Nicole Egan | Palladium - Feb 25 2020
Consumers Will Pay More for Sustainable Products, but Certifications Aren't Enough

Cacao beans in Peru.
Source: Palladium

Sales of products that are marketed as “sustainable” have grown more than five times the rate of those that are not, according to a study published in the Harvard Business Review. As consumers demand more from corporations, the ones that will thrive are those who can pivot, invest, and prove their commitment to sustainability.

Amanda Fernandez, Director of Economic Growth at Palladium, isn’t surprised by the news – but she points out that there’s work to be done to get consumers what they want.

“Consumers will pay more for sustainable products, but sadly, proving sustainability remains challenging, even with today’s technologies,” she says.

Fernandez is intimately familiar with the challenges, working on traceability initiatives in some of the world’s most environmentally fragile areas. She’s hopeful that blockchain technology, already being leveraged to connect consumers with some brands, is one way that markets can benefit without vast infrastructure investment.

“Most companies try to prove sustainable production via certifications, but these only really certify a percentage of the products produced,” Fernandez explains.

In her experience, the other key challenge is that most traceability systems collect their data at the end of the production process – at collection centres – and lack the necessary insight into what happens before the product arrives at those centres.

"Consumers want more transparency into how products are actually produced."

“There have been multiple cases of fraud and abuse among collectors of products like coffee and cocoa, with traders saying the product is organic or sustainable, or certified, when it’s not,” she continues. “Consumers are catching on to this and are starting to mistrust sustainably-produced claims. They want more transparency into how products are actually produced, especially products from places that are environmentally fragile.”

Fernandez is quick note that while technology can help solve this problem, we have to consider the fragmented nature of many supply chains like coffee or cocoa, and the fact that most of these products globally are produced by very small farmers living in remote communities, many without Internet or smart phones, which is where blockchain solutions present an interesting option. Whatever the solution, consumers are making their voices heard, and demanding transparency.

Christina Shim, Managing Director at Palladium echoed those thoughts.

“We’ve been seeing consumers speaking with their wallets for a while now,” she observes. “This means that companies have to incorporate sustainability, and transparency is no longer a nice to have – it’s a must have. This will be demonstrated through market share, growth, and shareholder value for them. With the markets crashing at the moment, it’ll be interesting and illuminating to see who takes advantage of the distraction to re-invent themselves and who will scurry back to business as usual.”

Only time will tell.

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