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Published on January 15th, 2008 | by weatherholtz

10

A Time To Be Green or to Save Your Greenbacks?

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Will a recession—or the prospect of a recession—curb consumer desire for green products? In the shadow of flat growth, will corporations slow their corporate social and environmental initiatives? Will we see a decrease in the burgeoning world of green marketing? The word “recession” has been splattered upon every newspaper and on the tongues of anyone with some knowledge of the lending crisis and skyrocketing price of petroleum. The question on my mind is whether an economic downturn will play a factor when consumers shop. Will green products take a backseat again?

According to the big-poppa of all securities firms, Goldman Sachs, consumer spending will continue to slow as the sickly housing markets have made it difficult for people to tap into their home equity. Another interesting thing to think about is how this will cause the unemployment rate (currently 5 %) to increase — economists predict it will increase to 6.5% by the end of 2008. Fewer jobs equals less money to be mixed in the economic batter and one more reason why consumers may opt for less expensive non-green goods.

There has already been evidence of consumers tightening up their wallets in other areas needing of discretionary income: the technology sector, which was very recently a safe haven for investors fleeing the housing markets, is fleeing the squeeze as consumers cope with the decreasing value of their homes and increasing fuel costs. In the days prior to January 1, the S&P technology index dropped 7.7 percent, making it the worst performing sector. Will consumers be just as wary to opt for premium priced green goods?

In the fourth quarter of ’07 and even into the new year we’ve seen copious amounts of data pointing to increases in consumer spending on green goods or goods from companies with a green bent:

  • “Consumers expect to double their spending on green products and services in the next year” read this
  • “More than half of global consumers (53 percent/representing 1.1 billion people) prefer to purchase products and services from a company with a strong environmental reputation” read this
  • “Approximately 50 percent of U.S. consumers consider at least one sustainability factor in selecting consumer packaged goods items and choosing where to shop for those products…” read this

My hope is that consumers will approach these times of frugality with the idea that reducing the amount they buy, and continuing to purchase local goods and environmentally preferable goods, is, in the long, much better than reverting back to less expensive alternatives with greater environmental footprints. I’m trying to believe the optimisism and feel comfortable that the green movement and green business has hit critical mass and has crossed the bridge of relapse, but I’m still unsure. One thing to hope for is more stringent government regulation as the White House has a change of tide, but if there is a recession, will political candidates talk more about stimulating the economy and less about the environment? As long as the price of oil continues to climb, perhaps we’ll see a vast embrace of renewable energies.

I welcome your thoughts and opinions.

photo credit: dollar bills



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10 Responses to A Time To Be Green or to Save Your Greenbacks?

  1. Kate says:

    I think higher cost green goods may suffer as a result, though people are surprisingly dedicated to “status” goods even when money is tight. But as many have pointed out, we probably can’t shop our way out of global warming. Our best hope is that financial constraints drive innovation, as high oil prices did in the 1970s, and we discover that we really can do more with less.

  2. Noelle says:

    Are there any companies out there trying to make green less expensive, or focus on inexpensive alternatives?

  3. Marc Brodeur says:

    Re-education campaigns about long-term energy savings vs upfront costs have been largely successful… and I would expect them to continue to be.

    Obviously, an economic downturn will make some people think short-sighted, but I will make others put in a little extra effort to save some money and buy things that use less resources. (automobiles and home heating/lighting comes to mind)

  4. Rachel M. says:

    I second what Kate said about doing more with less…in a lot of ways, “being green” goes better with frugal, depression-era values than with always buying the latest and greatest.

    Although I certainly hope companies continue to see a good financial return from switching to more sustainable business practices, the prospect of a recession might be a good time to emphasize the savings benefits of reducing, reusing, recycling.

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  6. Rawley says:

    First off, great article Kyle. Like most consumers, I have been so preoccupied with the effect of a recession on my own pocketbook that I have not thought about the important questions that you bring up.

    But on that note, aren’t green incentives offered to consumers by the government even more enticing in a time of penny-pinching? If the new government of 2008 offers substancial tax credits for green lifestyles/products, I believe this could spark some big consumer trends, and be even more effective at a time of recession.

    I guess it all leads back to the same question: Can the government fit Green into the nation’s budget with two wars fronts, a fragile social security fund, and a sick healthcare system?

    How much would it suck to be US president in 2008? Why are these nuts trying so hard (and spending so much money) to get this job?

  7. coop says:

    Regardless of what “should” happen-no one gives a damn how renewable a resource is when there is no money and you need to heat a home, or eat, or travel to keep work. Would you go to the home of a poor person who can barely afford any heat and tell them to look at renewable or “green” heat sources?-of course not-they are already doing all that they can afford to keep warm. Human survival always has and always will trump any other motive or ideal. If there is a recession like you speak of, then people will simply do what they need to do to survive-as they should.

    Many of you may disagree, but try telling a cold and hungry 5 year old that his parents should sacrifice a little heat or their choice of food because of environmental considerations.

  8. coop — you’re right, of course, that immediate needs will trump environmental values in the situation you describe. Why not use such situations as “teachable moments,” though: energy efficiency upgrades (even as minimal as caulking windows, etc.) can save that family money. The important thing we all have to do on this front is speak to the needs of our audience… in the case you present, there are numerous “green” changes that can make a real difference in people’s lives… and it’s not even necessary to present them as “green.”

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  10. scott says:

    Social investment and environmental investment in the UK is on the rise even though the ‘credit crunch’ is taking its tole on all areas of the market, having major effects on housing, stocks and currency.

    The green movement is however becomeing more attractive in some ways for products such as micro renewables as issues around fuel poverty increase. More government support exists in Scotland now to financially support micro and small scale renewables, which in turn is helping to increase sales in renewable technologies as well as increase related markets.

    Areas of localised markets such as food co-ops and fairtrade stores seem to be suffering at the same time as government and national priorities change.

    Is it true that with any markets there will be areas that out perform others, areas with growth and other areas that shrink and event become extinct over time?

    The ethos of ‘green’ and social will however play a major part in the survival of poorer performing areas of the ‘green movement’ and markets, as models such as social enterprise and ethical trading (or fairtrade) provide support and protection that standard (old style) corporate business ethics and processes would not allow for.

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