Economy May Affect Behavior

By Jim Prevor, Editor-in-Chief, Produce Business

It was a year ago this month at the 2007 PMA convention in Houston that this author presented a workshop unveiling important consumer research related to sustainability. In the year since, we have learned a lot, both about how consumers react to sustainability initiatives and about how businesses can deal with sustainability under different circumstances.

As Bryan says, when it comes to consumers, the PMA research is different than a consumer behavior study; it is intriguing but offers the opportunity for more questions rather than giving definitive guides to behavior.

Consumers say they will pay a quarter a pound more for sustainably produced and sold produce, but if given a choice — two stacks of bell peppers, one a quarter more a pound with a sign saying “certified sustainable” — will the consumer buy the more expensive offering? Or does it mean the consumer would like his or her retailer to buy and sell only sustainable product and would accept that this retailer is more expensive?

In the United Kingdom, when it comes to FairTrade — a mechanism by which product is sold with a premium going to producers and their communities in developing countries — it was mostly the latter. FairTrade was commonplace as an option on bananas, but the big boost came when two chains, first the small but very upscale Waitrose and then the much larger but still upscale Sainsbury’s, decided to go 100 percent with FairTrade bananas.

It was this decision by retailers to establish FairTrade as a procurement standard on bananas that created the real boom in FairTrade in fresh produce.

Yet even this example leaves more questions than answers. Waitrose and Sainsbury’s are both upscale retailers that attempt to differentiate themselves based on their values. But neither Wal-Mart’s U.K. subsidiary ASDA — a highly price-oriented retailer — nor the middle-class leader Tesco — the biggest U.K. retailer — went this FairTrade route.

It seems to imply FairTrade is like charity — something we might expect the rich to be more able to afford than those struggling to get by. Is this the kind of definition we can use for sustainability?

PMA’s Planet, People, Prosperity model, echoing countless other models built around the same precepts — The Triple Bottom Line, People/Planet/Profits, etc. — are all useful in reminding us what we are talking about but all problematic in not establishing any clear basis for trade-offs among these concepts.

In other words, if a business is considering putting solar panels on the roof of its facility, we all know it should do so if the return on investment — considering savings on not buying electricity and tax credits — is adequate. But this alone makes sustainability a concept of limited meaning, saying not much more than one should have a sharp accountant. The more serious question is this: Is there something in the intersection between what PMA calls Prosperity and the People and Planet spheres of sustainability that means one should put up the solar panels even if the ROI is inadequate?

Our work in sustainability has led us to define three precepts that help “square the circle” on sustainability and provide a basis for action that is not solely the same thing as saying the ROI is adequate:

First, sustainability involves long-term thinking. If a private equity firm just invested in your company and is intent on selling out in two years — and so won’t invest 15¢ if the investment won’t pay off within two years — this kind of thinking is inherently unsustainable. A lot of sustainability involves recognizing the true long-term costs of doing things the way they have always been done. So instead of mindlessly replacing a light bulb with the same type just because we always did, we are going to look at where a more expensive but more energy-efficient bulb might pay off over the long term.

Second, sustainability involves considering the value of “reputational capital.” We live in a world in which government, individuals, non-governmental organizations (NGOs) and the media can play an important part in the success or failure of a business. The ability to build a store, expand a warehouse, use a chemical, etc., is often determined not simply as a matter of right but as a consequence of reputation. Sometimes there may be value in doing things that don’t obviously pay off because they pay off in reputational ways that will ultimately create financial value for the business.

Third, sustainability is about avoiding inadvertent results. An idea such as “stakeholder engagement” — basically reaching out to all those that may have a stake in whatever actions you might take, even if they have no contractual relationship to you — is partly a belief that input from more sources will produce better decision-making, but stakeholder engagement is also a way of getting an early wake-up call on what troubles may lie down the road.

With the financial crisis at hand and economies around the world going south, we are finding sustainability is rapidly retreating as a corporate concern. Or to be more precise, corporations are morphing their sustainability efforts into cost-saving programs, although with the recent retreat in energy prices, projects that looked sustainable a few months ago now no longer seem feasible.

Will consumers find meaning in programs that become just corporate cost-saving regimens? Will they care about sustainability if the family income gets squeezed? Can the world find a meaning for sustainability that accords with the difficult economic circumstances we may yet confront? This is still very much an open question.