The Business case for sustainability is not working. It is time to focus on the Customer case for sustainability
As we see business-driven sustainability efforts falling short, it’s time to reconsider the concept of the business case for sustainability and why it isn’t working. Perhaps it’s time for a shift in companies’ focus to prioritize what customers truly value. The pathway to mainstreaming sustainability in business requires creating sustainable products and services that, first and foremost, address customers’ key needs and prioritize affordability and customer experience.
Part 1: The failure of the business case for sustainability
In January 2024, the World Economic Forum (WEF) came up with a very optimistic headline: “Why 2024 is the year sustainability develops a credible business case.” This optimism was based, among other things, on a Capgemini Research Institute report, which found, for example, that the percentage of executives who thought the business case for sustainability was clear went up from 21% in 2022 to 63% in 2023.
This is great news, no? Well, it is if you believe in wishful thinking type of surveys, such as those suggesting that most consumers are willing to pay a premium for sustainable products. In both cases, it could indeed be the case that the people interviewed actually believe in it, but in reality their (or their organization’s) behavior won’t really reflect it and won’t change much.
The Capgemini report itself provides a data point demonstrating the actual state of sustainability in business: “Investments in sustainability initiatives remained flat between 2022 and 2023 and represented less than 1% of total revenue in 2023, while marketing budgets were equivalent to 9.1% of annual revenue on average.” In other words, companies invest almost 10 times more in marketing than in sustainability.
However, we truly don’t need this data point to see the reality as it is — while companies have adopted sustainable visions, strategies, and practices, they do so slowly and most times incrementally. We see progress, but one that is mostly insufficient, especially when we add to the equation the pace of the challenges we face, first and foremost the climate crisis. In my book, I describe the current state as sustainability-as-usual, i.e., sustainability has been normalized but is still subjected to profit maximization considerations that always come first.
I believe it is time to be honest and recognize that the premise of the business case for sustainability is just not working. Or at the very minimum, it is not creating the impact it was supposed to have. In other words, the potential of sustainability to make businesses more competitive, resilient, innovative, attractive to customers and employees, and less exposed to different risks, which was supposed to make it a no brainer to business executives, has not been fully recognized so far.
Why isn’t it working?
Three years ago, I wrote an article entitled “Forget about the business case for sustainability,” where I looked into the question, pointing out that the issue is more likely about mindset change rather than a misunderstanding of the benefit-cost analysis involved in adopting sustainability measures, i.e. this is about the system, not strategy.
The key problem is that the dominant mental model in business still prioritizes profit maximization and short-term growth. As long as this is the case, sustainability is unlikely to win, at least not fast enough, as unsustainable practices and strategies are still fairly competitive in getting the job done, i.e., maximizing profits and short-term growth. Furthermore, when companies encounter new growth and profit-making compelling opportunities, they will eagerly embrace them, even if these opportunities have significant negative sustainability impacts, as demonstrated example in the case of Microsoft’s investment in AI.
Additionally, we still have too many executives who have been trained and evolved in business-as-usual environments and, as Andrew Winston notes, are too quick to see sustainability in an unfavorable way, assuming it to be “a drag on earnings and to always add to costs.” Given these reasons, it is not too far-fetched to assume that we just haven’t yet reached peak unsustainability.
So, what we do with it?
In my previous article on this challenge, I advocated for a mindset change as a key approach. However, three years later, I would also like to add another component that I find critical — we need to change not only the mindset but also the focus. It’s time to stop talking about the business case for sustainability and start focusing on the customer case for sustainability.
Part 2: It’s the customer, Stupid!
The reason to change the ‘business case’ focus is very simple. At the end of the day, companies need to create and deliver value for their customers. As Peter Drucker famously said, “the purpose of a business is to create and keep a customer.” Many companies still operate under this principle, not because they don’t value other stakeholders, but because they are designed this way. Therefore, if their customers do not want sustainability-centered offerings, then companies are less likely to change, and vice versa.
Before we talk about focus, let’s talk about what the customer case for sustainability is. There is nothing new about the customer case for sustainability and it is actually considered to be part of the business case for sustainability, together with other elements, both tangible and intangible, such as risk reduction, increased employee retention, innovation, etc. However, in my opinion, it has been conceptualized in a way that is somewhat misleading.
The common view regarding the business case for sustainability is reflected in Wayne Visser’s explanation: “More positively, a credible sustainable brand can reap the value of customer goodwill and loyalty.” Tensie Whelan and Carly Fink echo this sentiment, pointing out that “…consumers in a post-Recession era are shifting purchasing decisions to brands with integrity, social responsibility, and sustainability at their core.”
The idea is that customers care more about sustainability, so if a company offers them more of it, whether in its products and services or by making itself more sustainable in general, or both, then it becomes more attractive to customers. The problem is that in reality, this feedback loop is still the exception, not the rule.
While we have some evidence that products with sustainability claims are performing better than similar products without such claims, broader trends suggest that, for the most part, unsustainable offerings are still pretty attractive to customers and generally end up being more popular. Air travel is breaking new records, sales of single-use water bottles are growing, instant fast fashion is booming, and restaurant chains remove plant-based meat from their menus due to lack of interest. These are just some examples showing that, in the greater scheme of things, people in the Global North are still very far from changing their unsustainable lifestyles.
What companies need to focus on?
There are two levels that require a company’s attention. One relates to people’s lifestyles, which is discussed in a forthcoming paper I’m working on. The other focuses on how to ensure that sustainable offerings are more attractive to customers.
In terms of the latter, the idea is fairly straightforward: companies must focus first and foremost on developing sustainable offerings that are desirable at scale, rather than as niche solutions for a select few, as they are still, for the most part, today. When this occurs, sustainability becomes ingrained in the business zeitgeist. Subsequently, as companies find more incentives to develop and deliver sustainable offerings, they gain a clearer and less challenged pathway to enhancing their overall sustainability efforts. It’s essential to note that this approach doesn’t replace a mindset shift but rather serves as a supplementary tool in the meantime.
Shifting the focus of a company’s sustainability journey entails redirecting the starting point to customers and what they value. Borrowing from Simon Sinek’s Golden Circle framework (see below), we begin with the question, “Why would a customer choose a sustainable option?” rather than “What does a sustainable company look like?”
To answer the “why” question, companies need to focus on two key points:
1. Understand your customers’ Jobs-to-be-done
One explanation often mentioned for why people don’t buy into sustainable options is that sustainability is unclear, complex, and not easy to communicate. In other words, what do we talk about when it comes to sustainability? This is certainly true, and greenwashing of all sorts doesn’t make it easier. Another issue is that sustainability is still not relatable enough to people’s needs and wants. This is all true, but I believe there is a way to overcome it — focusing on people’s jobs to be done.
The concept of jobs to be done is pretty straightforward. Here’s how Christensen et al. explain it:
“When we buy a product, we essentially “hire” it to help us do a job. If it does the job well, the next time we’re confronted with the same job, we tend to hire that product again. And if it does a crummy job, we “fire” it and look for an alternative. (We’re using the word “product” here as shorthand for any solution that companies can sell; of course, the full set of “candidates” we consider hiring can often go well beyond just offerings from companies.)”
When we look at jobs to be done, we discuss them in terms of functional, social, and environmental jobs. Tony Ulwick points out that “as a customer uses a product to get a functional job done, they often want to feel a certain way and be perceived in a certain light by their peers and/or friends and others. The way they want to feel and be perceived constitutes their emotional and social jobs-to-be-done.”
In essence, this framework helps companies understand what people value and then hopefully connect the dots effectively between sustainability and customers’ jobs to be done, so customers will hire their sustainable products or services to get the job done at scale. Scale is important, as getting the job done for a small audience is not that hard, but also not that impactful.
The point here is that at the core of a company’s value proposition is not the generic notion of ‘sustainability is important to customers,’ but ‘these are the jobs that customers prioritize, and we address them in ways that are more sustainable.’ In other words, you need to know what is desirable to your customers and build sustainable value around it.
Weber Shandwick released a very interesting report in March based on global research entitled “The Primacy of the Personal,” which alludes to the importance of understanding what people value. “If you want people to care. If you want them to buy from you, invest in you, vote for you, work for you, believe in you. You have to contribute value to their lives,” they write, and you cannot do so without clarity on what your customers’ most important jobs to be done are.
As an example, in the report, a key finding is that personal emotional value has the greatest importance for people. It is, according to the report, connected mainly to personal safety, security, health and happiness, as well as, although less so, with entertainment, excitement, and empowerment. Companies should ask themselves to what degree they are actually prioritizing these factors in the design of their sustainable products and services, or they won’t win this game. If you’re looking for an example, check out IKEA and the work it does, for example, focusing on making life at home better.
2. Focus on two key elements: Price and the customer experience
I’m not a big fan of Jeff Bezos, but he knows a thing or two about customers and how to offer them compelling, not to say addictive, offerings. There’s one key lesson Bezos shared that I find critical in our context:
“I very frequently get the question: ‘What’s going to change in the next 10 years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time. … [I]n our retail business, we know that customers want low prices, and I know that’s going to be true 10 years from now. They want fast delivery; they want vast selection. It’s impossible to imagine a future 10 years from now where a customer comes up and says, ‘Jeff I love Amazon; I just wish the prices were a little higher,’ [or] ‘I love Amazon; I just wish you’d deliver a little more slowly.’ Impossible.”
Let’s face it, Bezos is right. Customers will continue to prioritize price and experience 10 years from now, no matter what. Therefore, if sustainable offerings want to win over unsustainable offerings they need to beat them on price and experience. It’s not easy and some would say impossible but these are the make-or-break elements and companies need to figure them out. This notion coincides with Weber Shandwick’s report, suggesting that “For any value equation, for most any organization, what we all know is that leaders must first and foremost deliver monetary and functional value for their stakeholders. It’s as close to an immutable law as they come.”
For one thing, it is clear that sustainability will never be mainstreamed if we don’t figure out how to make it affordable. The attractiveness of low prices is not going anywhere, so companies better invest in innovation (including in business model innovation) to respond to it. The days of the sustainability premium should be over, hopefully with circular solutions, new materials, different business models, and innovative collaborations (for example with cities), making the notion that sustainability is only for the rich who can afford it a thing of the past.
The same goes for the customer experience when they engage with your product, platform, and service. Customer expectations, even for those who are less price-sensitive, are only going in one direction — more convenience, increased customization, access across different channels, faster response, easier engagement, and more joy. All of these elements are critical especially when it comes to sustainable transition that is done in an environment dominated by “me over we” zeitgeist.
Companies need to remember they compete with very strong customer experiences provided by other companies with unsustainable offerings like Shein and Amazon and thus they need to figure out how to create their own experiences in ways that outcompete the unsustainable competition. Personally, I like Oatly’s efforts to create a unique experience for customers, and although it’s not a perfect example (is there any?), it shows how you can focus on creating a fun, distinctive and somewhat quirky customer experience. Can other companies find their own way to do so?
Raz Godelnik is an Associate Professor of Strategic Design and Management at Parsons School of Design — The New School. He is the author of Rethinking Corporate Sustainability in the Era of Climate Crisis. You can follow me on LinkedIn.
