk of sales growth in many consumer product categories, especially food, personal-care, and household products.

The report employs point-of-sale data from nearly all retail chains in the US (grocery, convenience, department, and wholesale-club stores) to develop a comprehensive portrait of current sales of RC products — and more notably, the recent rapid sales growth of RC products in comparison with overall sales growth.

3 KEY FINDINGS

  • Responsible consumption has moved beyond niche consumers and is becoming increasingly mainstream.
  • Responsible-consumption products are projected to account for the majority of grocery sales growth in mature markets in coming years.
  • With few exceptions, major consumer product companies have ceded the responsible- consumption space to smaller specialty manufacturers and retailers’ private labels.

RIDING THE RESPONSIBLE-CONSUMPTION WAVE

While most major brands have missed out on the initial growth of RC products, BCG contends that they can still ride the RC wave as responsible consumption becomes increasingly mainstream throughout this decade.

The responsible-consumption market has many attractions for major brands. In addition to offering high prices and high margins, the market continues to grow rapidly. What’s more, this market is growing at the expense of traditional brands that are not embracing responsible consumption.

3 things major brands could bring to the RC market

Major brands that fully embrace the growing responsible- consumption market in the near future, however, will have some distinct advantages over existing competitors.

  • Size and strength. A-brands that create or acquire their own RC brands could have significant advantages by virtue of their size and strength in sourcing raw materials, manufacturing, and regional reach.
  • Scalability. By learning from the successes of the specialty RC brands that have preceded them, A-brands can implement RC improvements and then scale up their investments. (Indeed, A-brands probably have already begun to implement such improvements in response to shifting standards in product categories in which existing RC players have succeeded.)
  • Brand reputation. A-brands already have developed an emotional resonance with consumers and a reputation, which works to their advantage in introducing RC claims (and, as noted below, sometimes also to their disadvantage). By establishing credible RC claims, however, A-brands have an opportunity to augment their already-established brand reputations.

3 BUSINESS IMPLICATIONS

  1. In many cases, companies that succeed in satisfying one or more responsible-consumption demands will raise the bar for the entire product category, forcing competitors to meet or exceed the standard they have set. For this reason, companies that don’t want to be constantly playing catch up (and don’t want to lose market share) will find it advantageous to be the one setting the standards. This will require investment in consumer research to pinpoint RC attitudes and in R&D to identify and satisfy the RC demands they suggest.
  2. Manufacturers (and retailers) do not need to satisfy all of consumers’ RC demands in order to succeed. Instead, companies will likely have more success focusing on achieving one or two RC goals and obtaining independent validation that they have met those goals.
  3. At the same time, both manufacturers and retailers who want to prosper in the RC space will try to capture as many positive aspects of responsible consumption as possible. These aspects include being good for the individual consumer (i.e., usually healthier); good for the world (e.g., environment, labor, etc.); or good for the class dynamic (i.e., affordable luxuries that cost a little more, but for good reason).