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Changing the Way We Consume

 Insights

 Issue Overview

In the four years since the World Economic Forum’s Sustainable Consumption Initiative started, an estimated 450 million people have been lifted out of poverty and the number of households in the emerging and developed world living on an income of more than US$ 3,000 a year has increased by 28%. More than 150 million new consumers will join the middle class each year until 2030. This generation of mostly young, urban consumers from emerging markets presents huge opportunities for social progress and markets. These same consumers will also create new demand for products and services – and place additional strain on the planet’s finite resources.

Challenges and Complexities

Current approaches to sustainability are predominantly focused on sustainable supply, and will struggle to address this new demand. It is imperative to take a closer look at the consumption of our resources and how we can change the way we consume as a society.

Meanwhile, the topic of sustainable consumption itself remains a sensitive one. This is largely because within our current economic model there are no obvious scalable solutions to aim for. The idea of consuming less is certainly not appealing to anyone trying to grow a business or an economy, or even to anyone trying to grow a family. However, it is important to break down what we mean by consumption – are we interested in consuming “stuff” or in consuming value? Products or services? Disposable goods or durable goods? Ownership or collaborative consumption? Each of these questions provides a possible piece of the sustainable consumption puzzle, but also still challenges an incumbent model of consumption.

While case studies and innovations leading towards a more sustainable consumption are becoming more prevalent, they are not necessarily solutions that can be readily adopted by a multinational manufacturer or retailer. A series of these were explored by the 2010-2011 Council in a report that was published in October 2011: “Consumer Industry Emerging Trends and Issues”. (http://www.weforum.org/reports/consumer-industry-emerging-trends-and-issues). This publication highlighted several innovations in the way that consumers are engaged, including fractional ownership models such as car sharing and end of life models through repurposing and recycling. In addition, the idea of sharing information as well as products is gaining traction in as well, in particular through the use of data to communicate more with the consumer or to personalize services to offer more value without using more resources.

While the examples and cases are thought provoking, it is the dichotomy between such innovations and their scalability that causes the friction around the issue of sustainable consumption. Many of the innovations listed in this report are direct threats to organizations with vested interests in the current system of “take, make, waste”. What will a manufacturer sell if it is not products? How does a major retailer make more money while selling less stuff? These questions, often implicitly rather than explicitly, lurk like elephants in the room when discussing sustainable consumption.

Even within the Council, the conversation over the past year has not been an easy one. Bridging the gap between an ideological debate full of “shoulds” and the reality of getting projects going on the ground or running a profitable business has proven to be difficult. The incremental steps being taken by major players are clearly insufficient to meet the scale of the challenge, but they are best in class and must be embraced as steps in the right direction.

However, one cannot, get stuck in the rut of recycling the cold water used for washing or reusable shopping bag examples that have been around for several years. These innovations are important, but it must be acknowledged that they are clearly insufficient, and are only the first steps. The challenge is that even through Council brainstorming, there are very few examples at the next level to inspire change at scale.

Council Focus – Sustainable Consumption and the Consumer Engagement: Implications for Different Issues

Sustainable Consumption is a complex issue because it encompasses the interconnected impacts from a range of environmental issues, including water, food, energy and climate change. A few examples illustrate the scale of the challenge being addressed by other Global Agenda Councils:

  • Water consumption already outstrips demand in many parts of the world, and analysis suggests that by 2030 the world will face a 40% global shortfall between forecast demand and estimates of available water supply.
  • Enough food is grown today to comfortably feed seven billion people. However, according to the Food and Agriculture Organization of the United Nations, roughly 50% of all produce grown is wasted in the European Union, the United States and Sub-Saharan Africa. In addition, the changing appetite of new consumers for meat and dairy products will have significant environmental impacts.
  • With advanced technologies, the role of the consumer plays an increasing role in lowering energy consumption. McKinsey estimates that customer demand response, known as “demand side management” can reduce peak energy demand in the United States by 20% between 2009 and 2019.
  • Greenhouse gas emissions are generally calculated by their origin, however nearly 20% of China’s emissions are produced on behalf of other countries and emissions in the United States would be 8% higher when measured by consumption.

Across all these issues, the primary focus tends to be on supply – where will the water come from? How can we grow more food? How can we ramp up renewable energy? While resource security is an important part of the equation, it does not address demand, including delivery of value or overconsumption of resources.

Through conversations with other Councils, the Council on Sustainable Consumption identified some key opportunities where demand plays an important role. While this was agreed by Council Members, survey data repeatedly shows that moral or ethical arguments will only drive 10%-15% of consumers to make more sustainable choices, even while more that 50% state that they are doing “everything they can” to protect the environment.

There is an opportunity to explore the role of other tools to catalyse consumer change. These range from “sticks”, such as choice editing, more enabling “carrots” such as nudging or gamification. This last tool is a new field that taps into the competitive spirit of consumers to reward targeted behaviours with points or public status symbols, often using the power of social networks.

 Impact

Events

At the World Economic Forum Annual Meeting 2012 in Davos-Klosters, there was keen interest in sustainable consumption, particularly consumer behaviour and the potential of technology. In a private session on sustainable consumption and consumer behavior, several Council Members played an important role in whetting the appetite of CEOs to advance work during 2012. It was agreed that a fruitful area of focus could be the juncture between consumers, new social media, emerging cognitive and behavioural work on consumer behaviour, and sustainability.

Since Davos, a new project, “Engaging Tomorrow’s Consumer”, has been initiated to explore this interconnected area. The project will bring together Chief Marketing Officers, Chief Sustainability Officers and other executives from media and communications, technology and consumer industries. Working with experts from the Global Agenda Council on Sustainable Consumption, the new project will explore how to close the intention-action gap that consumers so often display.

Also in Davos, lead participants in five key Councils met and agreed to work in collaboration with the Council on Sustainable Consumption. The targeted output is a series of short papers that explore how sustainability-related consumer action on the specific issues of these paired Councils can be scaled. Key Global Agenda Councils committed to this include Climate Change, New Energy Architecture, Food Security, Oceans and Water Security.

Building on the conversations in Davos and the interest in the United Nations Rio +20 Earth Summit in June 2012, the Council has set up its own series of cross-Council dialogues, with ongoing conversation with Global Agenda Councils New Energy Architecture, Food and Nutrition, Climate Change and Water Security. In addition, representatives from the Councils on Social Networks and Brain & Cognitive Sciences are engaging to explore how their expertise can add value to these cross-Council challenges.

Findings so far include:

  • Climate change: The impact of the consumers and their consumption on climate change is significant, and presents a huge opportunity. It has been calculated that behavioural change and product choice could deliver around 75% of the emission reductions required by 2050.
  • Energy: Consumer response and demand-side approaches offer promise for scaling up energy efficiency, however, consumer demand is not currently leveraged in adequate proportion. This failure to get to scale is largely due to information inadequacies, existing incentive and disincentives governing consumer behaviour, policy and regulatory considerations, and value-based reasons. Companies such as Opower are paving the way by using timely and transparent delivery of information to change consumer habits around energy consumption in the home.
  • Water: Consumers can engage on water issues at three levels: general awareness and understanding of water cycles, water catchments and how these link to behaviour; direct impacts of actions in the home, though these are usually statistically insignificant; and indirect impacts of consumption, in particular embedded water in food, and the contextual relevance of these in terms of geography and types of water impacted (green water, blue water, grey water, etc.)
  • Food security: Globally, around 30% of all food is wasted along the supply chain, from production to consumption. In many parts of the world, most of this waste happens at home, by the consumer. A major new initiative on food waste, which is expected to be launched in Rio, will address the role of consumer behaviours.

The Council is also presented with a very near-term opportunity given the interest in sustainable consumption at the Rio+20 Earth Summit. The Brazilian Chair of the Rio+20 Summit has selected sustainable consumption as one of the 10 themes that will be discussed by stakeholders in a series of publicly broadcast dialogues during the Summit’s multistakeholder consultations. This world stage presents an opportunity for both the issue to gain increased awareness, and also to contribute to a more holistic view of environmental and economic systems. The Council is working with the World economic Forum’s Environment Team to ensure that demand-side solutions are part of the Forum’s Rio+20 submission.

Across each of these issues explored above, there are many ways to engage consumers, many of which can be applied from one topic area to another. The relative energy consumption on an energy bill which motivates the consumer to use less can be applied to water metering as well, and incentives to shift to a less carbon-intensive diet can be applied to shifts in transport modalities.

Where to From Here?

From this exercise, several general levers have been identified as enablers of sustainable consumption. They are applicable whatever the resource, product or service that is being consumed. Collectively, these have the potential to change consumer behaviour across any of these issues examined. Levers identified are as follows:

  • Pricing: Honest price signals, price on the costs of pollution and constraint natural resources
  • Education: A significant effort to combat the consumption messaging driven by mass media
  • Metrics: Measurement of consumer product impacts and simple communication of this information
  • Choice editing: Regulation of harmful products by companies or policies and standards
  • Aspiration tuning: Shaping cultural norms and desires with marketers and cognitive scientists
  • New business models: Moving beyond efficiency from volume to value, from products to services
  • New materials: A shift to a circular economy that uses technology and infrastructure to eliminate waste
  • Market readiness: Companies rewarded by investors to meet their long-term dividend yields

In the next phase of the Forum’s work on sustainable consumption, a new project will take a more focused view on the role of the consumer, and how to overcome the vast gap between consumer intentions and consumer actions. In conjunction with the Forum’s new “Engaging Tomorrow’s Consumer” project, several of these levers will be explored deeper.

To address the intricacy of the conversation, new expertise will be brought into the Council, including thought leadership on behavioural psychology, cognitive science, social media, and the use of gamification as a motivator and incentive for change. The Council will work closely with the new project team to ensure that the Council work and project work are mutually beneficial.

Disclaimer

The opinions expressed here are those of the individual members of the Council and not of the World Economic Forum or any institutions to which they are affiliated.