Reaching the 85 percent of American consumers who won’t buy a more expensive product simply because it’s the eco-friendly alternative is one of the largest challenges facing American manufacturers.
That was the discussion Thursday morning between Wall Street Journal editors, Procter & Gamble Co.’s chief executive, the entrepreneur behind Paul Mitchell shampoos and Patrón tequila, and one of the founders of GoodGuide. The discussion is part of the Journal’s annual Eco:nomics conference being held this week at Bacara Resort & Spa in Goleta.
“We’ve set some ambitious goals for waste reduction,” said Robert McDonald, CEO of Procter & Gamble.
Proctor & Gamble is the largest consumer products company in the world — its brands include dozens of household names such as Bounty paper towels, Tide laundry detergent, CoverGirl makeup, Charmin toilet paper and Crest toothpaste. About 4.4 billion consumers around the world use a P&G product every day, McDonald said, so any small push toward sustainability at the company can potentially move the needle in a big way.
The company has made efforts in recent years to green its products and supply chain, he said, and has set goals of eventually being powered by 100 percent renewable energy.
But McDonald said the challenge remains cost. Studies have shown that only about 15 percent of American consumers are willing to pay more for a product simply because it’s green.
One of P&G’s big pushes toward sustainability has been a promotion of Tide Cold Water. McDonald said that if 70 percent of U.S. consumers use cold water to wash their clothes, the equivalent of the energy usage for 4.4 million American households would be saved. He said about 40 percent of U.S. households currently use cold water. (A quick electronic poll of Eco:nomics audience members found that 59 percent currently use cold water, while 41 percent don’t.)
McDonald said Procter & Gamble realizes that consumers are becoming increasingly interested in the entire supply chain behind the goods they buy. “This is the way of the future,” he said. “People want to know about the product, and the company behind the product.”
That information is increasingly coming from third-party channels, said Dara O’Rourke. He’s the co-founder of GoodGuide, a website that rates companies and products on issues including environmental consciousness, worker safety and personal health.
His research has found that most people will pay 10 to 20 percent more for a green product, he said. (Forty percent of the Eco:nomics audience members surveyed said they would pay 10 percent more for a greener product).
“The joke in the ’70s was that that green products cost twice as much and work half as well,” he said. That has since changed. “Many consumers are “being driven by the ‘safe, healthy’ angle,” O’Rourke said, and realize that often “products that are good for you are good for the environment.”
John Paul DeJoria, the entrepreneur behind Patrón tequila and Paul Mitchell haircare products argued for a top-down approach. Companies, he said, have the responsibility to figure out how to green their products, and then how to make the numbers work.
“My advice to you is, don’t just do something to green your product, do something to make it value-added,” he said to McDonald.
DeJoria said that Paul Mitchell decided it wanted to offer a paraben-free, sulfate-free haircare line. The problem was that the change would take the retail price for a bottle of shampoo from about $10 to $19. DeJoria said the company realized that very few consumers would want to pay almost twice as much for a product simply because it’s greener. So Paul Mitchell took the opportunity to significantly revamp the shampoo and turned it into a premium version. When the line went to market, it was one of Paul Mitchell’s best-selling successes right out of the gate, DeJoria said.
The company is currently testing what claims to be the first biodegradable plastic bottle. It would add about 2 percent to each product’s manufacturing cost, DeJoria said. “That’s nothing.”