Sustainability Grows in Importance Among Factors Driving Purchase Decisions

CHICAGO — Consumers are willing to spend more for sustainable products — a trend that is rising across several areas of discretionary general merchandise and consumer packaged goods (CPG).

As of September 2022, 40 percent of consumers reported that environmental issues impact their decision on whether or not to shop at a specific manufacturer or retailer, according to Circana, formerly IRI and The NPD Group, surpassing social issues for the first time.

[Read more: Supporting Social Issues Draws In More Customers]

"Products that impact our energy use, reduce waste and use recycled materials or natural ingredients are all getting attention from consumers and presenting pockets of retail growth," said Marshal Cohen, chief retail industry advisor for Circana. "Despite concerns related to rising prices, consumers continue to prove their willingness to spend on the right products that deliver the value — and values — they seek."

Although some consumers are not willing to pay more for sustainable products, there are discretionary general merchandise categories where the sustainable options outpaced the alternatives despite a higher price per unit:

• Unit sales of footwear made with recycled materials have grown more than six-fold over the past three years while sales of nonrecycled options declined.
• Recycled office supplies sales grew 14 percent vs. three years ago, but nonrecycled offerings declined by 16 percent.
• Prestige beauty is thriving overall, but unit sales of refillable options more doubled in the last three years while the rest of the market grew 25 percent.

Sustainability is making its mark on the CPG industry, as well. Circana conducts annual research with the New York University Stern Center for Sustainable Business and found that in 2022, among 36 CPG categories, sustainability-marketed products have a 17.3 percent share, but grew 30 percent from the prior year. The most prevalent sustainable claim on consumer food and beverage products is "recyclable," and revenue for products touting the fact that they use recyclable packaging has increased 12 percent vs. last year and 30 percent vs. three years ago, outpacing the industry averages for both comparisons.

Sales of vegan cookbooks have also been on a steady rise over the past four years, which indicates a consumer desire for incorporating more sustainable, plant-based foods and beverages into their diets. Increased spending is going toward categories like oat milk and frozen meat substitutes, Circana found.

[Read more: Food & Beverage Spending Drive Retail Sales Revenue]

"The continued growth in sustainable product sales demonstrates the importance of bringing newness and innovation to the market," said Cohen. "Even with all the economic and political distractions facing consumers, they continue to demonstrate a focus on sustainability and a willingness to pay a premium for it. Bringing sustainability to the forefront continues to be a wise marketing tool and, for some brands, the main tool when it is built into the DNA of the product."

Chicago-based Circana is a leading advisor on the complexity of consumer behavior, helping nearly 7,000 of the world's leading brands and retailers take action and unlock business growth.