Offsetting or reducing CO2: This is what consumers want

Newswise — The popularity of climate-friendly products is on the rise, with consumers increasingly valuing items like Apple's MacBook Air made from recycled aluminum or Microsoft's Xbox, for which compensation payments are made to offset emissions throughout its life. Companies typically achieve a neutral climate balance through two approaches: direct emission reduction and post-emission compensation. While both methods can render a product climate-neutral and have positive environmental impacts, compensatory measures are facing growing public scrutiny.

In a study, consumers' attitudes were explored, revealing that they were more inclined to spend extra on a product if its emissions were directly reduced rather than compensated for afterward. The underlying reasons for this behavior remain somewhat unclear. One possibility is that consumers may hold a higher regard for companies that actively protect the environment through innovative processes, which directly reduce emissions.

However, there is an exception to this preference. If emissions cannot be controlled by the company, such as those arising during the extraction of raw materials, consumers tend to perceive compensation and reduction as equivalent. In such cases, willingness to pay more for a climate-friendly product is higher among environmentally conscious consumers.

In conclusion, consumers are increasingly paying attention to climate-friendly products, and their willingness to pay more is positively influenced when emissions are directly reduced. Nevertheless, compensation measures are subject to more critical scrutiny, except in situations where the company has no control over emissions, making reduction and compensation equally acceptable.

Recommendation to companies: Communicate green actions transparently

Recent studies reveal that consumers are becoming increasingly conscious of the social and environmental impacts of their buying decisions, prompting many companies to take ecological actions. However, some companies hesitate to communicate these measures, fearing accusations of "greenwashing," where they merely portray a façade of environmental responsibility.

The study emphasizes the significance of transparent communication regarding emissions reduction for companies. This clarity allows companies that actively reduce emissions to distinguish themselves from competitors who only resort to compensation measures. Professor Troester highlights the importance of clearly differentiating controllable and non-controllable emission components in this regard.

While investing in innovative processes to decrease CO2 emissions may be costlier for companies, the study suggests that such investments are worthwhile. Consumers demonstrate a willingness to pay more for products associated with companies that actively prioritize emission reduction, indicating a potential return on these eco-friendly endeavors.

Additional information:

The results of the study are based on an online survey with around 200 participants and an experiment with around 80 participants.

¹ CDP (2019). Top FMCGs in race to keep up with conscious consumers. www.cdp.net/en/articles/media/top-fmcgs-in-race-to-keep-up-with-conscious-consumers   
Nielsen (2018). Global consumers seek companies that care about environmental issues. nielseniq.com/global/en/insights/analysis/2018/global-consumers-seek-companies-that-care-about-environmental-issues/
Golob, U., & Kronegger, L. (2019). Environmental consciousness of European consumers: A segmentation-based study. Journal of Cleaner Production, 221, 1–9

Publication: N. Roemer, G.C. Souza, C. Troest and G. Voigt: Offset or reduce: How should firms implement carbon footprint reduction initiatives? Production and Operations Management https://doi.org/10.1111/poms.14017