Increasing consumers’ willingness to pay (WTP) for environmentally friendly products is a key challenge for sustainable development in market economies. Still, how consumers react to favorable and unfavorable environmental information is largely unknown.
Customers do not count
The research published on 30 May 2021 in Industrial Ecology suggests a survey-based experiment conducted among a representative sample of the German population. Results confirm that the negative effect caused by unfavorable product carbon footprint information on WTP is stronger than the positive effect caused by respective favorable information.
Consumers do not evaluate the absolute level of a product’s environmental performance, but rather its deviations from a reference point. Options which positively deviate are perceived as gains, negative deviations are perceived as losses. So to say, consumers tend to generally reward or punish deviations of a product’s environmental performance from industry average instead of consistently accounting for the size of these deviations.
From a sustainable development perspective, the observed patterns highlight a problematic contrast between the need for substantial environmental improvements and limited market incentives for companies. This analysis highlights that for many companies (those offering products with very low or above average levels of environmental performance) markets provide hardly any incentive to improve environmental product performance. This stresses the importance of governmental intervention for environmental consumption such as negative environmental labeling, raising consumers’ environmental reference points, minimum environmental industry standards, and subsidies for radical environmental improvements.
The influence of a product’s environmental performance
Increasing consumers’ willingness to pay (WTP) for environmentally friendly products is crucial to achieve sustainable production and consumption and also to sustainable development in general.
Multiple studies find that positive environmental information can stimulate purchase behavior in specific contexts, for instance, food and consumer electronics. In general, previous studies suggest that while consumers do prefer to buy more environmentally friendly products, they need to trade-off a product’s higher environmental performance against its potentially higher price. Investigating WTP accounts for a consumer’s price consciousness which is of great importance given the fact that environmentally friendly products are usually more expensive than their conventional equivalents.
Product carbon footprint (PCF) can be defined as an indicator measuring the direct and indirect green-house gas emissions caused by a specific product along its entire life cycle. Unlike most environmental labels, PCFs provide quantitative and not only qualitative environmental information. While many sustainability labels present positive sustainability information, researchers suggest that combined positive and negative labeling would be more effective to foster sustainable purchase behavior.