How to Turn consumers green.
Via McKinsey&Company
Why should we care about the environment? For most of us, the answer seems obvious enough: it’s the right thing to do. But if we consider this question from a purely rational perspective, it makes little sense to spend the extra money and effort supporting causes that can’t possibly benefit us directly. If we are perfectly selfish, rational beings, why should we purchase carbon credits or recycled paper for twice the price and often twice the hassle for benefits that we will never personally enjoy? After all, the benefits of green consumption are (at best) very small and typically go to future generations.
This is the view of the simple rational-choice model. However, much research in the field of behavioral economics has shown that humans aren’t, in fact, rational robots who make all decisions based on the maximization of personal profit. We can also be altruistic creatures who sacrifice money, time, and happiness for the well-being of others, putting the welfare of future generations above our immediate pleasures and comforts. In fact, 66 percent of global consumers say that they prefer to buy products and services from companies that give back to society, according to a recent Nielsen survey of 28,000 online respondents in 56 countries.
Sounds great, right? With this positive view of green spending, we can easily imagine that we will soon see store shelves stocked with environmentally friendly products and a clean, sustainable, energy-efficient future. Unfortunately, there’s a catch. In spite of our remarkable ability to think of ourselves as eco-friendly consumers, our actions often fail to match the standards of our intentions. How could this be? One possible explanation is that we don’t really care about the environment. Although social pressures promote outward conformity to the green zeitgeist, we don’t actually have genuine environmental convictions.
While this pessimistic explanation is surely a possibility, a growing body of social-science research points to a different interpretation of the intention-behavior gap. The basic finding goes like this: we do care, but we have a hard time aligning our behaviors with our intentions. In the same way that we often fail to act on positive intentions about dieting or exercise, we put off actions that help the environment.
Because we tend to focus on the present, future goals seem less important, and we brush them aside to worry about another day. The consequences of our collective misbehaviors are vague and (to some degree) uncertain, and their cumulative effects on the environment would be devastating only in the distant future. In addition, environmental issues are complex and overwhelmingly expansive. For example, it’s no easy task for anyone to calculate the environmental impact of a one-degree increase in global temperature. And because the problem is so large, it’s hard to see how any one of our individual actions can produce a useful result.
This is sometimes called the “drop in the bucket” effect. Interestingly, one way to overcome it is by appealing to emotions rather than giving logical reasons for a particular course of action. We rarely spring into action when we are presented with statistics or lectured on the devastating effects of X or Y, but we often do act when confronted with vivid examples of misery (take, for example, a drowning polar bear).
With all these factors loaded against green consumer behavior, what can we do to encourage more environmentally responsible purchasing? Can we rely on government regulation to enforce environmental standards? Unfortunately, legislators are often more focused on pleasing their constituents in the short term (and remaining in office) than on protecting the environment, particularly because the latter often imposes substantial short-term pain in exchange for delayed long-term benefits. Rather than relying on legislators to intervene, manufacturers and retailers can take on the responsibility of creating products that promote greener spending. For example, we can use insights from behavioral economics to create smartphone apps that harness peer pressure to influence the decision process; if a consumer buys an app that tracks shopping expenses and informs his social network about his purchases, social pressure to be green might encourage him to make more sustainable spending decisions.
How about providing information to individual consumers? The rational assumption is that many failures in decision making can be corrected by supplying individuals with additional information. In theory, consumers will take the information provided to them and use it to make better decisions. Unfortunately, this view ignores ample evidence showing that consumers are bad at collecting relevant information and putting it to good use. In 2009, for example, New York City mandated that all fast-food restaurants post calorie-count information on their menus. You’d expect this information to motivate rational consumers to eat fewer calories, pushing obesity rates down. However, such interventions have had little effect on actual behavior.
What if a lack of information isn’t the problem? What if consumers just need a little push to get them to behave in their own best interest? If our goal is to reduce unhealthy overeating in fast-food restaurants, for instance, we could simply invite diners to eat less. In a field study at a Chinese-style fast-food restaurant, my colleagues and I tested this very assumption. We asked customers whether they would like to substitute a half portion of their chosen side dish for the default 10-oz portion. Perhaps surprisingly, about a third of them happily agreed.
Similarly, most of us understand that texting while driving is an unsafe practice. Yet many people still text and drive. Accident rates actually increased after many states outlawed texting while driving. Why? Because many drivers tried to hide their behavior by texting under the wheel, increasing the risk of an accident for the sake of avoiding a ticket.
Information clearly isn’t the problem in the sustainability realm. We are inundated with statistics on global warming, water conservation, fuel efficiency, and myriad other environmental concerns. This information is right at our fingertips, readily available and sometimes even shoved into our ear canals. Yet it doesn’t seem to get results. While we may be able to change beliefs through informational appeals, igniting action is a different story. If we want to influence behavior, we can’t assume that providing information will do the trick.
Rather, we need to expand our scope and look for barriers and motivations that aren’t based on information alone. For example, most of us find it difficult to change old habits. If we aren’t in the habit of turning off lights, checking tire pressure, or showering efficiently, it’s very hard to adopt these behaviors and make them stick. A better approach is to address one-time decisions that have a large impact on energy consumption. To do this, interventions need to interrupt the decision chain at those crucial moments when consumers are installing heating systems in their houses or purchasing new kitchen appliances, actions that might seem minor but can have a significant long-term impact.
When someone is buying or selling a new home, for example, the decision point is brief but can have a profound effect. The marginal cost of an energy-efficient refrigerator or a “smart” thermostat is negligible compared with that of buying a new house or renovating an existing house. At such pivotal points, solutions from behavioral economics can be applied to encourage greener spending in the moment, thus locking in environmentally friendly behavior over the long term. Just as savings rates rise when employees precommit to transferring a certain percentage of their income into retirement-savings accounts, sustainability can rise when consumers commit to green consumption patterns via one-time purchasing decisions.
Because we encounter so many energy-related decisions, it becomes cognitively exhausting to consider all of them, all of the time. We can lighten the cognitive load by selectively asking individuals to consider the environment when it counts most. For example, we can provide simple product comparisons within the same domain so that product differences are conspicuously highlighted at the point of sale (that is, contrasting incandescent light bulbs with more efficient CFL or LED bulbs).
Sensible product design can also reduce cognitive burdens and boost sustainability. We should sell thermostats that easily and automatically find the most efficient settings, program energy-saving defaults into all appliances before they leave the factory, and design environments so that they encourage greener behavior. In one study, researchers decreased the size of home trash cans and found that residents produced less trash. If we want to encourage people to do more recycling and less throwing away, we should shrink trash cans and supersize recycling bins.
The world of gamification provides additional opportunities to exert a positive influence on consumer behavior. We can encourage sustainable choices by creating competitive games based on point accumulation, and tapping into social motivations such as pride and shame. We can promote competition between individuals, neighborhoods, schools and towns, rewarding those who save the most energy. A company called Simple Energy is now experimenting with this concept by rewarding customers who save energy on peak days of energy use. Simple Energy held energy-saving contests just before particularly hot summer days and found that participants reduced their energy use below baseline consumption levels. Motivated by competition with their peers and a tiered prize system (by saving more energy, they become eligible for more attractive prizes), these consumers reduced their energy consumption when it had the greatest impact.
Based on the relative success of antismoking and seatbelt campaigns—my favorite examples—we can also use kids to guilt their parents into better long-term behavior. While people may not be motivated to change their behavior for their own sakes, they may do so for their children. As hard as we try to influence other adults, in the end few things will be more effective than the nagging cries of the six-year-old in the back seat.
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