Newsletter 21 Jun '23
Our purchasing decisions have a powerful influence over corporate behaviour. We can harness this to drive companies' rapid decarbonisation.
The global climate crisis is an unprecedented challenge that demands urgent action from every sector of society. While governments, industries, and policymakers play crucial roles in mitigating greenhouse gas emissions, consumer demand is an equally essential force in driving change. This is especially true in wealthy countries like Australia and the United States; the most voracious consumers of emissions-intensive goods and services in the world.
Making greener purchasing decisions isn't always easy. There are lots of areas where consumers are blocked from doing more for the environment, either because of greenwashing, a lack of transparency in product labelling, or because of the abject failure of government regulation.
Oftentimes the environmental cost of certain goods and services isn’t priced into their production, and thus the ‘sustainable’ choice is sometimes the most expensive one, penalising consumers for their altruism.
Despite these challenges, it is still an immensely worthwhile pursuit. When you exercise some critical thinking to wade through the mire of greenwashed nonsense, and find your way to a product or brand you actually trust, you are sending a clear message to the corporate overlords that your desire for zero carbon and climate-friendly products is strong enough to shift your consumer behaviour. You are demanding something different. Plus, there are more and more sustainability leaders in different industries innovating to remove the ‘green premium’. Already in many categories, sustainable products are the cheapest (which makes sense when you think about how much cheaper a sustainably produced good can be when it involves repurposing waste to form part of its raw materials, or no longer needing to pay for fuel due to the use of solar energy to power manufacturing). The tricky part is getting this knowledge into the hands of a massive number of mainstream consumers so sustainable consumption can actually scale.
"Consumer demand refers to the choices individuals make when purchasing goods and services. It encompasses the products we buy, the brands we support, and the values we prioritise. Historically, consumer preferences have heavily influenced market trends and shaped the behaviour of corporations."
Several studies and reports have examined the potential impact of consumer demand on global carbon emission reductions. While precise figures vary, they all underline the substantial influence of consumer choices.
A study of OECD countries in 2015 traced emissions back through supply chains and found that roughly 60% of global greenhouse gas emissions could be directly linked to households’ consumption of goods and services. People in the wealthiest countries accounted for a large majority of this, given their much higher rates of overall consumption compared to people in developing countries.
The latest UN IPCC report also found that behaviour change and demand-side mitigation measures, which includes reducing consumer demand for emissions-intensive products and services, could account for between 40-70% of the global emission reductions needed by 2050.
Consumer demand also drives the behaviour of markets. Look at how many car companies are now scrambling to offer electric vehicles. Tesla was the front runner, creating a socially desirable vehicle that was perceived as a luxury, high-status purchase, and in doing so established the consumer demand for EVs. A demand which other car companies are now attempting to meet.
The same can be seen in the rise of vegan foods- with Australia being the 3rd fastest growing vegan market in the world. Do you remember seeing as many meat or dairy-free alternatives in the supermarket 10 years ago?
Consumer demand has driven these changes and accelerated their pace, because companies are in the business of making stuff that people want to buy. If you view your own choices in isolation, they can seem meaningless, but if your choice forms part of a trend in consumer behaviour, this has a proven impact on companies and their product offerings.
So how can we engender big and rapid shifts in consumer demand in key sectors like transport, home energy, food and general household goods and services? The first step is to ensure the sustainable choice is the easiest one. This means it needs to be competitively priced, conveniently accessible and high quality.
Each sector will face its own challenges trying to achieve this, made especially difficult by the fact that 60% of countries have absolutely no government policies in place to shift consumer demand to support emissions abatement.
On the matter of price, sustainable goods and services need to be cheaper than the polluting ones or at least comparably priced. As sustainable products sell more and increase their scale, their prices tend to fall. And if companies manufacturing goods that pollute the atmosphere and degrade the environment were actually charged or taxed for this in some form, they would no longer be able to charge such perversely low prices and undercut healthier alternatives.
A regulatory overhaul like this would be super difficult to achieve, given that most products pollute the environment in how they are manufactured. We'd also need to mitigate the potentially regressive side effects, whereby the poorest people suffer the most from an increase in prices across the board.
I should mention here that reducing your consumption of non-essential items does typically save you a lot of money, largely because you’re opting to buy less stuff in general. Reducing consumption is actually more important and even less talked about than shifting consumer demand by switching products. I'm keen to focus on this in an upcoming newsletter.
Next comes the totally opaque and impenetrable labelling of products. As consumers, identifying the greenest choice from the most polluting is tremendously difficult, with companies making all kinds of fabricated or cherry-picked claims.
This rampant green washing is something the ACCC is now cracking down on, but it pales in comparison to measures that would stop these behaviours from occurring in the first place. For example, a certified, centralised labelling system that makes it easy to identify the most sustainable choice across product categories.
Another major challenge is planned obsolescence, by which companies design products to degrade and malfunction faster to prompt repurchase. Each of us having to buy a new phone every 2-5 years creates a huge amount of e-waste, but these tech companies have us in a chokehold. I’ve been using my iPhone for around 6 years, and although the crappy battery can be replaced, what's the point when most new app updates and software have become incompatible.
A durable product is in principle better for the environment. We could regulate against planned obsolescence by creating a system to independently assess the durability and lifespan of any given product, and then clearly labelling this info on the product itself.
There are a few key players like CHOICE Australia, who do a good job of independently and rigorously assessing the performance of different products. But given how fast the market moves and how constantly new products are released, it's extremely difficult to accommodate the years-long studies required to assess the actual life cycle of a given product and compare this to its alternatives. Most groups have neither the resources nor capabilities to run this type of life cycle assessment.
While the lack of regulation makes shifting many of your consumer choices hard, costly and confusing, there are some private actors attempting to meet the growing consumer demand for transparency and trustworthiness.
For example, B Corp is a voluntary certification system that rigorously assesses environmental impact and labour standards, and only gives its accreditation to the best companies. They even have a dedicated search engine where you can input a particular product or service to see if there is a B Corp-certified option you can support.
The Good On You platform rates a huge number of fashion brands on their environmental sustainability and labour credentials, directing consumers towards circular economy brands that use eco-friendly textiles and engage in sustainable and fair trade manufacturing practices (although I’d always recommend not buying first-hand and instead shopping second-hand whenever you can).
And then there’s Acacia Money, the new kid on the block. Acacia gives you the information you need to shift your passive services to more environmentally-friendly alternatives (that also save you money), to ensure your money isn’t supporting carbon intensive activities.
These passive services include who you bank with, your superannuation fund and your electricity provider. 'Passive' because although you selected them originally, their impact on carbon emissions is not something you actively or deliberately participate in.
And this impact can be massive.
For example, the pie chart below displays the emissions breakdown of an average, 44-year-old Australian man with $188,000 in superannuation and $30,000 in personal savings:
Don't underestimate these passive services!
Acacia's software addresses a bunch of the previously mentioned blockages to make sustainability the easy choice. They allow you to see the price and environmental impact of your current provider up against different providers at a glance, identifying the ones that can save you the most money and the ones that are better for the environment.
For example, let's take your energy provider. In Australia, you have what are called gentailers - groups that sell electricity to consumers, but also own energy generation assets. AGL, Energy Australia and Origin Energy are the biggest players in Australia. These giants have each been making the right noises when it comes to emissions reduction over the past few years, but they also own a hell of a lot of fossil fuel generation assets and maintain a big fat stake in their continued operation. Meanwhile, many newer electricity retailers are either owned by renewable energy generators, or don’t own any fossil fuel assets at all.
Acacia’s free tool compiles clear, simple data so you can see which energy providers will save you the most money, and which ones are ranked the greenest according to Greenpeace’s Green Electricity Guide and Acacia’s own methodology. For instance, the average household could recently have saved over $300 per year by switching to one of the top 5 most climate-friendly energy retailers – making the sustainable choice the easiest one.
If you haven’t already switched your energy provider, bank, super fund or home loan to ensure you’re with a climate-friendly provider, then Acacia is a great place to get a tailored assessment. I’ll be following up with more info on exactly how you can shift your own consumption habits and help shift consumer demand in the right direction, using some of our in-app programs and Acacia’s free tools.
Finally, thanks for your patience with me during the previous months of radio silence. I took some time off work to have a baby, named Mihály, with a gratuitous pic of us below. It’s been a blast, and came after I decided I wanted to have children with my partner in spite of the impending climate crisis, choosing optimism over despair in a pretty profound way– but that's a topic for another newsletter!
Thanks for reading,