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China, Emerging Markets Ready to Pay More for Green Products

The message Germany’s DHL is pushing from its 160-page report on green logistics, out last week, is that Asian customers are overwhelmingly more willing to pay for green supply chains than are Western customers. Here’s the money quote, making the rounds of logistics blogs:

    Especially customers in Asia are ready to accept that [environmentally-friendly shipping] may cause higher prices, the study shows. For example, 84 per cent of consumers in China, India, Malaysia and Singapore say they would accept a higher price for green products—compared to only 50 percent in Western countries.

The finding echoed an Accenture study back in January that found virtually all Chinese respondents (98 percent) would pay for cleaner options, and that “electronics companies” in particular “should respond to consumer demand for environmentally friendly products by stepping up efforts to make such products,” according to a report at the time from IDG.

Is this true? The study fits nicely into DHL’s announced strategy to cut its emissions by 30 percent, while also building out its Asian operations. The company recently gave a $3 million endowment to Singapore National University’s Logistics Institute to found the Sustainable Supply Chain Center of Asia Pacific.

At the same time it inaugurated a research partnership with Shenzhen’s China Development Institute, and announced it was studying a move into technical support functions, based in Asia. A finding that customers on the Asian end of trans-Pacific and Asia-Europe supply chains are more willing to pay more for green products than are Europeans and Americans, by nearly a two-to-one margin, helps make DHL’s argument — that Asia, where it’s pouring resources, is a smart bet for long-term supply trends.

What’s not clear is whether DHL’s study tells us anything we didn’t know. Last year, in a widely reported study of 1002 American electronics customers conducted for {complink 4907|Sharp Electronics Corp.}, even US respondents said they were willing to pay more for energy-efficient electronic appliances by a three-to-one margin, if they believed it would save them money over the long run.

DHL’s study tells us a few things, but the one thing it says most loudly is the one thing it didn’t include: that the shipping company has made a huge bet on Asia, and a huge bet on green technology, and needs to look prescient on both fronts.

16 comments on “China, Emerging Markets Ready to Pay More for Green Products

  1. Barbara Jorgensen
    October 19, 2010

    Hi Marc,

    Great info. I do and still have a question after taking a quick look at the report: did they say how much more? 5%? 10%?

  2. Hawk
    October 19, 2010

    Marc, You cited several survey results that indicated Asians were more inclined to say they would pay more for “Green” and environmentally friendly products. The missing link for me was why? To reiterate, why were the survey respondents in Asia much more inclined to pay more for Green products than respondents in the West? Also, what does this mean for the industry? It's obvious DHL sees an opportunity here and I feel they should be applauded for that, after all, that's how you make money; find a need and fill it. Could you help me understand why some people are willing to pay more for environmentally friendly products in a given region while others in another location were not.

  3. Anna Young
    October 19, 2010

    I live in Europe and I can tell you this, we are already paying more for products manufactured under conditions that would leave reduced impact on the environment. We recycle like crazy, buy only what we need, live in tiny houses, take public transportation except and only when it is not a viable option and pay high gasoline taxes. I don't know who in the West took part in the survey but I don't need a survey to tell me what I am prepared to pay for “Green” products. My pocket is already feeling the heat and you won't see me picketing anyone because of that. It's the way to leave a better environment for our children and I am all for that. I am not alone. In England, my neighbours are all for it and we do it because we want to not because a company encouraged us to adopt “Green” practices.

  4. Marc Herman
    October 19, 2010

    Barbara, Hawk, thanks for your comments. I was wondering the same thing, and I suspect you've touched on why this survey smacks a bit of greenwashing. Pay more for a car? A washing machine? A hot dog? DHL is making somewhat of a broad claim, that happens to support their other investments in the region. So I'd be wary of extrapolating from the report that “Asia” — a big place — has generally greener attitudes than other places. The number only really says that consumers may be more tolerant of price rises if they are led to believe those price rises are necessary to green the system that made a product available to them. It begs more study.

    Anna, I'd be curious to see how DHL and its competitors would, or have, reacted to EU or other efforts to regulate greener practices into the logistics business. Looking at that would tell you whether they're as serious as you are on this issue.

    Thanks for commenting.

  5. SP
    October 19, 2010

    I agree it is very much possible. In India most of the population live in rural areas and the basic fundamentals of life teaches to be “green”. People may want to pay more for green products. In West I guess people think twice to spend even a dollar more.

  6. Marc Herman
    October 19, 2010

    Hi, SP, that's interesting. I'd be very curious to know specifically how Indian customers are or are not similar to regional neighbors on this issue, and how attitudes vary within India.

  7. Barbara Jorgensen
    October 20, 2010

    I can easily accept certain regions are more willing to pay for “green” products. Europe and Asia are way ahead of the U.S. in this regard. At this point of time in the U.S., the decision is all about price. “Green” is still a luxury for most of the middle class. Green cars are more expensive upfront and many of us will wait until our current car is absolutely dead before making our next car purchase. Homeowners are deferring putting in energy-efficient lighting, windows, siding and heating units because they are vastly more expensive than status quo. Many of us are educated consumers that know the differencet between price and cost–green will save us money in the long run. But shelling out the money right now is something that many of us won't do until the unemployment rate drops; goevernment subsidies and/or tax credits increase; interest rates go up; or prices drop even further.

    The other option is financing these investments–living on credit–and we all know where that got us.

  8. Steve Saunders
    October 20, 2010

    Doesn't anyone else find it surprising that some of the countries that are the absolute worst polluters in the world (China, India) also have customers that are more willing to pay more for green tech than western companies?

    I think that's a real eye-opener and i'm wondering where the disconnect is…. is the survey flawed in that talk is cheap (it's easy to say you would do something but whether you would actually follow through when money is on the line?) or is there somethign else here to explain why the worst polluters have the most “green” purchasers?

  9. SP
    October 20, 2010

    Hi Marc,

    More than 60% of Indian population live in rural areas, where there is hardly electricity, they still use natural gas for cooking and use walking or animals for transportation. So they are still living in “Green”. In urban areas I would not be surprised if people are ready to pay little extra for using green products. India is a country of diversity where you will see Mercedes and bullock cart on the same road. The environment minister is also very actively putting extra efforts to make people aware of the usage of green products. India also has a democratic governement so NGOs and social societies are very active.

  10. Marc Herman
    October 21, 2010

    I'm a little hesitant to define one place or another as “absolute worst polluters,” or to assume anything about the complex relationship between consumer, corporate and public sector behavior in a given place. I could see how living near a computer monitor factory with poor waste regulation, for example, might influence someone to seek less toxic options in their consumer transactions. Studying that kind of behavior is hardly new and if the response to this item has suggested anything, it's that it's necessary to follow this more closely in future items. Thanks for your comment, Steve.

  11. Steve Saunders
    October 21, 2010

    yes, it's complex. Would love to see more blogs on this topic from this site.

  12. DataCrunch
    October 21, 2010

    It won't be long until “green” becomes the new “organic” and will cost a premium.  An interesting not-for-profit organization in the UK called the Carbon Trust introduced The Carbon Reduction Label, in which it is attempting to be the standard that companies post the amount of CO2 used in producing a product, similar to the ingredients label.  It will sure be interesting how all this plays out.  Would you make a buying decision based on a product's CO2 footprint if it was on a label and would you pay more based on a lower footprint?

    See image courtesy of The Carbon Trust (http://www.carbontrust.co.uk) and (http://www.carbon-label.com/the-label)

     The carbon Reduction Label is featured on all Tesco own brand orange juice

  13. bolaji ojo
    October 21, 2010

    Marc Herman is actually revisiting this subject with a fresh update as so much has been happening. Over the course of the last week alone many other surveys have been done by other logistics companies partnering with researchers and academic organizations. I believe UPS, which contributes the Change in the Chain column on this site, will Nov. 1 announce the results of its own survey on a similar subject. It will be well covered and explored on EBN.

    While the results of the surveys are important, it is equally significant to point out that the companies sponsoring these surveys are active in trying to figure out the direction of public opinion and hence, how they should channel their resources. The companies that get it right, right now, will also be properly positioned to benefit from any business initiatives that support the results of the survey.

  14. Steve Saunders
    October 22, 2010

    how reliable are these surveys if the companies underwriting them have a bested interest in the results? Sounds shadey.

  15. Steve Saunders
    October 22, 2010

    That's interesting. The answer for me would be a qualified yes – i would factor that into my buying decision. Qualified, however, because there have been so many shenanigans already over things like carbon credits that it is hard to know how reliable this stuff is.

    Based on the tone of the current tea party debate about global warming in the US its apparent that many other Americans don't give a rat's a** about this stuff, however.

     

  16. DataCrunch
    October 22, 2010

    Yes.  There is no shortage of shenanigans.  Perhaps a “Shenanigans Footprint” is in order.

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