Tehmina Haider and Michael O’Leary lead L Catterton Impact, the impact investing arm of consumer private equity firm L Catterton. Michael is also the author of Responsible: The Rise of Citizen Capitalism (HarperCollins 2020).
This spring, ExxonMobil boss Darren Woods came under fire after telling Fortuna Magazine that consumers – not ExxonMobil – were the ones who delayed the transition to clean energy. “We have opportunities to produce lower carbon fuels,” he said, “but people are not willing to spend the money to do that.”
The SEC’s new rules on climate disclosures also place emissions on the shoulders of consumers: While public companies must now report their emissions, they do not have to include emissions from consumers who use their products. Instead, these emissions implicitly remain part of the of the consumer carbon footprint.
Many in the climate community bristle at blaming consumers. After all, even the concept of a consumer’s “carbon footprint” was only popularized by a BP-funded advertising campaign in the early 2000s.
But Darren Woods is right in principle: It doesn’t matter what sustainable products companies create if consumers don’t buy them. We shouldn’t blame consumers for companies’ actions, but we should focus on what they really want to buy.
Within the climate movement, we have often adopted an “if we build it, they will come” approach to climate investment, assuming that if we can develop the technology, then climate-conscious consumers will be eager to adopt it. Consider transport and food, which together represent about half of a consumer’s total emissions in many countries. Within each of these, we have developed technologies that offer substantial reductions, but we are now seeing how fickle consumer adoption can be.
According to the latest analysis from the Department of Energy, cradle-to-grave emissions from today’s electric vehicles are 48% lower than comparable gas vehicles. However, electric vehicles represented just 7.6% of US car sales last year, up from 5.9% the previous year, but still a long way from the two-thirds that share some plan for 2030.
In our food system, independent assessments of alternative proteins suggest emissions savings of up to 90% compared to beef, similar in scale to the savings resulting from adopting a vegan diet. But with just a 2% market share, alternative proteins have yet to become mainstream.
Overall, consumption is responsible for 72% of greenhouse gas emissions, slightly above the consumer’s share of 68% of US gross domestic product. To limit global warming to 1.5°C above pre-industrial levels, we need to reduce per capita emissions by 50% within a decade. But whatever emissions savings these and other climate technologies may boast will only come to fruition if consumers love them enough to pull out their wallets.
In the impact fund we lead, we saw that, although many studies cite how much consumers – especially younger consumers – care about shopping more sustainably, the reality is more complicated.
Consumers may like sustainability, but loathe compensation
For any category, consumers tend to have a set of criteria that interest them most, such as price, quality or convenience. Eighty percent of consumers now say it’s important for brands to be sustainable, but sustainability is almost never among their most important criteria. If you are forced to make a trade-off between sustainability and these other factors, support for the sustainable option could drop by 70% or more.
In fact, one way to tell the story of plant-based meat’s stalled growth is that as close as it has come to imitating meat, it still can’t overcome consumers’ most important taste and nutrition criteria. Many consumers are delighted by these near-meat alternatives, but few prefer them.
The only way to drive long-term adoption of a sustainable product is by reversing the trade-off and finding ways to make its sustainability a positive driver of other criteria that consumers care about. Ironically, only when consumers prefer the sustainable product for reasons unrelated to sustainability will it achieve general success.
For example, many more consumers will say they buy a dairy alternative because it is healthier and tastes better than because of any desire to help the environment, something organic products have long benefited from. Electric heat pumps, which now account for the majority of new heating system sales in the U.S., save the average consumer money. More Gen Z consumers say they buy sustainable brands because of quality or value rather than concern about the climate.
As with any consumer market, consumer segments may weigh factors differently. For decades, cars sold in Europe had, on average, about 50% better fuel economy than those sold in the United States. This is not due to unique European technology. This is due to historical consumer preferences supported by stricter regulations. Similar patterns are repeating themselves again with electric vehicles, as penetration in Europe is twice that of the US.
While much of the conversation around climate companies focuses on the cutting edge of the technology landscape, innovation in business models can also have a big impact.
Resale, rental, refillable products and reusable packaging require very little innovative technology, but can still surpass consumers’ top purchasing criteria. Second-hand clothing has grown much faster than general clothing, for example, largely because it satisfies consumers’ desire to save money.
The lesson is simple: the consumer is still king. If we hope to make significant progress toward a net-zero emissions world, we need to build products that want to buy more than traditional alternatives. And this matters much more than the environmental balance we decide to measure these emissions.
We cannot blame consumers for climate change until we offer them better options.
More must-read reviews published by Fortune:
The opinions expressed in Fortune.com comments are solely the opinions of the authors and do not necessarily reflect the opinions and beliefs of Fortune.
