Me, my life, my wallet - Sector deepdive

A sustainable world needs sustainable finance. Financial services organizations are central to this process. Many are setting increasingly ambitious targets to eliminate their emissions, achieve net zero ‘financed emissions,’ support the transition of existing clients and fund new climate solutions.

It is less easy for consumers to see how finance can make an impact on the environment, as it is an intangible product. Consumers do not see the same level of environmental importance when it comes to banking and see little banks can do to mitigate their impact. However, 65 percent have chosen to receive electronic statements rather than paper.

For higher - income groups, sustainable investment in ecologically sound firms has become a significant area. Sustainable investing embraces investments contributing to environmental and social issues. They tackle challenges like renewable energy, waste management, greenhouse - gas emissions, circular economy or social cohesion and integration. This plays to consumer desire for active participation of companies on many fronts.

The work the CPG industry is doing to improve their environmental and sustainability impact is not quite so visible to consumers as it is for other industries. It is where consumers perceive the biggest gap lies between the importance ESG should have in the sector and the perceived activities that brands are undertaking to improve things. Sixty-four percent of consumers are willing to pay more for sustainably sourced CPG.

However, because it is less visible doesn’t mean it isn’t happening. Significant innovations are being made in fully recyclable or reusable packaging, responsible ingredient sourcing and reducing overall carbon emissions. The challenge is making this visible and relevant to the consumer.

For many consumers (32 percent), fair-trade products are a conscious choice; it is an easy-to-understand proposition that plays to an increasing awareness of working conditions around the globe.

For many CPG brands, single-use packaging is a huge sustainability problem. Even when packaging is recyclable, brands can’t guarantee that consumers won’t simply throw empty wrappers away.

PepsiCo, for example, has partnered with Loop. Founded by waste management company Terracycle, Loop gives CPG brands ownership of durable, reusable food and drink packaging.

Products are delivered to consumers, who leave reusable containers on the doorstep once they’re empty.

Globally, 49% of consumers care that their energy is green rather than just cheap. Three key factors are accelerating the drive towards sustainability for the energy and utilities sectors:

Increasing government regulations
Around the world, government actions such as clean air acts are mandating the industry to reduce carbon emissions and meet sustainability targets. This sits well with consumers — 77 percent stated that governments should put in place stringent laws to protect the environment and 80 percent feel governments should provide more support for energy and water companies to be sustainable.

Increasing consumer and shareholder demand
Consumers and shareholders are more eco-invested and continue to put pressure on companies to focus on sustainable practices and renewable energy sources such as wind, solar, thermal, tidal and others. Forty-three percent choose to use green energy as their primary source. This rises to 70 percent when those that do so on occasion are added.

Decreasing cost of renewable energy
As more renewable energy installations are developed, theoretically, the cost of generating renewable energy goes down. Consumers are willing to play their part: 59 percent actively monitor their energy usage to reduce consumption. This rises to 82 percent when those that do so occasionally are added. Twenty-six percent are actively investing in renewable energy for their homes, such as heat pumps and solar panels.

Like banking, the role of insurance in environmental matters is less clear to consumers. Insurers do, however, have a big role to play. On the underwriting side, insurers are having to deal with some major issues, including the growing difficulty in modelling the risks from climate-related extreme events.

Also, insurers are influential investors — US insurers alone controlled US$7.5 trillion of cash and invested assets in 2020. They can have an outsized impact on the transition to a low-carbon economy if they channel their investments accordingly.

Some insurance companies are working to enhance their customers’ practices through impact underwriting, persuading policyholders to adopt a greener lifestyle in several ways, for example by incentivizing the adoption of eco-friendly appliances, buildings and cars. Besides offering lower premiums for eco-friendly choices, insurers can allow for upgrades to more energy-efficient appliances and machinery as well as encourage people to opt for repairs instead of replacements.

Environmentally conscious, green attractions are becoming more prevalent. Disney, for example, is the most eco-friendly theme park in the world. For over a decade, it has invested in nature-based climate solutions. These natural places provide habitats for animals and resources for local communities, including food, shelter and income, all while helping reduce the impact of climate change. They have installed waste-management programs that encourage the practice of reducing, reusing, recycling and donating.

Operators are helping engineer better practices by highlighting their commitment to sustainability to guests and educating them on the ways they can play a role in shrinking that footprint. Attractions can act as role models by highlighting the benefits of shifting to a more-circular economy where all elements can be reused at different points in their overall lifecycle.

From product design and supply chains to consumption cycles, sustainability is now at the forefront of consumers’ minds when it comes to all forms of retail. Consumer interest in sustainability was gaining considerable momentum in this sector prior to restrictions imposed because of the COVID-19 pandemic. The disruption caused by the pandemic has only strengthened these interests with 52 percent of consumers saying it has become more important over the last 12 months and 64 percent wanting to understand the environmental impact of a product before purchase.

Retailers can focus on motivating and enhancing consumers’ sustainability practices by developing, offering and promoting sustainable products, services and disposal processes.

The heightened interest in sustainability issues results in consumers taking more accountability for everyday purchasing habits.

Multinational retailer Marks & Spencer recently unveiled its own sustainability standards for denim, a staple item in consumer wardrobes. They have collaborated with a sustainable denim organization, Jeanologia, to reduce the amount of water used in wash processes by 86 percent compared to the industry average, as well as switching indigo dyes to sustainable alternatives.

Furniture retailer IKEA asks consumers to repair, upcycle and donate their furniture items, increasing usage and the lifecycle of products. IKEA accepts used furniture in exchange for an agreed value for the items to be resold in their bargain section.

This encourages consumers to recycle and adopt sustainable behaviors.

Retailers need to look at the afterlife of a product and encourage several lifecycles, which should be considered at product design. The implementation of sustainable processes can shift in consumer thinking, where people will actively seek purchases that reward sustainable behavior.

Consumers are actively choosing brands that are genuinely committed to reducing their environmental impact on the planet. Nearly two-thirds of global consumers are willing to pay more for sustainability in their supermarkets and convenience stores and are increasingly demanding environmentally friendly alternatives. Consumers are concerned about food waste, packaging and recycling.

Food waste is rising to the top of shoppers’ agendas with 84 percent of consumers feeling there is a need to reduce food wastage. Sixty-eight percent take active steps to reduce their own food waste. Forty percent of respondents stated that they buy imperfect fruit and vegetables to reduce food waste.

Packaging is also a concern with 50 percent of consumers globally feeling that plastic and chemical pollution due to rapid development is not justified.

The message on single-use plastic bags has been received loud and clear with 78 percent now regularly using their own bags for shopping trips. Forty-five percent of consumers globally do not use products that contain/release ingredients that damage our water systems and ocean.

Consumers also see that supermarkets have a role to play in promoting awareness of personal health, with 81% of consumers feeling that people should be encouraged to live a healthier lifestyle. Sixty-six percent of consumers also feel manufacturers have a responsibility to reduce levels of sugar and salt in the food they produce.

Labelling is felt to be critical in enabling informed choices. TARGET in the US for example does this by providing online consumers with the option to filter based on sustainable concerns, like biodegradable formulations.

They show their dedication to clear labelling and quality through sustainable sourcing. Transparency on meat, poultry and fish vendor sourcing signifies intent to protect delicate ecosystems.

Working with value-chain partners is also important. When the Co-operative retail group in the UK measured emissions across the value chain, they identified that 71 percent arose from the ingredients themselves.

Consumer demand for environmentally friendly telecoms is growing rapidly. Forty-six percent of mobile telephony consumers have become more aware of sustainability issues following the pandemic, over 61 percent are willing to pay more for products that are sustainable.

Operators have started to focus on green issues and sustainability as part of their ESG strategies to satisfy the expectations of investors, regulators and consumers. Even some of the economic and social effects of communications and telephony that appear positive have had the indirect effect of reinforcing trends that are unsustainable in the longer term—for example, by increasing overall demand for non-renewable energy and facilitating the exploitation of finite natural resources.

Consumers have an increasing awareness and concern as to the conditions with which these resources are being mined.

Worker’s security and safety along with access to sanitary conditions and clean drinking water all play a part in how they judge the industry. Seventy-seven percent of respondents stated that countries that do not uphold basic human rights should be sanctioned.

The manufacturing of products, including computers and mobile phones, is carbon-intensive and uses scarce resources.

Seventy-nine percent of travellers on occasion, 55 percent frequently, make environmental - implication decisions when determining how they are going to travel and select the most environmentally sound.

The present relationship between transport and the environment is not sustainable. The challenge of sustainable transport development is to attain environmental improvements without sacrificing mobility. The transportation sector faces major difficulties in terms of sustainable development due to the multi-faceted positive and negative impacts of transport.

Transportation systems play a crucial role in modern economies, but alongside their benefits, they generate such adverse impacts as congestion, environmental pollution and safety risks.

When it comes to travel, people have become more aware of the impact of air travel, with 50 percent saying they would choose other modes of travel if possible — cycling has risen in popularity both for eco and health reasons. Over half (54 percent) will make efforts to offset the emissions from their travel.

Unfortunately, along with travel, there are significant environmental threats from tourism. These include severe limitations in terms of land and space resources, damage from the construction of roads, damage to the terrain, flora and fauna, damage to archaeological sites, visual pollution, congestion and inappropriate activities at sites which diminishes their value and image.

Sustainable development of tourism will need to strive to assure the development and advancement of the sector while conserving tourist resources such as landscape, nature and the built heritage, both as cultural and social values and as economic assets.