"Shopping for a better world" only partially effective

More and more consumers are turning to ecological and fair trade products. In Germany, sales of organic products amounted to 8.62 billion Euro in 2015, a plus of 11 percent as compared to 2014. The market for Fair Trade products, with a size of 978 million Euro in 2015, has grown by 18 percent compared to 2014. Correspondingly, more and more stores are expanding their product ranges to include organic and Fair Trade alternatives. But is it always a genuine interest in sustainable production processes that is the driving force behind these developments?

In a recent study, BCCP fellow Jana Friedrichsen argues that this development can also be related to consumers’ interest in their social reputation. Purchasing environmentally friendly or socially responsible products is certainly intrinsically valued by some consumers but it is also a means of improving one’s social reputation, and some customers are willing to pay a premium for this image boost. This in turn may make it more profitable for vendors to offer products that are more geared toward building up the customer’s ego than actually supporting sustainable production. 

Jana’s analysis is based on a theoretical model that allows to investigate the optimal pricing and product design when consumers consider “image” and “sustainability” in their decision-making processes. The model analysis shows that consumers who place more importance on their “green” image than on the underlying production processes incentivize vendors to sell products that prioritize image over fully exploiting the potential for sustainable production.

Measures to promote sustainable consumption – such as the national program that was adopted by the German federal cabinet in February 2016 – should therefore take the motives of vendors and customers into account. In order to optimally promote the market share of truly sustainable products, there needs to be a shift in values when it comes to production conditions. Such campaigns should therefore be tailored specifically to information on sustainable production methods.

Read the full article in DIW Wochenbericht 38 (only in German), the five questions to Jana Friedrichsen (only in German), or the underlying theory paper.