How to convince customers to pay more to save the planet

The behavioural economics of sustainability.

by Natasha Abramson
Last Updated: 23 Sep 2019

The traditional linear economy of make, use and dispose is incompatible with the Earth’s finite resources and its limited capacity to absorb waste products, and the problem only becomes more acute the faster we grow. 

The circular economy has been proposed as a solution by government, charities and activists. Instead of disposing of our used products, we recycle, reuse or remake them, meaning that materials are always in use. 

Socially conscious businesses may well find the idea appealing, but it brings with it a unique set of challenges.

Sam Taylor and Rich Smith transitioned their affordable fashion business Goose Studio into the circular economy gradually, starting off by using 100 per cent organic cotton, before looking at the materials they use more widely in the production and packaging of their clothes. Now everything is recyclable, and Goose Studio actively encourages customers to reuse clothes rather than buy more.

"We found the hardest part was creating a profitable business - it’s been a lot slower to grow than we initially thought. It just takes a lot longer for the customer purchase to happen," says Taylor. 

"By being more sustainable, things do cost a small business more. If you choose organic cotton and recyclable packaging, it will cost slightly more. We're trying to be competitive at the most competitive end of the wider fashion market, the affordable side. And that has meant that our margins and the ability to grow through those margins has been a real challenge."

The circular economy and sustainable businesses more generally struggle to generate economies of scale, says Yolanda Berry, behavioural economist of UKBE.

"We've become so used to if I need something, I'll just pick it up and then I can just throw it away. As a result, manufacturers can produce a lot of this stuff at a very low cost to them. But the real cost comes to the environment and in resource depletion. So where I see the circular economy being stifled or stymied is asking consumers to pay more." 

Take water bottles as an example. It’s a significant behavioural change to ask consumers to pay more for a product they instinctively expect to be cheap (water) by making them take responsibility for their waste - a responsibility people generally prefer to think of as someone else’s.

"As a behavioural economist, I understand why this is. Each of us has some kind of limit to their cognitive load, and every single decision that we make, big or small, hits that cognitive load. So to use up that precious resource on what should or shouldn’t be recycled is difficult. I've got other things that I want to think about," Berry explains.

The key is to reframe the problem away from paying more in the name of sustainability. There is a short-term surcharge on circular economy products, for example, but a long-term pay-off for consumers in the ability to reuse their purchase.

Goose Studios’ Taylor says businesses also need to think long-term. "Our customers are really keen on advice to live more sustainable lives. And that only ends up being a positive conversation, even if they’re saying you don’t sell sportswear, but where can I find more sustainable sportswear? What fabrics should I be looking out for? The customers use us to get advice and that's such a strong relationship to have as a business," says Taylor.

4 ways to induce behavioural change

Berry recommends a method called EAST for nudging consumers towards sustainable purchases. This involves ensuring that any choice is:

1. Easy

2. Attractive

3. Social

4. Timely

The example she gives is a sign she saw on the back of a roadworks lorry - red with white lettering, all caps and easy to read. The sign read "slow down, my daddy works here".

"It incorporated all the elements. It was easy to read, it was attractive through its use of bold colour, it was social through the use of the word ‘daddy’, and it was timely," says Berry.

Image credit: Naked King via Getty images

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