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New insights on how to outperform the market


A new report from Nielsen offers concrete evidence that brands really can do well by doing good.

A landmark global report from Nielsen show that brands that demonstrate a commitment to sustainability grow faster than those that don’t. According to the 2015 Nielsen Global Corporate Sustainability Report, in the past year, sales of consumer goods from brands with a demonstrated commitment to sustainability have grown more than 4% globally, while those without grew less than 1%.

"Sustainability is a worldwide concern that continues to gain momentum—especially in countries where growing populations are putting additional stress on the environment," said Grace Farraj, senior vice president, public development and sustainability at Nielsen. "An increasing number of consumers in developed regions consider sustainability actions more of an imperative than a value-add."

To gain better insight into the factors that influence consumer sentiment and purchase behavior, Nielsen polled 30,000 consumers in 60 countries across the globe. Consumers were asked how much influence factors such as the environment, packaging, price, marketing, and organic or health and wellness claims had on their consumer goods purchase decisions. One of the key findings is that 66% of global consumers say they are willing to pay more for sustainable brand, up considerably from 55% in 2014. The sustainability premium is even more pronounced among Millennials with 73% of global millennials indicating they are willing to pay extra for sustainable offerings compared to 50% in 2014.

Topping the list of sustainability factors that influence purchasing for nearly two-of-three (62%) consumers globally was brand trust.

"This indicates an opportunity for consumer goods brands that have already built a high level of trust with consumers to evaluate where best to introduce sustainable products into the market to drive growth," said Carol Gstalder, senior vice president, reputation and public relations solutions at Nielsen. "On the flip side, large global consumer goods brands that ignore sustainability increase reputational and business risk. This may give competitors of all sizes, the opportunity to build trust with the predominantly young, socially- conscious consumer looking for products that align with their values."

Other key findings included the following:

WILLINGNESS TO PAY A PREMIUM: Sixty-six percent of global respondents say they are willing to pay more for sustainable goods, up from 55% in 2014 (and 50% in 2013). And it's no longer just wealthy suburbanites in major markets willing to open their wallets for sustainable offerings. Consumers across regions, income levels, and categories are willing to pay more, if doing so ensures they remain loyal to their values. Sustainability sentiment is particularly consistent across income levels. Those earning $20,000 or less are actually 5% more willing than those with incomes greater than $50,000 to pay more for products and services that come from companies who are committed to positive social and environmental impact (68% vs. 63%).

"Consumer brands that haven't embraced sustainability are at risk on many fronts," says Gstalder. "Social responsibility is a critical part of proactive reputation management. And companies with strong reputations outperform others when it comes to attracting top talent, investors, community partners, and importantly, consumers."

AGE MATTERS: Despite the fact that Millennials are coming of age in one of the most difficult economic climates in the past 100 years, they continue to be most willing to pay extra for sustainable offerings—almost three-out-of-four respondents (73%) in the latest findings, up from approximately half in 2014. The rise in the percentage of respondents under 20, also known as Generation Z, who are willing to pay more was equally strong—from 55% of total respondents in 2014 to 72% in 2015.

"Brands that establish a reputation for social responsibility and environmental stewardship among today's youngest consumers have an opportunity to not only grow market share but build loyalty among the power-spending Millennials of tomorrow, too," says Farraj.

HEALTH AND WELLNESS: Consumers are looking for products that are both good for them and good for society. A product's health and wellness benefits are influential purchase decision drivers for more than half of survey respondents (59%). Products made with fresh, natural, and/or organic ingredients carry similar weight with consumers (57%). Finding opportunities to bridge the two is a powerful and impactful way to connect with consumers.

THE ENVIRONMENT: When it comes to sales intent, commitment to the environment has the power to sway product purchase for 45% of consumers surveyed. Commitment to either social value or the consumer's community are also important (each influencing 43% and 41% of respondents, respectively). Retail data backs up the importance of these influencers. In 2014, 65% of total sales of consumer goods measured globally were generated by brands whose marketing conveyed commitment to social and/or environmental value.

"The hierarchy among drivers of consumer loyalty and brand performance is changing," says Farraj. "Commitment to social and environmental responsibility is surpassing some of the more traditional influences for many consumers. Consumer goods brands that fail to take this into account will likely fall behind."

TV ADS: TV ads highlighting a company's commitment to positive social and/or environmental impact are influential in the path to purchase for 34% of global respondents. Brands that actively reinforce societal commitment must amplify and socialize their message using multiple sources and distribution channels.

Says Gstalder: "While marketing good deeds is encouraged and expected by consumers, authenticity and credibility are essential. Using multiple communication methods is important to demonstrate good deeds, such as third-party validation (news coverage), annual reports, affiliation with a respected non-profit or civic organization, employee volunteerism, advertising, or reporting actual work in the community on a web site. A balanced approach is key for brand communicators, with the emphasis on demonstrating good deeds versus self-serving promotion."

DEVELOPED VS. DEVELOPING MARKETS: While the relative importance of sustainable factors that influence the path to purchase is consistent across regions, the overall rates were lower in North America and Europe than in the Middle East, Africa, Asia, and Latin America. Consumers in developing markets are often closer to and more aware of the needs in their surrounding communities as they are reminded daily of the challenges around them, which leads to a desire to give back and help others. This suggests a greater likelihood to seek out and pay more for sustainable products.

When it comes to sustainability, the findings show it is generally harder to influence consumers in developed markets to pay more. Consumers in Latin America, Asia, Middle East, and Africa are 23%-29% more willing to pay a premium for sustainable offerings.

"Consumers in developed markets are flooded by choice, often making them more skeptical and therefore harder to influence," says Farraj. "Consumers are starting to consider sustainable practices a basic cost of entry, rather than a market differentiator. Going forward, brands have to define a credible, relevant social purpose, deliver greater social value, and communicate that value effectively to attract and retain consumers."<

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