Yesterday, I wrote that meme stock trends throw business fundamentals out the door. Similar tension between business fundamentals and ESG has increased because of anti-ESG laws and initiatives, putting pressure on companies to look for or improve the business case for their ESG and sustainability programs. Sometimes these involve a green price premium for products and services. My experience with and research into those in the past (back to the 90s) indicates that consumers won’t actually pay more for sustainable/green products even though they say they will. I’ve seen numerous academic studies on this and a small number of products that tried, but on Monday The Guardian wrote about a fascinating real-world attempt at something similar:
“In a week-long experiment in all 2,150 branches of the Penny chain, a range of nine products, mainly dairy and meat, will be priced at what experts from two universities have deemed to be their true cost, in relation to their effect on soil, climate, water use and health.
The ‘wahre Kosten’ or ‘real costs’ campaign has seen the price of wiener sausages rise from €3.19 to €6.01, mozzarella go up by 74% to €1.55, and fruit yoghurt increase by 31% from €1.19 to €1.56.
The awareness promotion week is taking place in conjunction with academics from the Nuremberg Institute of Technology and the University of Greifswald, and was triggered by the conviction among consumer researchers that price tags in supermarkets in no way reflect the true environmental or long-term health costs of producing the foodstuffs and getting them on to retailers’ shelves.”
I know this is kind of the opposite of a green price premium since it reflects estimated social costs of environmental impacts (aka “externalities”) rather than “positive value” of green products. Even so, it will be interesting to see how sales change due to higher prices based on environmental and social impacts. In the meantime, our Guidebook Communicating ESG Value offers other ways to demonstrate benefits of corporate ESG programs.
