Will Consumers Pay More for Products With a Lower Carbon Footprint, Despite the Economy? (Part 1)

Even though I don't necessarily believe we can extrapolate from UK consumer data whether US consumers will pay more for products and brands that showcase corporate social responsibility (e.g., products with lower carbon footprints than comparable items), I do find the results of a UK study quite interesting. The Guardian highlights some of the findings from a Carbon Trust research study showing "consumer demand for lower-carbon products and services is growing, despite the tough economic climate." In addition, the "research also reveals that consumers are more aware that the products they buy come at a high price in terms of carbon emissions across the supply chain." Moreover, "70% of respondents said they would follow simple energy-saving advice on product packaging to reduce their carbon footprint" and "47% of people were more likely to choose those with a label" that marked a particular item as meeting a certain standard or showing the specific lower-carbon impact.

From a procurement and supplier management perspective, the most fascinating elements of studies like this are also the scariest. Central to meeting this emerging consumer need to not only lower carbon footprints of products but also label items effectively is the ability to track and manage multi-tiers of the supply chain, starting with raw materials and cascading through to logistics and warehousing, is the ability to manage supplier information on a multi-tier basis. Yet few companies Spend Matters has interviewed or worked with are capable of providing the level of traceability that would be required to accurately label each and every item, especially across large geographies with multiple production facilities and different supply chains for the same items.

Even though we question the level of granularity and accuracy that even go into the most detailed calculations (e.g., is the source of energy that is used in various stages of production factored into the overall equation?), it's clear that procurement organizations need to begin to embed stronger data collection efforts as part of the direct supply chain supplier on-boarding, ramping and production processes to understand how these different elements add up. Given the fact that one of the safest food supply chains in the world (or among them), Germany's, took weeks to zero in on the particular source of a rather nasty and deadly bacterial breakout in the fresh foods supply chain, how comfortable are we with calculations that rely on facility, production, logistics, warehousing and inventory related calculations from a CSR standpoint?

I'll try to address this issue in Part 2 of this post.

Jason Busch