Consumers care about sustainability — but will they pay more?

A majority of U.S. consumers — particularly younger consumers — say they are willing to pay extra for more sustainable products.

Recent surveys, including those conducted by IBM with NRF and the Baker Retailing Center at the University of Pennsylvania, found between half to two-thirds of consumers said they will pay more for sustainable products.

For consumers ages 18 to 34, the percentage reaches 80%, according to a Business of Sustainability Index report. Similar survey results date back to at least 1989, when 78% of consumers claimed they would pay 5% more for products in more sustainable packaging.

But retail executives are understandably skeptical: They see a long-running gap between consumer intentions and actual consumer behavior. While consumers say they will pay more, self-reported purchasing practices suggest otherwise.

According to GfK Consumer Life data, over half (53%) of U.S. consumers think more sustainable products cost too much. That’s a slight increase from the previous year — which might be attributed to consumer concerns about the economy.

“Although environmental concerns are certainly here to stay, economic volatility pushes some behaviors to the background for some consumers,” says Rachel Bonsignore, vice president at GfK Consumer Life. “Americans who are worried about inflation and high prices are less likely to factor sustainability into their purchasing decisions.”

With inflation rates rising to 6.2% in 2022 from an average of less than 2% for the past decade and home mortgage rates climbing to almost 7% in early 2023 from less than 3% in 2021, consumer priorities are shifting.

The cost of “greener” products is not a new concern. Back in 2011, 70% of consumers were worried about the “green premium” for more sustainable products. Concern about the additional cost for these products has declined over time as the cost differences with more traditional products has decreased — but cost concerns for all products, including more sustainable ones, increase in challenging economic times.

“We’ve been here before and during similar times,” Bonsignore says. “From 2008 to 2010, we saw a notable rise in concerns related to cost, quality and efficacy of sustainable products.”

GfK notes current consumer concerns about the quality of more sustainable products rose 8 percentage points from 2020 to 2022. Consumers claiming they lack sufficient knowledge to identify more sustainable products grew 6 percentage points and family resistance to sustainable products increased 5 percentage points during the same period.

Despite financial worries, consumers are interested in buying more sustainable products and remain concerned about climate change and related sustainability issues. GfK research shows 62% of U.S. respondents identify climate change as an extremely or very serious issue. About one-third (32%) say they consider the environment all or most of the time when making purchases.

Although consumers are looking for more sustainable offerings, they continue to report difficulty identifying them. The Business of Sustainability study reported 78% want to buy from environmentally friendly companies but don’t know how to identify them. The same study reported that 72% of consumers read product labels or rely on third-party certifications to identify a product’s sustainability benefits.

NRF’s own research shows that consumers seeking more sustainable offerings use multiple strategies to identify them. When offered seven likely strategies and given the ability to check all that apply, consumers reported reading product labels (34%), conducting online research (33%) and looking for independent labels or certifications (22%) as the most frequently used.  Only 25% of consumers report not seeking any sustainability information.

Deloitte’s sustainability team examined related data and concluded “if sustainable purchases are falling because of financial stress, it means many consumers are begrudgingly buying traditional products that they know aren’t the best option for the planet — and that signals opportunity.”

Consumers do care about sustainability — but they’re also weighing the costs. Retailers that deliver sustainability benefits in ways consumers understand and at the price points they desire will find ways to thrive.