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Three Marketplace Trends

Here are three current trends that appear to be having a significant impact on consumer decisions in the marketplace:

  1. "Sustainable Consumption" Goes Mainstream

    Amid an age of plenty -- at least in the U.S. and other industrialized nations -- there is growing interest in the simple question about "How much is enough?" This question is certainly not new, but more recently it has extended beyond a small corps of alternative lifestylers to more mainstream folks who, for a variety of reasons, are beginning to question the linkages between quantity of possessions and quality of life.

    In recent years, the voluntary simplicity movement has grown to include burned-out overachievers and others wishing to escape the fast-track treadmill of the New Economy. Voluntary simplicity courses now are being taught in schools, even inside companies. And there's the growing attention paid each year to "Buy Nothing Day" (or, in some countries, "No Shop Day"), an annual event promoting reduced consumption. In 2000, Buy Nothing Day activities took place in more than 30 countries, from Brazil to South Korea to Israel. Meanwhile, a 1998 book, The Overspent American: Upscaling, Downshifting, and the New Consumer, by Harvard economist Juliet B. Schor has gained attention and currency. Schor identified an insidiously ruinous form of "competitive spending" she calls "the new consumerism." This new consumerism has spawned a backlash, according to Schor, leading some Americans to "downshift'' to lower-paid, less-demanding jobs and curb their appetites for "commodified leisure."

    Clearly, this is no mere recasting of the green consumer movement. While environmental impact is a factor in "sustainable consumption," it is only part of the equation. Sustainable consumption is decidedly more complex, taking on a more global perspective than green consumerism, grappling with the gaps between the "haves" and "have nots" in both the developed and developing worlds. It has to do with satisfying basic human needs and with spiritual, moral, and ethical matters. And it involves addressing the problem of underconsumption that characterizes a significant percentage of the world's populace.

    How are companies responding? Surprisingly, one place "sustainable consumption" may manifest itself is in the automotive industry. At first glance, automobiles and the environment seem at direct odds with each other. Yet most modern societies are built around the notion of mobility -- getting to jobs and schools, moving goods and materials from place to place, shopping and transporting purchases home, and in general living lives that enjoy the freedom and independence of movement. Automobiles are not going away. Indeed, car ownership is expected to continue its upward climb in coming years.

    Consider the numbers: In 1999, the global passenger car fleet stood at 520 million vehicles, according to the Worldwatch Institute. And while that may seem significant -- the number of cars has doubled since 1975 -- it means only about 8 percent of the earth's population owns a vehicle. More than nine in ten people don't -- yet.

    What happens when the newly opened markets of India, China, Africa, Eastern Europe, and Latin America create perhaps a billion more middle-class individuals desirous of increased mobility? Can the planet and its people support this magnitude of vehicle growth? How do you bring mobility to billions without necessarily raising pollution and resource use proportionately? The global automobile manufacturers -- at least, those that plan to be around in 25 years -- are pondering that question. Ford, General Motors, Honda, Volvo, and other global automakers are beginning to view themselves not merely as vehicle manufacturers but as "mobility providers," or even "sustainable mobility providers." "Sustainable mobility," for example, embodies the notion of "servicizing" a product. Servicizing refers to an increasingly utilized business model centered around selling the services a product delivers, rather than the physical product itself.

    An example from the world of automobile manufacturing involves Ford and the automotive paint division of DuPont. In the 1990s, Ford recognized that a significant amount of the paint it was buying did not end up on vehicles. Inefficient manufacturing processes allowed much of the paint to escape as air emissions or water-based sludge. Ford paid twice for the paint -- once to buy it and once to properly dispose of the wasted paint -- neither of which brought value to Ford or its customers. So DuPont and Ford renegotiated their relationship to "servicize" the painting process. Now, rather than selling Ford paint, DuPont sells a service -- painted cars. This gives DuPont an incentive to paint cars with the least amount of waste. A business model that shares the resulting savings rewards both companies for their increased efficiency.

    The notion of servicizing can apply not just to painting cars, but to owning and driving them, too. Consider, for example, the Intelligent Community Vehicle System, or ICVS, created in the late 1990s by Honda.

    ICVS is a system of shared electric and hybrid-electric vehicles -- from bicycles to small passenger cars -- suitable for use in a campus or small- community environment. Participants receive an electronic "smart card" that enables them to use the system. So, for example, someone needing to use an electric-assisted bicycle would insert a smart card into a vending machine at a centrally located kiosk and receive a small battery that is easily inserted into the front of the bicycle near the handle bars. After reaching her desired destination, the user would return the battery to a nearby vending machine, with the appropriate charge levied to her smart card. Meanwhile, the system keeps track of the bicycle inventory and where they are located.

    Using the small passenger cars in the ICVS system involves even more sophisticated technology. An individual desiring to use a car inserts his smart card into a kiosk, at which time a vehicle automatically drives up and parks. The user's smart card serves as a means for both unlocking the doors and starting the engine. Then, when the user reaches his destination kiosk, he locks the car, inserts his smart card into the kiosk -- and the car drives away and parks itself!

    In effect, ICVS has "servicized" transportation by removing ownership of the physical good (the car), and providing only the desired service (the ride from place to place).

    Honda isn't alone in thinking about such notions. William Clay Ford, chairman of Ford Motor Company, acknowledged in a 2000 speech that, "We understand the triple bottom lines of sustainability must all be addressed for us to be successful. For example, we can't expand in potentially huge markets such as India and China -- and provide a better life for millions of the world's poorest people -- unless we can do it in a sustainable way. In addition to the automobile, [sustainable mobility] may include mass transit, or Internet access, or something we haven't even thought of yet."

    Of course, there is the human factor. Getting people to accept the notion of sharing, not owning, vehicles could be challenging if the U.S./Japanese/European model of individual car ownership takes root in emerging markets. While the notion of sharing vehicles may be compelling, it has never been tried on a large scale. Can automobile companies' considerable marketing clout shape individuals' mobility aspirations? It remains to be seen how much consumers actually will embrace products and services that promote "sustainable consumption."

  2. Looking Beyond Products to Companies

    The protests over the notion of globalization in recent years are a pointed reminder of the growing collision of environmental concerns with those of human rights, labor, and community economic development -- the so-called triple bottom lines of economic, environmental, and social sustainability. Activists -- and a few enlightened business leaders -- are recognizing that companies increasingly are being judged not just on how much economic value they add, but also on how much environmental and social value they add -- or destroy. Whether the triple bottom line becomes the new consumer standard, and how companies adapt to consumer expectations to be "socially responsible," will be among the more interesting marketplace stories of the coming years.

    What, exactly, makes a company "socially responsible"? There's certainly no consensus. Most definitions illustrate the sweeping agenda that businesses face in satisfying the needs of demanding consumers. For example, according to Business for Social Responsibility corporate social responsibility, or CSR, is defined as "operating a business in a manner that meets or exceeds the ethical, legal, commercial, and public expectations that society has of business. CSR is seen by leadership companies as more than a collection of discrete practices or occasional gestures, or initiatives motivated by marketing, public relations, or other business benefits. Rather, it is viewed as a comprehensive set of policies, practices, and programs that are integrated throughout business operations, and decisionmaking processes that are supported and rewarded by top management."

    That's no small order. Indeed, BSR lists 116 CSR topics and subtopics provided that comprise the CSR agenda. For companies conducting business on a global scale in "Internet time," the CSR agenda can be overwhelming. But not for consumers, who increasingly expect companies to pay attention to all of their impacts: on employees, customers, communities, the environment, and other "stakeholders." And today's consumers aren't afraid to make an example of companies perceived to be behaving badly.

    Consider Nike, the $8 billion footwear and apparel company, which has become a lightning rod for activists, consumers, the media, and others, who have taken aim at the company's workplace, environmental, and human rights practices. According to its critics, Nike has engaged in a variety of practices that have exploited Third World workers and the communities where they live. The images proffered by Nike's critics are vivid: women and young children toiling for long hours for low pay in squalid conditions, breathing fumes of toxic chemicals, unable to protest for fear of losing their jobs, manufacturing goods whose price tags exceed their monthly pay.

    Nike acknowledges that in the past it was less than vigilant in monitoring the practices of its factories -- nearly all of which are contracted to independent manufacturers -- but it has launched an aggressive and ambitious effort not only to correct such situations, but to set a shining example for its industry. The company has begun using sustainability as a design criteria to reduce the use of toxic materials and generation of waste in its manufacturing process. Nike cut the use of solvents in its adhesives by 800,000 gallons in one year and has a goal of reducing its use of volatile organic compounds per unit of production by 90 percent by 2001. The company also supports organic cotton farming by providing incentives for farmers to switch to organic production.

    None of this seems to have stemmed the tide of criticism. In recent years, Nike has been named among the ten "worst" international corporations by Multinational Monitor magazine; had an Indonesian factory looted and burned by protesters; and suffered criticisms by U.S. women's groups, who pilloried the company for commercials that call for empowering women while poorly paying its predominantly female overseas workers. Its hometown, Portland, Oregon adopted a resolution urging its troubled school district to "respectfully decline" a $500,000 cash donation because of the company's alleged human rights abuses.

    The experiences of Nike and other companies that have come under intense public scrutiny because of perceived wrongdoings suggest that consumers' expectations of brands are changing. It is no longer enough that a company delivers good- quality products. In the search for differentiation, the battleground shifts from the tangible -- pounds of chemicals and other wastes released into the environment -- to the intangible -- ethics, values, and corporate culture.

  3. The Rising Power of NGOs

    In his 1998 book, Which World?, World Resources Institute senior scientist Allen Hammond developed three scenarios "to explore alternative possibilities for how the future may unfold" in the 21st century. In the most idyllic scenario -- Hammond dubbed it "Transformed World" -- he described an explosion in the number and influence of nongovernmental organizations, or NGOs. The NGOs' power, he said, comes from their "ability, despite the bewildering number of causes they espouse, to form spontaneous coalitions and to motivate and arouse public opinion."

    Whether "Transformed World" comes to pass remains to be seen, but the transforming power of the NGOs already is evident. In recent years, coalitions of activists increasingly have influenced how companies, politicians, and the public think about issues ranging from child labor to sustainable forestry.

    The world of NGOs -- which range from public-service and humanitarian-relief agencies to local, national, and global activist organizations -- is growing. For example, in 1948 there were 41 consultative groups formally associated with the UN Economic and Social Council. Half a century later, there were more than 1,500.

    Why the growth? One contributing factor may be the near paralysis of government institutions in addressing environmental and sustainability issues. Another may be the recognition that there is a wealth of knowledge and expertise outside of government and the private sector. Still another is a sense that cooperation is needed to produce new technologies and policies. Today's NGOs are more willing to engage companies in productive dialogues and partnerships. They are better tuned to what makes companies tick, and they know how to leverage meager resources to promote corporate change.

    Consider, for example, the experiences of one well-known consumer-products company that came under scrutiny by a group of "zero-waste" NGOs for failing to live up to a commitment to use a significant percentage of recycled material in its packaging. The NGOs placed the company on a list of targets for a nationwide campus boycott. Most such boycotts have negligible effect on company sales and profitability, and this boycott was no exception. But the NGOs added a twist: College students also were urged to boycott the company's recruiters when they visited campuses seeking to interview potential job candidates.

    That hurt. The company's top environmental manager received a call from senior management, wanting to know how the company got into this mess -- and how it could get out of it. In an economy in which a company's ability to attract and retain talent has become a source of competitive advantage, the recruitment boycott cut to this company's core business strategy.

    NGOs' roles can cut both ways. As P.J. Simmons writes in "Learning to Live with NGOs": "Embracing a bewildering array of beliefs, interests, and agendas, they have the potential to do as much harm as good. Hailed as the exemplars of grassroots democracy in action, many NGOs are, in fact, decidedly undemocratic and unaccountable to the people they claim to represent. Dedicated to promoting more openness and participation in decisionmaking, they can instead lapse into old-fashioned interest group politics that produces gridlock on a global scale."

    All signs indicate that NGOs' power will not wane any time soon. During the 1990s, NGOs rose to become almost de facto governments, often wielding more clout than elected officials in engendering change in the corporate sector. Emboldened by their fight against globalization and empowered by the Internet, NGOs increasingly will band together to fight industrial pollution, push a sustainability agenda, and encourage consumer participation. But NGO activity won't all be anti-business: Many groups will promote firms they see as proactive and responsible, create buyers' groups to support emerging technologies, and even launch for-profit ventures to jump-start promising products and services. All of which will create opportunities for companies and consumers to engage in new and productive dialogues.


Next section: The Future of Consumer Power

Sections
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Sections
Consumer Power: Front Page
Introduction
Saving Face
Green Consumption
Beyond Green
Three Marketplace Trends
The Future of Consumer Power
Audio
Voices
Voices
Hear what Americans randomly interviewed on the street think about our environmental future
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Audio
Betsy Taylor
Betsy Taylor
Executive Director, Center for a New American Dream discusses consumption and choice.
Audio: Consumption
Audio: Choice
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Kevin Coyle
Kevin Coyle
President of the National Environmental Education & Training Foundation discusses environmental literacy in America.
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Jeff Hollender
Jeff Hollender
President and CEO, Seventh Generation talks about environmentally friendly products.
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External Links
GreenBiz.com
Sustainable Cotton Project
Organic Trade Association
Center for a New American Dream
The National Environmental Education & Training Foundation
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