www.sustainableenterprise.org

SuStainable conSumeriSm: what DoeS it mean for new ZealanD exporterS?

Sustainable Enterpr ise

Sustainable Enterprise Ltd assists CEos and senior leaders to transform their organisations towards sustainable enterprise.

www.sustainableenterprise.org

A Sustainable Enterprise Ltd project.Project led by Mike Pratt - Professor of Sustainability and Leadership at the University of Waikato.

Research assistant - Susie Pratt - Research Fellow at the University of Glamorgan

Sustainable Enterprise thanks all those people who contributed time and energy into this report.In particular we thank Peter Corijn, Adam Werbach, John Duggan and Maurice Levy for their expert opinions, Professor Juliet Roper (University of Waikato) for her editorial recommendations and Simon Upton for his commentary and critique. Special thanks to Susie Pratt and Reuben Thomas for the design work and to Helga Pratt for research, editorial ideas and review.

The contents of this report are the sole responsibility of Sustainable Enterprise.

Date of publication: August 2008

All images are Creative Commons licenced and sourced from www.flickr.comcover - g-hat - http://www.flickr.com/photos/g-hat/284150337/pg10 - WorldIslandInfo.com - http://www.flickr.com/photos/76074333@N00/476290128/pg13 - Sami Keinänen - http://www.flickr.com/photos/sami73/34295686/pg19 - Vertigogen - http://www.flickr.com/photos/vertigogen/261617810/pg29 - pedrosimoes7 - http://www.flickr.com/photos/pedrosimoes7/435347929/pg37 - office Now - http://www.flickr.com/photos/officenow/2631536228/pg43 - vernieman - http://www.flickr.com/photos/vernieman/158758766/pg45 - rich_childs - http://www.flickr.com/photos/rich_childs/197901376/

creat ing transformat ional stor ies

Contents

Executive summary ---------------------------------

Introduction ---------------------------------------------

Economic context ----------------------------------- Food and beverage exports --------------------------------- Tourism --------------------------------------------------------

100% Pure New Zealand brand --------------

Un-sustainability issues -------------------------- Climate change --------------------------------------------- Resource scarcity ------------------------------------------ Energy systems --------------------------------------------- Waste -------------------------------------------------------- Summary ----------------------------------------------------

Trends and tipping points ---------------------- Developing economies ------------------------------------- Ageing population ------------------------------------------ Wellbeing ---------------------------------------------------- Glocalisation ------------------------------------------------- Certification -------------------------------------------------- The backstory ----------------------------------------------- Experience economy --------------------------------------- Transparency and choice editing --------------------------- Summary ----------------------------------------------------

Expert opinions -------------------------------------- Peter Corijn ------------------------------------------------- Adam Werbach ---------------------------------------------- John Duggan ------------------------------------------------- Maurice Levy ------------------------------------------------

Sustainability and quality ------------------------

Conclusions --------------------------------------------

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Sustainability considerations, like quality, are an essential element of successful business value creation and cost minimisation

Sustainability is more than just climate change

opportunities can be created by being at the forefront of sustainability development

Consumer expectations in our major markets in regard to sustainability, quality, health and safety of food products and tourism experiences are increasing rapidly

Retailers are accelerating the trend towards sustainability

There is risk to brand New Zealand and therefore to our food and tourism export base if our 100% Pure New Zealand image is found to be lacking in authenticity

Urgent action is needed by the food and tourism sectors to address the risks and take advantage of the opportunities

Executive summary

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The perspective taken is that of the consumer in our overseas markets. We explore changing consumer sentiments and consider a range of behavioural changes and trends that could alter market conditions for the future.

In particular we:

assess the markets that are sensitive to these changes in sentiment and those that may become so (as a result of changing income and education)

discuss what is known about the ‘tipping points’ that can engender changes in consumer preference with respect to sustainability values

The purpose of this paper is to consider the risks and opportunities faced by New Zealand’s food export and tourism sectors from increasing scrutiny in key markets where there is increasing consumer scrutiny of the environmental and broader sustainability footprint of goods and services.The paper is intended as a review that will serve as a resource for people relatively new to this field. At the same time it will also serve as a catalyst for reflection and further research.

Traditional affluent northern hemisphere markets inform the core of the analysis. Some evidence of trends in rapidly developing economies is also presented.

In order to provide a broad cross-section of insights we have developed this paper through four complementary methods:

(1) a conventional literature review of relevant journal articles with an emphasis on surveys of consumer attitudes and behaviour

(2) a web-based review of recent media commentary and trade journals (this was seen as important because of the emergent and rapidly changing nature of this phenomena)

(3) interviews with expert commentators in respect of the US, Europe, the UK and developing markets

Introduction

Methodology

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1 TGI (Target Group Index). (08/10/2007). Green Values: Consumers and Branding, p.11. Retrieved November 8, 2007 from : http://www.tgisurveys.com/knowledgehub/reportsaccess.aspx?id=2

2 ‘TGI attributes various characteristics to eco-adaptors: on average eco-adaptors are likely to be female, aged between 35 and 54, urban, financially secure and pay

Many of the most comprehensive surveys on consumer attitudes and behaviour used in this report are studies on UK consumers, who have been identified as early adopters in this area of sustainability. Market researchers Target Group Index (TGI)1 in their Green Values analysis have identified the USA, Britain and France as eco-adaptors. These three countries also make the most significant contributions to transport-related carbon emissions when road traveland aviation are taken together. The media attention on climate-change issues in these countries has lead to consumers increased concern about their choices. The reason for focusing on eco-adaptors is the potential influence of their advocacy.

They can be considered opinion leaders in the area of environmental issues, who will have a disproportionate influence on other consumers. Consequently they are worthy of attention.2

Theory for Sustainability Developement

The theoretical frame of reference we use for this paper is developed from Zadek’s model of sustainability development, which highlights potential opportunities and risks for organisations. He explains that opportunities can be created or identified through an understanding of emerging sustainability issues. Such foresight is then used to develop new products or services or to differentiate existing ones as a means of creating sustainable value. Risks can also be anticipated and countered through sustainability foresight. We see sustainability as being both an opportunity and a risk for New Zealand. Zadek’s model can be used to review sustainability issues in regard to our national or organisational knowledge about these issues and their relative maturity. If our knowledge and actions fall behind global awareness and action amongst our competitors we are at risk. opportunities can be identified through foresight and innovation.3

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attention to where and how their food is produced. The TGI Green Values report also states that eco-adapters have larger carbon footprints on average than the rest of the population, but they are also a market with the greatest potential for carbon offset. Ibid. p.12-16.

3 Zadek, S (2004). The Path to Corporate Responsibility. Harvard Business Review, December 2008, p125-132

OR

GA

NIS

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ION

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LE

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NIN

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ISSUE MATURITY

Latent Emerging Consol idat ing Inst i tut ional ised

Global Leadership

Strategic

Manager ia l

Compl iance

Defensive

SUSTAINABILITY DEVELOPEMENT

Opportunity

RIGHT TO OPERATE

Risk

Developed from Zadek, S. (2004) The Path to Corporate Responsibility. Harvard Business Review, 82(12), p129.

Zadek defines four stages of issue maturity:

(1) During the Latent stage activists and NGos are aware of the issue, but there is weak scientific/research evidence and the issue is largely ignored, dismissed by or unknown to business, except for the occasional pioneer. Climate change was in this category for about 30 years from the first inklings of the issue in the early 1970s. Tobacco was in this phase for a lot longer.

(2) During the Emergent phase there is growing political and media awareness, emerging research evidence, and leading businesses experiment with dealing with the issue. Climate change has been in this phase since the late 1990s.

(3) During the Consolidating phase standards of business practice start to emerge (eg the beginnings of a carbon accounting framework), voluntary initiatives established (eg carbon offsets) and there is litigation and increasing demands for legislation.

(4) In the Institutionalised phase legislation or business norms are established, and practices are a normal part of business excellence. Climate change is on the cusp of Consolidating and Institutionalised.

The diagonal line from bottom left to top right bifurcates the model between risk and opportunity and defines the right to operate. An organisation can plot its positioning on any given issue (such as climate change or obesity). The more developed the issue and the weaker the response, the greater the risk. opportunities for value creation occur through being above the right to operate line; risks below it. Followership therefore is a risk strategy. Risk is mediated by the speed of response. opportunities and value are created through leadership.

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organisations react to these issues in several discernable ways:

Defensive. They deny the issues, outcomes & responsibilities. They defend against attacks on reputation that could do short term damage to brand, sales, productivity or recruitment by seeking in a variety of ways to undermine, discredit and when that no longer works simply confuse or obfuscate the underlying issues. The tobacco industry has adopted this approach for decades. This is still the approach to climate change of some New Zealand business leaders and commentators despite the overwhelming scientific consensus that exists on the issue.

Compliance. organisations adopt a policy based on compliance as a cost of doing business. They mitigate the erosion of medium term shareholder value through reputation and litigation risks by doing just enough to satisfy legal requirements and immediate market expectations.

Managerial. organisations embed the sustainability issue into core management processes. They mitigate against medium term loss in shareholder value and achieve longer term gains by integrating sustainability into daily operations, for example through achieving certification to ISo 14,001.

Strategic. organisations integrate the sustainability issue into core business strategies to enhance long-term shareholder value and gain first mover advantages by aligning strategy and process innovations with sustainability issues. For example, organisations may choose to become certified as carbon neutral in order to take advantage of the marketing opportunities this presents.

Global leadership. organisations promote broad industry participation in corporate sustainability to enhance long-term shareholder value through industry leadership. By becoming recognised as an industry leader in issues of concern to consumers, organisations can dramatically enhance their brand and value creation opportunities. For example, Whole Foods Markets is the fastest growing food supermarket chain on the planet as a consequence of its leadership position in natural and organic food retailing.

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The economic context

New Zealand earns its way in the world through $33.4 billion of merchandise exports and $12.3 billion of services exports.4 More than 50% of merchandise exports are food and beverage and more than 50% of services exports are tourism. These two sectors combined drive the economy. Both of them are dependent to a considerable extent on New Zealand’s ‘clean, green’ image discussed in the next section. Extensive statistics are available in regard to the categories of product exports, but it is difficult to assess the nature and extent of transformation or value add, beyond commodity production. The Manufacturing+ Vision project, chaired by Mike Pratt, concluded that less than 44% of merchandise exports have significant value added.5 However, it proved extremely difficult to obtain accurate statistics of the nature and extent of transformation of merchandise exports, even with the help of the Ministry of Economic Development and Statistics New Zealand.

It is the stated intent of government economic policy to facilitate enhanced economic value added beyond commodity production in order to enhance productivity and gross domestic product per capita, and therefore the economic wellbeing of the nation and its citizens. The more exporters move towards value added, branded products and services, the greater the exposure to consumer preferences and the more sustainability expectations of consumers and retailers come to the fore.

Food and beverage exports

Currently and for the foreseeable future, New Zealand remains primarily a supplier of commodity ingredients that contribute to the global food value cycle at a variety of different points, but not primarily directly to the end consumer. The wine industry and niche manufacturers such as Comvita honey are noble exceptions.

As an ingredient supplier at a time of high and rising food commodity prices it could be seen that New Zealand is comparatively unexposed to consumer expectations. However, such a view would fail to take into account the escalating expectations of consumers and demand for information about the health and safety aspects of the entire source of origin of their food products; this issue is more fully discussed in subsequent sections.

The global grocery trade is forecast to be worth about US$-6 trillion in 2012, with the top three supermarkets Wal-Mart, Carrefour and Tesco accounting for approximately US$ 1 trillion. These three market leaders are strong sustainability advocates and are expected to lead the overall market in this direction. All three are rapidly globalising their activities, especially into high growth

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The economic context

4 Exports for the year ended 30 June 2007. Statistics New Zealand. (2007). External Trade Statistics - Key Points: June 2007 [online], Statistics New Zealand. Retrieved February 18, 2008, from http://www.stats.govt.nz/products-and-services/ext-trade-stats/key-pints-jun-06.html

5 New Zealand Trade and Enterprise (NZTE). (2006). Manufacturing+: a Vision for World Class New Zealand Manufacturers [online], November. NZTE. Retrieved February 19, 2008, from http://www.nzte.govt.nz/section/14454/16182.aspx. p.40.

6 Planet Retail is the leading provider of intelligence on the global retail and foodservice industries. Their 9 May 2007 report ‘Top 30 Ranking by Planet Retail Reveals Changes at the Top’ can be obtained from http://www.planetretail.net

7 ‘Tourism expenditure includes spending by international visitors and by domestic household, business and government travelers. International tourism expenditure includes spending by foreign students studying in New Zealand for less than 12 months.’ Statistics New Zealand. (2007). Satellite Account Year End March 2006, Statistics New Zealand. Retrieved February 22, 2008 from http://www.stats.govt.nz/products-and-services/media-releases/tourism-satellite-accounts/tourism-satellite-account-2006.htm

emerging markets, such that their influence towards sustainability will be felt globally. According to Natalie Berg, retail analyst at Planet Retail: 6

“Wal-Mart, Carrefour, Metro, Tesco and Seven & I are all driving expansion on a global level. From Mexico to Malaysia, the Top 5 players are collectively present in 67 countries around the globe. While internationalisation has always been a priority for the world’s leading retailers, it is the liberalisation of lucrative markets such as China and India that has attracted their attention in recent years.”

Tourism

Tourism is an important contributor to the New Zealand economy in both the creation of employment opportunities and the production of goods and services. It is the world’s largest industry and the second largest export sector for New Zealand after dairy. In the 2006/7 financial year:

International tourist expenditure accounted for $8.8 billion or 18.3% of New Zealand’s total export earnings.

Tourism made a direct contribution to the economy of $7.9 billion, accounting for 5.1% of GDP. Indirect value added amounted to $6.2 billion.

Tourism supported 108,100 direct full-time equivalent jobs, equivalent to 5.8% of the total workforce in New Zealand, up 1.9% over 2005/6.

Total tourism expenditure was $20.1 billion, up 4.7% over 2005/6.7

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The 100% Pure New Zealand brand

New Zealand has established an enviable clean green reputation throughout the world, nurtured by Tourism New Zealand’s 100% Pure advertising campaign, our low population relative to size and the natural beauty and isolation of our landscape. The Lord of the Rings imagery served to make the brand globally visible. our tourism and food and beverage sectors depend significantly on this positioning to command premiums on the world market for safe, healthy food supply and a pristine natural environment to visit.

There are few countries in the world that can or do claim this positioning. As a consequence we are uniquely at risk from any factors which may serve to undermine this brand. And there are an increasing number of such factors that have captured the attention of global media.

Typical is this report which appeared in Cosmos magazine in November 2007:8

New Zealand is renowned as a national model of environmentalism and sustainability, but the food miles and carbon impact debates may hit it hard in coming years (the image is from the country’s 100% Pure New Zealand campaign).

It may seem strange that a country the size of Britain with a population of only 4.1 million and few industrial smokestacks is facing accusations that its food and tourism industries are helping destroy the global environment.

“New Zealand’s reputation as a country with a clean and green environment is priceless,” Prime Minister Helen Clark said recently.

However impact of greenhouse gases from transport, especially aviation, on climate change mean New Zealand’s environmental credentials are coming under new scrutiny from distant markets.

Environmentally-conscious European, American and Asian tourists are being asked by campaigners if they can justify flying 20,000 km for a holiday on the opposite side of the world. They are also being asked why they are eating lamb, beef and butter from New Zealand when they could be buying from local farmers.

Tourism is New Zealand’s single largest export sector, providing one in 10 jobs and 8.9 per cent of gross domestic product. of New Zealand’s 2.42 million visitors last year, 54 per cent were from distant markets in Europe, the Americas and Asia…

The impact of long distance transport on climate change has also been used to attack New Zealand’s food exports. A British cabinet minister claimed last year a kilogram of kiwi fruit airfreighted from New Zealand to Europe caused five kilograms of carbon to be released into the atmosphere and suggested a tax on so-called ‘food miles’. The New Zealand government countered by pointing out that kiwifruit is always transported by ship, one of the most efficient methods of transport.

8 Agence France-Presse. (2007). Climate debate hitting New Zealand exports. Cosmos Magazine [online], 6 November. Retrieved January 16, 2008 from http://www.cosmosmagazine.com/node/1686

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The 100% Pure New Zealand brand

of New Zealand’s exports in the year to June totalling NZ$33.4 billion dollars (A$29 billion, US$25 billion), the US accounted for NZ$4.5 billion dollars and the EU NZ$5.2 billion dollars. Both are regions where there has been a high profile debate on the environmental cost of importing food from distant countries…

Critics in Britain and Germany in particular have been saying it is irresponsible to import food and drinks from the other side of the world and have urged consumers to consider the impact of food miles. But New Zealand researchers and politicians have been working overtime to knock down this theory.

Trade minister Phil Goff said foreign consumers would realise the “superficiality and flaws” of the food miles argument and would focus instead on the total carbon footprint of foods.

Furthermore, a report this year by Professor Caroline Saunders of New Zealand’s Lincoln University, showed British dairy farmers produce 31% more greenhouse gases than their counterparts in New Zealand, including the impact of transport to Europe. New Zealand’s temperate climate means cattle eat grass all year round and do not require other more energy intensive feed…

Clearly action needs to be taken to defend the brand. Beyond climate change there are serious concerns about the state of our natural environment that could, if not addressed, also undermine the authenticity of our 100% Pure brand positioning. The Environment New Zealand 2007 report, issued by the Ministry for the Environment issued in January 2008 provides a comprehensive assessment of the nation’s environment. The last report was issued ten years ago in 1997. Although some areas of the environment show welcome improvement, such as the number and state of landfills, there are a range of increasing pressures on the environment including the effects of fertilisers and agricultural run-off into our waterways, intensification of land use, biodiversity and energy consumption. The conclusion chapter to the report was omitted prior to publication, ostensibly because the facts in the report should stand by themselves. However, the draft chapter was subsequently made available ‘in the interests of transparency’. It makes sobering reading; for example:

It is the very aspects of New Zealand’s environment that underpin our economic wealth through tourism and primary production – our iconic flora and fauna, our stunning wilderness areas and our rural landscapes – which are particularly vulnerable to increasing pressures. This is perhaps the critical area where New Zealand differs from other developed countries: other countries do not rely so heavily on the preservation of their natural environment for their economic wellbeing.9

Although it may not be advisable to advertise our shortcomings to our overseas consumers and competitors, unless we confront and deal with these issues the authenticity and therefore value of our national brand could be at risk. In this world of instant digital information and citizen media, increasingly there is nowhere to hide.

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9 http://www.mfe.govt.nz/publications/ser/enz07-dec07/introduction.pdf accessed 4 September 2008

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Tourism

The government’s tourism website acknowledges that New Zealand is a long-haul niche destination with environment as the main attraction.

We have a different appeal than high volume tourist destinations like France, Spain, USA and the UK. Research indicates that New Zealand appeals to people seeking adventure, connection with nature, relaxation and revitalisation.10

International tourists from our key markets (UK, Germany, USA, Canada, China, Australia, Japan and South Korea) are attracted by the image of New Zealand and the 100% Pure brand. Proof that this branding and ‘clean, green’ image is now part of the global psyche is evident across popular consumer media within our key tourism markets. For example, New Zealand has been voted as the top 2008 destination country, for a second time, by readers of Wanderlust - one of the UK’s most popular travel magazines.

You can’t call New Zealand predictable. Yes, it does win your top country vote with a regularity verging on the mundane – but with good reason. With its spewing geysers, epic landscapes, lip-smacking wines and almost limitless numbers of ways of chucking yourself into, off and under things, the other Down Under is anything but dull.11

In 2007 New Zealand was voted number 2 destination in the world on the Lonely Planet Blue List. In 2006 NZ was voted ‘dream destination’ by the British Travel Awards, ‘coolest destination’ by CoolBrands and came first in a worldwide survey by Country Brands Index for its ‘natural beauty and outdoor activities’.

New Zealand Tourism’s campaigns continue to build on the success of the 100% Pure New Zealand brand, with campaigns in the UK and Germany using interactive media to target walkers and nature lovers, and the first ever 100% Pure New Zealand campaign in Shanghai aimed at increasing the value of visitors from China.12

The autumn 2008 ‘What’s on’ New Zealand tourism campaign in Australia referred to as ‘Green and Gold’ also played on the ‘green’ status of NZ and the Australian flag colours. The continued focus of tourism on our green image has established a brand that we cannot opt out of even if the landscape no longer fits due to degradation and mismanagement.

The 100% Pure brand, and the foundation for the tourism industry in New Zealand, will collapse if consumer satisfaction with our environment and environmental standards is not met. our current tourist satisfaction ratings are high. According to the results of Tourism New Zealand’s 2007 International Visitor Satisfaction survey, almost two-thirds of people surveyed felt New Zealand’s natural environment had exceeded their expectations.

10 New Zealand Tourism. (2008). The Tourism Industry [online].], New Zealand Tourism. Retrieved March 8, 2008 from: http://www.tourism.govt.nz/quicklinks/ql-tourismindustry.html>

11 Wanderlust. (2008). Wanderlust Travel Awards 2008, Wanderlust. Retrieved March 8, 2008, from http://www.wanderlust.co.uk/detail.php?page_id=1064&type_id=4

12 New Zealand Tourism. (2008). Visitor Arrivals, New Zealand Tourism. Retrieved March 8, 2008, from http://www.tourismnewzealand.com/tourism_info/market-research/visitor-arrivals/visitor-arrivals_home.cfm

13 Trade Resources. (2007). International Visitors Find Green Satisfaction, Tourism New Zealand [online], 10 December. Retrieved February 2, 2008 from http://www.newzealand.com/travel/trade/trade-news-events/trade-news/international-visitors-find-green-satisfaction.cfm

14 ‘Tourism New Zealand Chief Executive George Hickton told Tourism News that visitor satisfaction is one of the

best marketing tools we have for promoting positive word of mouth. “In this era of heightened awareness of climate change and environmental sensitivity it is vital that visitors have a positive experience with New Zealand’s environment.”’ Ibid.

15 Nunes, F.P. and Spelman, M. (2008). The Tourism Time Bomb. Harvard Business Review, April 2008, p. 20.

only 1% said that New Zealand did not meet or exceed their expectations.

Some 79% of respondents said they expected recycling facilities at tourism activities. other aspects that were very important were conservation efforts, environmental enhancements and strategies to minimise visitor impacts.

The research showed Europeans (British and Germans in particular) have some of the highest environmental standards of all our visitors.13

Consumer focus on climate change and airmiles clearly presents a risk to the New Zealand tourism industry. But we feel that the greater risk is the potential for our natural environment to no longer match the expectations of travelers. A fall from ‘pure’ will impact arrivals, far more than concerns about carbon.14 The United Nations World Tourism organisation suggests that annual international tourist visits will double from 800 million in 2008 to 1.6 billion in 2020. This implies that despite climate change and increasing costs of transportation due to a lack of oil what will be at stake is the preservation of tourist ‘sites’ from an influx of visitors not the reduction of travel. A Harvard Business Review article picks up on this phenomenon of ‘scarcity of place’. It emphasises that the rising middle class in developing countries will dramatically impact the global tourism industry. This indicates an emerging trend of global waiting lists to visit places rather than declining visitor numbers due to concerns about climate change.

International travel is no longer the exclusive province of the rich. over the next several decades, hundreds of millions of new entrants to the middle class will want not only the things - but also the experiences - that money can buy. Indian call-centre employees, Russian petrochemical engineers, Chinese middle managers, and Brazilian salespeople are already scouring the web for deals on trips.15

In New Zealand, we are seeing a rise in the number of tourists travelling on cruise ships. Seamiles could be seen as a sustainable alternative to airmiles, especially if cruise ships offer packages that declare the entire footprint and life cycle analysis of all aspects of the cruise.

The risk is that the country could fail to live up to its 100% Pure image and thereby fall off the top destination lists by failing to maintain the ‘pureness’ of its environment. If the niche market for walkers, nature lovers and adventure seekers is to be sustained, New Zealand must shift towards careful management of its environmental resources.

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The New Zealand Tourism Strategy 2015 report places sustainability at its core.

Vision: in 2015 Tourism is valued as the leading contributor to a sustainable New Zealand economy.16

We believe this is the correct position for New Zealand tourism to adopt to avoid risks and capture opportunity. The issues Prime Minister Helen Clark identified in her speech launching the tourism strategy reiterates values expressed in the report.

The strategy envisages tourism being the first and most visible sector to meet, or exceed, new environmental standards and take up new environmental initiatives.What this strategy fully takes on board is that without a commitment to sustainability, tourism in New Zealand will not prosper.But by committing to sustainability, tourism can plan for a strong future.That’s because the high value visitors we seek to attract are increasingly conscious of their environmental footprint.For many of them we are a long haul destination.on average for international visitors, their flight to and from New Zealand accounts for 90% of the carbon emissions generated by their visit.We don’t want to be ruled out of consideration as a destination because it is seen as unsustainable to be here at all.So New Zealand as a country, and tourism as an industry, must go the extra mile to prove sustainability credentials. Being clean and green and 100% pure is priceless positioning and we must keep it.17

In order to keep it, we must earn it. The strategy is strong. Much needs to be done to live it.

The development of a comprehensive plan to formulate an industry wide approach to the implementation of sustainability principles would be a valuable investment for New Zealand’s future enterprise success.

16 Ministry of Tourism, Tourism Industry Association and Tourism New Zealand. (2007). The New Zealand Tourism Strategy 2015.. Available from http://www.nztourismstrategy.com/download.htm.

17 Clark, H. (2007). Launch of NZ Tourism Strategy [online], 7 November., The New Zealand Government. Retrieved December 3, 2007 from http://www.beehive.govt.nz/node/31225

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Un-sustainability issuesBelow is an introduction to key un-sustainability issues or trends that will be of importance to consumers of New Zealand’s food exports and tourism in the next ten years and beyond. This report is intended to serve as a catalyst for reflection on the opportunities and risks of changing consumer sentiment and behaviour within these industries.

The issues to be discussed are:

Climate changeResource scarcityEnergy systemsWaste

Climate change

Climate change is one of the most significant issues affecting consumers’ opinions about NZ food exports and tourism. Although New Zealand itself is not a major contributor to climate change, mounting scrutiny of the environmental footprint of products and services is impacting the concerns and purchasing decisions of consumers worldwide.

The flood of media attention on climate change over recent years has led to a heightened awareness amongst consumers of the environmental impact of their purchasing choices. Notably in 2006 both Al Gore’s Film An Inconvenient Truth (May) and the Stern Report (November) sparked widespread global debate on climate change which has not left the papers, blogs, TV, fashion magazines, financial magazines, podcasts and dinner tables since.18 In some instances consumers’ heightened awareness of climate change and their wider environmental footprint leads to behaviour changes, but recent surveys still document a concern-action gap. Some 66% of consumers in the USA and UK [USA - 61%; UK - 69%] surveyed by Globescan for the Consumers International and AccountAbility report What Assures Consumers on climate change felt that “everyone needs to take responsibility for their personal contribution to global warming”.19 However a subsequent question asked by Globescan revealed that while the majority of consumers are concerned about climate change many - particularly in the USA 42% compared to UK 76% - could not name a key action they could do to be more climate conscious.20

Evidence from these consumer surveys does not suggest immediate large scale action by consumers to drive environmental change through purchasing choices. However, the heightened levels of concern may well translate into direct action as the publicity shifts in emphasis from awareness to education about actions, as is now happening. This is likely to impact first on high value premium niche products targeted at high end, and more sustainability aware, consumers. It is this category of premium niche product that New Zealand exporters need to emphasise in order to enhance value creation and per capita productivity.

Consumer preferences are only part of the story. Both governments and retailers are seizing the initiative in part out of political pressure to be seen to be doing something, and in part because they perceive potential competitive advantage.

There is a high probability that purchasing decisions impacting New Zealand exports and tourism will be impacted by government regulations. There has already been discussion of carbon tariffs for Europe, instigated by France, on exports from countries which are not involved in global emissions reductions.21 The likelihood of increasing government engagement with climate

18 See New Zealand Trade and Enterprise (NZTE). (2007). Market analysis: Food miles and sustainability trends in the UK (report produced by Fishburn Hedges), Wellington, New Zealand: NZTE. for a deeper analysis of the media coverage of climate change, in particular food miles, in the UK. Also the 2007 Nielsen global online survey Climate Change & Influential Spokespeople reports that 66% of people that had seen An Inconvenient Truth reported that the film had changed their mind on global warming, 89% said seeing the film increased their awareness of climate change 74% stated that the film caused them to change some of their habits. Nielsen. (2007). Climate Change & Influential Spokespeople: a global Nielsen online survey, June., Nielsen. p.2. Retrieved September 12, 2007from http://www.eci.ox.ac.uk/research/climate/nielsen.php. 47 Markets Covered, margin of

error - +/- 4% for n=500 and +/- 3% for n=1000.19 AccountAbility and Consumers International. (2007).

What Assures Consumers on climate change?: Switching on Citizen Power, (GlobeScan opinion Survey), June., AccountAbility and Consumers International. p. 9. Globescan online survey: February 2007, 2734 US and UK representative sample, age 18+. Margin of error 2.7%.

20 ibid. p. 21.21 See Hot Topic: Global Warming and the Future of New

Zealand by Gareth Renowden for further discussion of the implications of carbon taxes to prevent emission leakage from imports within economies that build carbon prices into their products and services. Renowden, G. (2007). Hot Topic: Global Warming and the Future of New Zealand., Auckland, NewZealand: AUT Media. p. 136.

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Un-sustainability issues

change is compounded by indications that consumers want government to drive responsibility for climate change. In the Globescan survey in What Assures Consumers on Climate Change over half of the consumers surveyed believe governments should be forcing businesses to phase out products that contribute to global warming. (Combined 51.5%: USA 45.7%. UK 57.1%) 22

This lack of personal responsibility could be attributed to a feeling that as individuals consumers cannot make any impact on the issue so they shift the problem to Government. Several reports have revealed a similar sentiment. For example, in the report What Assures Consumers on Climate Change 75% of consumers were situated in the category of concerned “but challenged to see how their action could make a difference”.23 The press release title for the Nielsen global survey on attitudes to climate change (2007) was a confirmation of this theme: “Consumers look to governments to act on climate change”.24 Many consumers now expect governments and business to acknowledge the ‘cost’ of their actions and mitigate through reduction, caps or offsets. overseas governments driven by obligations to reduce carbon emissions, such as commitments to the Kyoto Protocol, and in part driven by consumers, will demand exporters that meet their own regulations. Risks arise if exporters are unable to meet changing regulations sufficiently quickly. However, from these risks arise simultaneous opportunities to work with governments locally and internationally to shape future standards for calculating and documenting the carbon footprint of products and services. Leadership in this field could sit comfortably with New Zealand’s clean green image and reputation for neutrality.

The 2008 PricewaterhouseCoopers global CEo survey reveals a low concern amongst CEos for the impact climate change will have on their business in the medium term, but at the same time a desire for government assistance to tackle climate change.25 However CEos in Asia-Pacific presented over 20% higher concern for the threat of climate change. Four fifths of CEos agreed or agreed strongly that governments should take more of a leadership role in determining mitigation strategies for climate change.26 This may mean that CEos feel the issue is not their responsibility and needs to be worked through collectively. Enterprises that can prove a low carbon footprint to emissions sensitive consumers face real opportunities, particularly if the food export and tourism industry can demonstrate to consumers that their individual purchasing behaviour makes a difference.

There are already examples27 of New Zealand enterprises using concern for the environment as a leverage point in competitive overseas markets. The New Zealand Wine Company, producers of Grove Mill Wines, has demonstrated that significant opportunities exist for exporters who can

22 AccountAbility and Consumers International. (2007)., What Assures Consumers on Climate Change? [online], June. AccountAbility and Consumers International. p. 23. Retrieved May 8, 2008 from http://www.consumersinternational.org/shared_asp_files/GFSR.asp?NodeID=96683

23 Ibid. p. 26.24 Nielsen. (2007). Global Nielsen Survey: Consumers

Look to Governments to Act on Climate Change, [online], June 5. Nielsen. Retrieved october 12, 2007 from http://www.nielsen.com/media/pr_070605.html

25 PricewaterhouseCoopers (PWC). (2008). 11th Annual Global CEO Survey: Compete & Collaborate – What is the success in a connected world?, PricewaterhouseCoopers. p. 24. Retrieved February 19, 2008 from www.pwc.com/ceosurvey

26 “‘In total, we [PWC] conducted 1,150 interviews with

CEos in 50 countries conducted between early September and the end of November 2007. 90% of Asians share the concern that climate change will have an impact on their business compared to only 64% of North American CEos.” PWC attribute this disparity to the fast economic growth in Asian countries and consequent demand for resources and destruction of ecosystems. P. 24.

27 Antipodes water,Trilogy skincare products, Snowy Peak fashion and design house, Design Mobel bodyfit sleep system, The New Zealand Wine Company, Comvita natural and healthcare products, Formway office seating and furniture are just a few of the New Zealand enterprises using concern for the environment and the NZ Pure brand as tipping points in international markets.

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28 Tesco., (2007). Tesco Corporate Responsibility Review 2007 - Customer: Green Choices [online].], Tesco. Retrieved December 8, 2007from http://www.tescocorporate.com/crreport07/04_climatechange/greenchoices.html

‘Working in the widest collaboration, we have begun the search for a universally accepted and commonly understood measure of the carbon footprint of our products covering their lifecycle from manufacture through to use. This will enable us to label all our products so that customers can compare their carbon footprint as easily as they can currently compare prices or nutritional profiles.’

29 Patton, D. (2008,January 24) Wal-Mart chief pledges higher prices for sustainable suppliers [online], Food&Drink europe.com. Retrieved February 13, 2008 from http://www.foodanddrinkeurope.com/news/ng.asp?n=82762-wal-mart-supply-chain-cies

30 The July 2006 and updated July 2007 Lincoln report Food Miles – Comparative Energy/Emissions Performance of New Zealand’s Agriculture Industry

caused considerable global debate around New Zealand food miles, in comparison to the more accurate life cycle analysis, as a measure for energy use and carbon dioxide emissions. one of the most significant findings of the report was that New Zealand is more energy efficient than the UK in the production of lamb, dairy product and apples, even after shipping across to the UK. The 2007 updated report concentrates only on the contentious dairy sector and includes greenhouse gas emissions – carbon dioxide, nitrous oxide and methane. The report still concludes that New Zealand produces less emissions than the UK – for each kilogram of milk solid New Zealand produces 35% less emissions. Barber, A., Saunders, C., Taylor, G.., (July 2006) Food Miles – Comparative Energy/Emissions Performance of New Zealand’s Agriculture Industry. Christchurch: Lincoln University - Agribusiness & Economic Research Unit. Retrieved from www.lincoln.ac.nz/story_images/2328_rr285_s13389.pdf Lincoln University (2007,July 25) New ‘food miles’ report shows NZ dairying still more

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be carbon neutral at delivery. In late 2006 they were the first winery in the world to gain carbon neutral certification, from Landcare Research’s CarboNZero team. Grove Mill’s environmental positioning has enabled it to achieve competitive advantage in the tough wine retail industry in the UK, particularly with increased orders by Sainsbury’s.

There is strong emerging evidence to suggest that the risks to a business from not being able to authenticate their carbon footprint might be driven more by retailers than by consumers. For example, Tesco, a leading UK retailer has asserted that they will be providing carbon footprint labels for all their products.28 Lee Scott, the CEo of the biggest retailer in the world Wal-Mart, advised in January of this year that Wal-Mart will favour suppliers that can deliver quality and sustainability.

“Paying more in the short term for quality will mean paying less in the long term as a company. Higher quality products will mean better value, fewer problems, fewer returns and greater trust with our customers.” 29

With the growing consciousness in overseas markets of carbon emissions it is vital for New Zealand to maintain its reputation as an energy efficient producer and service provider.30 It will be essential that we develop authentic scientific evidence about greenhouse gas emissions from New Zealand food and tourism products to enable us to contest inappropriate claims by our competitors, and where appropriate to assert the energy efficiency of our products as a source of potential competitive advantage. The Lincoln University report on the energy use and greenhouse gas emissions of select New Zealand food exports31 was a good start but more work is needed.

At a national level, the 2007 ShapeNZ report from the New Zealand Business Council for Sustainable Development shows that there is business support for harnessing opportunities that arise from climate change. The ShapeNZ survey indicates that 54% of business people in New Zealand (compared to 39% of New Zealanders) believe there are more economic opportunities available to New Zealand as a result of climate change.32

McKinsey & Co’s March 2008 report “Addressing consumer concerns about climate change” is important reading.33 The authors conclude that “businesses must act on global warming and other issues to narrow a general trust gap between them and the public”. They report a sea

efficient than UK, greenhouse gases included [online]. Christchurch: Lincoln University. Retrieved october 13, 2007 from http://www.lincoln.ac.nz/story21175.html

31 Christchurch: Lincoln University. Barber, A., Saunders, C., Taylor, G., (July 2006) Food Miles – Comparative Energy/Emissions Performance of New Zealand’s Agriculture Industry.

32 New Zealand Business Council for Sustainable Development (NZBCSD). (2007). ShapeNZ: Climate Change Opinion Monitor 23 November – 3 December 2007.,December 5. NZBCSD. Retrieved from http://nzbcsd.org.nz/story.asp?id=847

1220 total responses, with a subset of 389 business decision makers, for this question.

change in attitude since their previous report 12 months ago such that “executives now regard the environment as the sociopolitical issue that will attract the most attention, by far, from the public and politicians over the next five years”.

Taking action on global warming and other environmental issues seems critical for narrowing a general trust gap between consumers and corporations. Yet this kind of activism will not be a panacea for companies hoping to address the growing societal expectation that business should contribute more to the broader public good.Consumers also want healthier and safer products, retirement and health care benefits for employees, and much else besides, though their expectations vary by industry and geography. What’s more, they say clearly that the performance of an industry or a company on a wide range of societal issues affects not only its reputation but also their willingness to buy its products. Each corporation faces a wide range of risks specific to the industries, regions and countries in which it operates. But our surveys also reveal that companies have significant opportunities to differentiate themselves and to increase shareholder value by acting responsibly to improve their reputations and by providing products and services that address the consumers’ concerns. Page 1.

The report has a section devoted to the food and beverage industry.

The food and beverage industry enjoys high trust ratings—70 to 90%—in both developed and developing economies. But consumers around the world thought that companies in this sector should improve their performance in health and safety, the environment and sustainability, and ethical business practices.It will be important to meet these expectations, for consumers report that they are more willing both to punish and reward the actions of food and beverage companies than of companies in other sectors. In fact, 55% of the respondents say they have already refused to buy the products of a food and beverage company because they had heard it was acting against the best interest of society. Just as many say they have bought the products of a food and beverage company because they had heard it did something to benefit society. The average for all sectors surveyed was 49% both for buying and refusing to buy products.A majority of the respondents in most of the countries surveyed say they are willing to pay more for food and drink from companies that address the respondents’ most important concerns about health (food safety, fat content, the use of pesticides and genetically modified products) and the environment (waste and pollution, the impact of packaging, and global warming).Consumers emphasise three things that a food and beverage company should do to make them more inclined to choose its products over those of competitors: label products clearly with honest information, make them more healthy and nutritious, and reduce waste and pollution in manufacturing. However, these companies must do a better job of publicising their green efforts: when asked which of five well-known brands was the most friendly to the environment, 63% of the respondents said they had no idea. Page 5.

“The survey is weighted against 2006 census data by age, gender, personal income, employment status, and party vote 2005. The maximum margin of error on the full sample is 3%... Business decision makers (defined by occupation as managers, proprietors and self employed).”

33 Bonini, S. M. J., Hintz, G., and Mendonca, L. T.., (March 2008). Addressing consumer concerns about climate change; McKinsey Quarterly, March 2007. Retrieved from http://www.mckinseyquarterly.com/Strategy/Strategic_Thinking/Addressing_consumer_concerns_about_climate_change_2115;

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Resource scarcity

Analysis of the impact of climate change on New Zealand has shown that we will not be as greatly affected as countries such as Australia, African Sahara, Southern Europe, and the American Southwest. Scarcity of food resources arising from climate change as a consequence of decreased production in regions negatively impacted by climate change could create opportunities for increased food and drink exports, or enhanced desire for tourism to biodiverse landscapes.

This immediate and future scarcity of global food resources is being exacerbated by the conversion of food producing land to inefficient bio-fuel production, incentivised through significant government subsidy in Europe and the USA. And at the same time we are witnessing dramatic population increase in the developing world. Total global population was about 2.4 billion people in 1948, 6.6 billion in 2008 and is forecast to reach 9.6 billion in 2048. This is leading to unprecedented demand for food and early indications are that the planet may simply not be able to cope. As India and China and other high growth Asian nations industrialise, there is a large and growing middle class now able to afford higher quality foods such as meat and dairy products, which are more demanding in energy, fertiliser and land utilisation. Price and availability of energy, fertiliser, water and food are becoming inexorably interlinked because of the bio-fuel phenomenon. This combination of forces has seen the price of basic staples such as wheat and soy beans more than double in the last year. This emergent crisis of food price and scarcity has been highlighted extensively in the popular press34, 35 At the same time as the rest of the world feels the impacts of climate change, New Zealand will feel the impact of global scrutiny on how resources are managed.36

Scarcity of resources currently taken for granted such as fresh water supply could impact half the population living on the planet in 25 years.37 But the most pressing resource concern of our current decade is how fossil fuels are used and how their resulting emissions are managed.38 In previous decades resource costs have been calculated without considering the complete costs of production; some costs such as pollution to air and water have been externalised. over the last 30 years shifts in social activism, media attention, legislation and subsequent changing consumer sentiment have contributed to new forms of corporate accounting to manage risks associated with the consumption of resources – often described as full cost accounting (FCA): integrating social, environmental and ethical factors alongside traditional historical cost accounting. For example, the international organisation for standardisation (ISo) has created audits to accredit organisations seeking to demonstrate their full accountability, for example ISo 14064 for greenhouse gases and the ISo 8000 series for Corporate Social Responsibility (CSR). A new standard on sustainability is currently being negotiated. It will be important for New Zealand to be at the forefront of these developments because of the potential for reporting to be used as a means for basing environmental legislation or as a means of securing competitive advantage.

34 For example Time A Consuming Need May. 7, 2008 | By Ngozi okonjo-Iweala; Act Now, Eat Later (How to End the Global Food Shortage) May. 5, 2008 | By Jeffrey D. Sachs; ’Stop Biofuels to Fight World Hunger’ Apr. 30, 2008 | By AP/SETH BoRENSTEIN; UN: Food Prices a ‘Global Crisis’ Apr. 25, 2008 | By AP

35 “Top scientists warn against rush to biofuel“, The Guardian Tuesday March 25, 2008

36 ‘Co2 concentrations are currently at 384ppm (Sir David King, public statement, June 2006) and have been increasing at an average of 1.9ppm per year between 1995 and 2005 (The IPCC WGI 4th Assessment Report). Assuming an annual increase of 2ppm per year, this will result in an additional 32ppm by 2022.’ Forum for the Future. (2007). (2007). Retail Futures: scenarios for the future of UK retail and sustainable development., London: Forum for the Future. p. 63.

37 United Nations Environment Programme. 2003, Key Facts In 2025 it is estimated that in 48 countries 2.8 billion people will be facing limited water supply and scarcity.

38 There has been wide debate on the true ‘cost’ of oil dependency. For further discussion see in particular Amory B. Lovins, E. Kyle Datta, odd-Even Bustnes, Jonathan G. Koomey, and Nathan J. Glasgow with Jeff Bannon, Lena Hansen, Joshua Haacker, Jamie Fergusson, Joel Swisher PE, Joanie Henderson, Jason Denner, James Newcomb, Ginny Yang, and Brett Farmery. (2005). Winning the oil endgame: Innovation for Profits, Jobs, and Security., Colorado: Rocky Mountain Institute.

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Energy systems

one of the biggest risks to New Zealand food exports and tourism is the perception that our distance from markets equates to a high carbon footprint for tourists and consumers of our goods. There is rising concern about food miles, the distance food is transported from where it is grown to different points of production and eventually to its final site of consumption.Travelmiles is another issue impacting consumer decisions. Air travel, in particular is facing scrutiny due to the large quantities of greenhouse gas emissions it creates (although air travel lobbyists are quick to point out that emissions from air transport accounts for only 2% of total global emissions).

The risk of the food miles concept is that it can oversimplify the issue of carbon costs. For example, the implication is that if product A travels further than product B, product A has the greater environmental and carbon footprint. But this ignores the energy use over the complete life-cycle of the product, beyond transportation. The Lincoln University Food Miles report39 argues that life cycle analysis is a much more accurate way of determining the carbon footprint of the product. However without data-mining and accurate labelling consumers cannot work out the size of a product’s carbon footprint. Foodmiles can appear to be a simple surrogate. Country of origin and an assumption about distance travelled are superficial clues consumers can use to try and determine what is a sustainable purchase. According to the HSBC Climate Confidence Index 2007, of those consumers (58%) prepared to make changes to alleviate climate change, lifestyle changes come first, then time, then money. It can appear deceptively simple to shift purchasing choices to locally produced products, even though in fact their carbon footprint may be larger.40

Another risk to New Zealand exports around the use of food miles or travel miles is the propensity to use New Zealand as an exemplar country for describing distance travelled, perhaps because New Zealand is as far as you can get from European markets. For example, the Eden Project [an environmental tourism destination in the UK which attracts millions of visitors each year] cites the case of the transport of New Zealand apples to the UK. Patagonia, a California based manufacturer of outdoor clothing, shows on its website (www.patagonia.com) a map of the origin and movements of its products throughout all stages of the process. Their wool comes from New Zealand and is transported first to Asia then to the USA and on to distribution centres; the web-site proclaims this as unsustainable.

An informative analysis of the link between New Zealand and food miles in UK media can be found in the report by UK-based consultancy Fishburn Hedges for New Zealand Trade and Enterprise.41 The found over 200 articles on food miles between January 2007 and August 2007 with New Zealand mentioned in around 17% - due to the Lincoln Food Miles report is attributed to this large result. They write that only 34 of the articles were weighty pieces that looked at the whole life cycle analysis as a balanced opinion, rather than focusing on food miles. The more tabloid/consumer media referenced food miles briefly. Fishburn Hedges say this may lead to a ‘tacit’ acceptance of food miles by consumers as a credible criterion for choosing products.42

39 Barber, A., Saunders, C., Taylor, G. (July 2006)., Food Miles – Comparative Energy/Emissions Performance of New Zealand’s Agriculture Industry. Canterbury, New Zealand: Lincoln University.

40 HSBC. (2007). Climate Confidence Index 2007. p.2. The survey is across nine economies – Brazil, China, France, Germany, Hong Kong SAR, India, Mexico, UK, USA. The survey was online, which HSBC acknowledges as creating a bias “since the field methodology was internet based, we will have achieved a more representative sample of the population in developed economies than in developing

economies where our sample is biased towards more affluent individuals.” p.5.

41 New Zealand Trade and Enterprise (NZTE). (2007)., Market analysis: Food miles and sustainability trends in the UK.

See : www.nzte.govt.nz/foodmiles42 Ibid. p. 6.

Waste

Many countries are now suffering from a lack of space for waste and a reduced capacity to cope with pollution and emissions. one waste area that overseas consumers do not want responsibility for is the packaging of exported food and drinks. Nielsen Climate Change Barometer, November 2007 40% of consumers surveyed stated they were ‘very’ concerned about packaging waste; an increase of 9% since May 2007. Concern about packaging was higher than all other environmental concerns – above climate change, water shortage, water and air pollution and use of pesticides.43 Deloitte’s survey of UK consumers An Appetite for Change also highlights consumer concern around packaging. When consumers were asked “what can supermarkets and food producers do to better meet your requirements?” less packaging came sixth with more choice and variety first and lower prices second.44 However the Ipsos MoRI survey of UK consumers Sustainability issues in the Retail Sector shows that consumer behaviour around packaging tops their list of environmental actions taken over the last 12 months.45

At the top of the list were:

- Re-used carrier bags (84%), - Sent items to be recycled (74%), - Bought free-range eggs (58%), - Bought products with recycled content (53%)

At the bottom of the list were:

- Avoided products transported by air (7%), - Avoided products grown out of season (11%).

The survey noted: “Packaging is the most important and tangible sustainability issue for retailers in the eyes of consumers, both the amount of recyclable packaging used and reducing the amount of packaging overall – ahead of issues such as climate change, sustainable sourcing and fairtrade.”46

The Global Nielsen Consumer Report Packaging and the Environment, March 2008 reveals that almost half of the global consumers surveyed would forgo convenience packaging if that would aid the environment.47 This statistic varied amongst different regions in the world. Generally, Asians preferred easily transportable and stack and store packaging options compared to Europeans and North Americans. The reason for this attitude is attributed to Asians’ preference for fresh food and frequent shopping trips. Factors such as kitchen storage space, size of family, use of public transportation and cultural habits also influence food and packaging choices.48

Commenting on Nielson surveys used with the report, Patrick Dodd, President, The Nielsen Company, Europe, said: “In more eco-aware markets there is an increasing expectation of packaging with minimal environmental impact, although for most consumers, this doesn’t

43 Nielson. (2007). Half The World’s Consumers Would Give Up ‘Convenience Packaging’ to Help The Environment, but Less Inclined to Forgo Packaging That Provides Hygiene & Protects: Nielsen Survey. 14 February 2008.Retrieved March 10, 2008from <http://www.nielsen.com/media/2008/pr_080214a.html

44 Deloitte. (2007). An Appetite for Change: Food and Beverage 2012., London: Deloitte. p.4. Retrieved from http://www.deloitte.com/dtt/article/0,1002,cid%253D142851,00.html.

45 Ipsos MoRI. (2007). Sustainability issues in the Retail Sector., Ipsos MoRI. p.49. Survey based on an Ipsos

Mori online omnibus survey of 1, 131 UK adults aged 16-64 between 13-17 March 2007.

46 Ibid. p.49. 47 Packaging and the Environment: A global Nielson

consumer report, Nielson. March 2008. Retrieved April 8, 2008 from http://www.nielsen.com/solutions/NielsenGlobalPackagingEnviroReportMar08.pdf Packaging designed for easy stacking/storing at home (49%); packaging that can be used for cooking, or doubling as a re-sealable container (48%); and packaging designed for easy transport (47%).’

48 41 Nielson. (2007). Half The World’s Consumers Would Give Up ‘Convenience Packaging’ to Help The

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Environment, but Less Inclined to Forgo Packaging That Provides Hygiene & Protects: Nielsen Survey.

49 Retrieved 4 September 2008 from http://www.nielsen.com/media/2008/pr_080214a.html

50 Ibid. At the other end of the scale, the Nielsen survey found consumers were least willing to give up packaging designed to keep products clean and untouched by others (27%); packaging designed to keep products in good condition (30%); packaging information in the form of food labeling, cooking and usage instructions (33%); and packaging that preserved products to make them last longer/stay fresher (34%).

necessarily translate into a willingness to pay more. What most consumers expect is packaging that provides an added ‘feel eco-good factor’, by minimising environmental impacts.”49

overall the most desirable qualities of packaging, as indicated by the survey, were the protective and hygienic aspects.50

A possible reason for the growth of consciousness around packaging is the direct ownership consumers have to take for the waste when it enters the household and is no longer useful. Added to this is the increase in awareness around recycling as a key tangible action consumers can take to improve their eco-footprint and feel good, for example, campaigns by local authorities, the media and retailers to replace plastic shopping bags with cotton reusable bags and outright bans on plastic bags in San Francisco, Melbourne and China.

Consumers tend to judge the eco-friendliness of a package by its material components and recycling possibilities, rather than life cycle analysis or environmental impacts of production,51 as these concepts are hard for consumers to engage with and to understand. Legislative pressure propelled by consumer demand could also prove a tipping point. Within the EU packaging was the first priority waste stream to be legislated. Retailers are also driving change in this area, with Wal-Mart leading the way. They realise there are opportunities for transport cost reductions due to lighter packaging, storage and shelf space cost reductions with smaller more compact product, and waste cost reductions with less packaging outside the store.

If New Zealand exporters want to target growing eco conscious markets that are sensitive to the way food is packaged they need to look into alternatives that demonstrate sustainability. Such as packaging that is biodegradable, recyclable and non toxic at disposal. Solutions could come in the form of corn base plastics – waste cellulose, paper, cardboard and/or glass instead of oil based packages. The aesthetic presentation, especially in Japan, of the entire package – not just the label – signifies the quality and authenticity of the brand.

An Ipsos MoRI survey found that 40% of people identify recycling as the action they believe would be most effective in reducing climate change; 34% say developing cleaner engines for cars; 11% flying on holiday less; 4% conserving water.52

Care about the nature and extent of packaging is arguably the most immediate issue that New Zealand exporters should address.

51 Van Dam, Y. K. (1996). Environmental assessment of packaging: The consumer point of view. Journal Environmental Management, 20(5), New York: Springer New York [online] September. Retrieved from http://www.springerlink.com/content/j465954156164613/

52 Ipsos MoRI. (2007). Tipping Point or Turning Point: Social Marketing & Climate Change. Climate Change Survey., Ipsos MoRI. p. 8. Retrieved from www.ipsos-mori.com>. Ipsos MoRI interviewed a representative sample of 2031 adults aged 16+. Interviews were conducted face to face, in home, on 14-20 June 2007.

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Un-sustainability issues summary

New Zealand is dependent upon the food and beverage and tourism sectors for more than half of our export base. These sectors are significantly dependent on the 100% Pure clean green image that implies safe healthy food and a beautiful natural environment to visit. This brand is under threat from the negative environmental consequences of the intensifying land use and from changing consumer attitudes towards the climate change phenomenon. Because more than half of our food exports are commodity ingredients as opposed to value added premium products they may be under less threat of consumer boycott. However, increasing demands for the backstory and source of origin behind consumer brands may place indirect pressure on New Zealand exporters who are further back in the value chain to elevate and demonstrate their sustainability commitment.

Global food commodity prices are rising because of increasing world population, an increasing middle class and rising incomes in developing nations, pressure of climate change on traditional food exporting nations and the conversion of farm land to bio-fuels and away from food production. None of these pressures are likely to change any time soon. Increasing global food commodity prices could take pressure for enhanced sustainability standards off New Zealand exporters. on the other hand the drive towards premium priced added value exports and consumer expectations for enhanced food safety and quality will increase pressure.

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Trends and tipping pointsIn this section we explore trends and tipping points that are accelerating change in consumer attitudes and actions.

Developing economies

of the countries surveyed in the HSBC Climate Confidence Index (2007) climate change is the significant concern amongst the developing economies - India, Brazil, Mexico and China.53 In contrast people from France, UK, Germany and the USA see climate change as third (Europe) or fourth (USA) in level of concern.54

The UN Population Division predicted in 2005 that out of every 100 persons added to the population in the coming decade, 97% will live in developing countries.55 With the world’s population set to increase by approximately one billion by 2020, this means the mostsignificant population growth on the planet will be taking place in economies where climatechange is the number one concern.56

Ageing population

People are living longer and more actively, particularly in developed economies In this era of unprecedented global ageing, people will place emphasis on health and personal care products and services. In the UK, the proportion of the population aged 65 and over is expected to reach 23% in 2031 compared to 16% in 2004.57 This demographic, dubbed the baby boomer generation, has more wealth to spend and a greater desire for new experiences than the 65+ generations that went before them.

An opportunity exists to tap into the imagination of this potentially significant market. For example a respondent in Forum for the Future’s Retail Futures report proposed: “We may see the emergence of ‘Tesco Silver’, with store formats, products and so on, all customised forolder people”.58

Recent consumer market research demonstrates the impact of an ageing population on sustainability market opportunities. The 2007 British Market Research Board (BMRB) TGI report indicates that British consumers over 50 show high levels of concern for where their food comes from. Some 66% of the over-50s surveyed regularly or always buy food grown in Britain, in contrast to 49% of people aged 25-34. Earlier research from BMRB reveals that women and people aged 45-54 or 65+ are more likely to buy products only from companies whose ethics they agreed with.59

53 HSBC., Climate Confidence Index 2007, p. 6.54 Ibid. p. 9. 55 Hania Zlotnik is Chief of the Population Estimates

and Projections Section of the United Nations Population Division. Zlotnik, H.., Statement to the Thirty-Eighth Session on the Commission on Population and Development [online]. Retrieved December 8, 2007 from http://66.102.9.104/search?q=cache:7mgLny4SnWMJ:www.un.org/esa/population/cpd/cpd2005/Statement_HZ_open.pdf+out+of+every+100+persons+added+to+the+population+in+the+coming+decade,+97+will+live+in+developing+countries&hl=en&ct=clnk&cd=1&gl=uk&client=firefox-a

56 Population 7.7 billion in 2020 up from 6.7 billion in 2007. United Nations, World Population Prospects. Retrieved January 5, 2008 from http://esa.un.org/unpp

57 Forum for the Future. (2007). Retail Futures: scenarios for the future of UK retail and sustainable development. p.13., London: Forum for the Future. “one in four of employees have no private pension provision whatsoever – office of National Statistics” ibid. p. 63.

58 A respondent’s comment from Forum for the Future research. Forum for the Future., Retail Futures, p.13.

59 British Market Research Board TGI consumer research report September 25, 2007 in New Zealand Trade and Enterprise, Market analysis: Food miles and sustainability trends in the UK, p.13.

Trends and tipping points

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Wellbeing

Wellbeing has been identified as an important consumer trend; see for example the Deloitte report (2007) An Appetite for Change based on surveys of UK markets. The drive for wellbeing is caused in part by the rise in obesity, particularly in developed economies such as the USA and the UK, and now expanding to developing economies. over the last five years obesity has received significant attention from NGos, government and the media. Fast food businesses like McDonalds have been targeted and increasingly scrutinised for their promotion of excessive and unhealthy consumption. For example the movie Super Size Me grotesquely highlighted the persuasive power McDonalds has over consumers’ health.

People are concerned about the nutritional value of their food and are purchasing food theybelieve will enhance their wellbeing. The Deloitte report on UK consumers predicts this wellbeingtrend will continue to expand, driving demand for organics and food perceived to be clean, green, pure and fresh. The report describes current consumer trends and future challenges:

ToDAY’S ISSUES - health and wellbeing / convenience / higher quality / authenticity / more demanding and informed / more out of home consumption / freshness / more grazing and snacking

FUTURE CHALLENGES - health and wellbeing / higher quality / stronger convenience / more demanding (e.g. organic) / more out of home consumption / greater environmental awareness of products / more experience driven / price-led value / exploring new tastes.60

Various factors have contributed towards sustainable lifestyle changes. For example, the trend towards organics in the USA has been partly attributed to first-time mothers, older than the demographic of previous years, wanting ‘safe’ food for their children. Enterprises can also beaffected by events in different industries, for example rapidly increasing health care costs and litigation in the tobacco industry have focused attention on obesity.61

What subtle industry and demographic shifts will tip further uptake of organics and other sustainable foods? It is hard to accurately predict, but it is evident that wellbeing will continue to increase in significance. Food safety and nutritional value should be top priorities. The authentic adoption of the New Zealand 100% Pure branding across the entire food industry would minimise risks and enhance opportunities. Early adopters in this ‘healthy lifestyle’ market will gain competitive advantage.

other opportunities exist for exporters who build on already established consumer perceptions. organics are associated with health benefits, more so than their environmental benefits, largely due to the removal of pesticides and lack of hormones.62 The major barrier to increased consumer uptake of organics is that current demand outstrips supply, which allows retailers to demand high prices for a premium product.

60 Deloitte (2007), An Appetite for Change, p. 20. Deloitte & Touche LLP

61 Zadek, S (2004). The Path to Corporate Responsibility. Harvard Business Review, December 2008, p129

62 Pirovano, T. (2008). From obese to organic – The Next obsession: organic, functional and local foods on the rise. Nielsen Consumer Insight Magazine, [online], January 2008(6). Retrieved March 3, 2008 from <http://www.nielsen.com/consumer_insight/ci_story3.html

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Glocalisation

The New oxford American Dictionary Word of the Year for 2007 was ‘locavore’. The different terminology around carbon emissions and choosing ‘local’ to minimise one’s carbon footprint, particularly in the UK, has created confusion amongst consumers over what are the best environmental behaviours.

So how do consumer attitudes around food miles sit alongside other consumption concerns and behaviour? The omnibus research by YouGov for Fishburn Hedges in May 200763 implies that the product’s source of origin does not dominate purchasing decisions, rather the perceived freshness, value for money and free range status of products are of higher concern to consumers. The New Zealand Trade and Enterprise Food Miles report on the UK market for New Zealand food producers also identifies other reports indicating that awareness of food miles does not necessarily lead to a shift in consumer purchasing behaviour, and notes that “quality of produce, freshness and price still rank highly for consumers”.64 Another UK study states that almost 75% of consumers believe the quality of food is the most important issue65. For New Zealand food exporters, the risk is that consumers may perceive food miles/distance traveled and time to shelf as undermining product quality and freshness.66

The push to reduce food and travel miles has seen the emergence of a drive to buy local and holiday local. A strict interpretation of buy local is purchasing food grown within a 100 mile radius of where one lives. However purchasing local food (eg UK consumers buying UK apples compared to New Zealand apples) does not necessarily equate to a lower carbon footprint. Full life cycle analysis (LCA), such as that done by Lincoln University in 2006,67 demonstrates statistically how the production and export of New Zealand apples, dairy products and lamb to the UK can use less energy and produce less carbon dioxide emissions than UK apples, dairy products and lamb.

Increased shareholder value will arise for enterprises that offer authentic experiences toconsumers seeking a healthy informed lifestyle and have the credentials to cut through the confusion and back up claims. one way to achieve and drive this opportunity is for New Zealand enterprises to develop a strong collective ’clean, green‘ brand to capture the desire for quality and health. The NZTE Food Miles report sums up the opportunity around quality, food miles and local consumption:

The trend toward ‘fresh and local’ is an issue but there are a significant number of consumers who value quality and will buy on quality and value. Continued investment in communication which promotes ‘brand New Zealand’ in the round (pure, green), and getting across sustainability and food safety/integrity messages will undoubtedly help New Zealand produce remain competitive and attractive in this new consumer climate.68

66 Renowden, G (2007). Hot Topic: Global warming and the future of New Zealand, AUT Media, August 2007, chapter 3

67 Christchurch: Lincoln University. Barber, A., Saunders, C., Taylor, G., (July 2006) Food Miles – Comparative Energy/Emissions Performance of New Zealand’s Agriculture Industry.

68 New Zealand Trade and Enterprise., Market analysis: Food miles and sustainability trends in the UK., p.14.

63 New Zealand Trade and Enterprise, Market analysis: Food miles and sustainability trends in the UK, p.11.

64 Ibid, p. 11.65 Ashridge Business School (Gribben, C. and Gitsham, M.).

(March 2007). Food labelling: Understanding consumer attitudes and behaviour., Hertfordshire: Ashridge Busi-ness School. Retrieved from http://www.ashridge.org.uk/Website/IC.nsfwFARATTFood%20

labeling:%20understanding%20consumer%20attitudes %20and%20behaviour/$file/ACBAS_Food_Labelling_ Report_web.pdf.

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Perhaps consumers’ emphasis on quality, price, free-range, fair trade and animal rights above food miles stems from a confusion over what they can personally do about climate change. Confusion on what to buy, particularly around ‘buy local’, ‘food miles’, ‘carbon footprint’ and ‘life cycle analysis’ is amplified by media that implies that food miles/buy local is the best way to avoid a heavy carbon economy, while other reports suggest that food miles don’t go the distance and buying local can be a more environmentally harmful choice.69

Exporters need to build on New Zealand’s already established reputation as an exporter of premium quality products - such as cheese, wine and organics - that tap into the high-end and luxury market. These consumers come from an educated and high-earning demographic, and are concerned about ethical supply cycles and sustainable production. These are the consumers that are prepared to pay for products and services that prove to be of superior quality, provide rich experiences and have world class sustainability credentials.

Certification

There is agreement across several market research reports about the potential influence trusted certification will have over consumers. Currently many consumers are confused by the different components that make up ethical and sustainable shopping. This confusion is one of the reasons why ‘food miles’, a high risk issue to New Zealand, has been so popular in the media rather than life cycle analysis (LCA); it is deceptively simple. The recent NZTE (Fishburn Hedges) market analysis concentrating on food mile trends in the UK identifies LCA and carbon labelling as key opportunities for New Zealand exporters.70

If exporters cut through confusion with clear internationally recognised third party labelling real opportunities could arise. The Lincoln Food Miles report71, shows that full LCA, and hence carbon labelling, is possible. The report has also demonstrated the educational potential of LCA and generated media awareness about the issue and New Zealand as a thought leader. Significant opportunities await exporters who build on the Lincoln research and label their products with verified information on details such as carbon emissions. New Zealand exporters could take advantage of the present confusion and guide consumers in their sustainability choices.

Demonstrating to consumers that their purchasing decisions can make an impact on the environment and society will encourage buy-in.72 Retailers are already pre-empting this behavioural change. Labelling such as nutritional labelling, Marine Steward Council (MSC) labelling on Fisheries, Forest Steward Council (FSC) on wood and forest resources are increasingly sought by Sainsburys, Tescos and Wal-mart. Wal-mart has pledged to stock only MSC seafood within five years.

69 A Google search of food miles reveals the contentious nature of the food miles debate. To see articles that look at the debate from a ‘food miles don’t go the distance’ angle see Gordon, P. (2007,September 6). Food miles: Does distance matter, The Independent [online]. Retrieved from http://www.independent.co.uk/environment/green-living/food-miles-does-distance-matter-401558.html Watson, Jenna. (2007,November 30) Misunderstanding Food Miles. Treehugger [online]. Retrieved from http://www.treehugger.com/files/2007/11/misunderstanding_food_miles.php McWilliams, J. E. (2007, August 10) Moveable Feast:

Eating Local Isn’t Always the Greenest option, The Texas Observer [online]. Retrieved from http://www.texasobserver.org/article.php?aid=2564

70 New Zealand Trade and Enterprise, Market analysis: Food miles and sustainability trends in the UK, p.10.

71 Barber, A., Saunders, C., Taylor, G., Food Miles (The Lincoln Report)

72 See for example (2008). on the Mark: Ecological labelling takes off. The Economist [online]. 28 January. Retrieved February 13, 2008 from http://www.economist.com/world/international/displaystory.cfm?story_id=10563590

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Paul Monaghan, head of ethics at UK retailer the Co-op, said the group believed that consumers’ apparent indifference to climate change was likely to be the result of believing they have little influence to force change:

They may believe they are powerless on climate change. People can choose to buy Fairtrade orFreedom Food labels, but there is no carbon label yet. We think shoppers see climate changeas an issue for corporations and governments.73

The backstory

Technology makes it possible to find both broader and more detailed information on products and services. This increased access to information coupled with a desire to know the ‘back story’ of food and tourism will reveal any gaps in Corporate Social Responsibility. Exposure of unethical behaviour could result in consumer boycotts, such as in the case of Nike, or simply make products and services uncompetitive compared with those where the story is told. For example in Japan (our third biggest export market) radio frequency identification (RFID) tags are being used to label products which consumers can scan with their cellphones to find out the supply cycles and back story to the product.

According to the Japanese Food Safety Commission, Japanese consumers are choosing to purchase local food over imported food primarily because of the improved ease of traceability.74

A trend is emerging whereby people are prepared to pay more money to gain information on the supply cycle and ‘backstory’ behind what they are eating.75 Plus a recent spate of scares of toxic substances found in exported Chinese products – petfood, toothpaste and pharmaceuticals – has increased concern over traceability and food safety.

Experience economy

An observable trend in the first decade of the 21st century is a shift in emphasis from product to experience, especially among high-end consumers.76 Services are mass customised to provide individual experiences, with underlying products and services as props. Enterprises must choreograph memorable events and experiences for their customers, and the memory of the experience becomes the product. A more sophisticated version of products as experience is when there is a transformative aspect to the experience, for example through educational or spiritual benefits. Tourism is an obvious example of product as experience, but experience economy ideas are impacting on many if not most consumer products. For example, Whole Foods Markets is the fastest growing supermarket chain on the planet with an annual growth rate of 25% over the last decade. Storyboards are used to explain the source of origin of products. The emphasis is on food and living, rather than products and consumers. You are invited to touch, smell, taste; a sensory experience beyond transactional.

73 Finch, J. (4th February 2008). Shoppers care more about animals than climate., The Guardian [online]. Retrieved February 20, 2008 from http://www.guardian.co.uk/money/2008/feb/04/consumeraffairs.climatechange

74 Rich, S. (23 November 2006). Using Cell Phones for Food Traceability., Worldchanging. Retrieved November 10, 2007 from http://www.worldchanging.com/archives/005403.html

75 Pilcher, J. M. (2006). Food in World History. p.106., oxon: Routledge.

76 Pine, J. P. and Gilmore H. J. (1999). The Experience Economy: Work Is Theater & Every Business a Stage. Harvard: Harvard Business School Press.

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In particular the tourism sector should tie into notions of providing cared for experiences – taking care of the environmental footprint for people so that they can focus on the holiday experience. The TGI Green Values report states that the group they call eco-adaptors is more likely to have high air miles, particularly the US consumers surveyed.77 So although air miles have been identified as a major contributor to climate change, the eco-conscious are still heavy users of planes. However they will seek ways to mitigate their footprint and search for authentic experiences. The Future Foundation’s 2005 report on The Future of Luxury Travel, lists a search for authentic experiences as a top priority for high-earning consumers.

Another report by the Future Foundation The World of Travel in 2020 looks at a range of countries’ opinions on travel – in particular affluent middle class consumers from BRIC countries (Brazil, Russia, India and China).78 The report notes that consumer concern about air travel is currently a low priority as more people seek new experiences. The report also finds that older ‘third age’ customers will be frequent flyers and seekers of new experiences in their retirement. However, the media, particularly in Europe is heightening awareness of flight miles. This is unlikely to deter experience seekers, but is likely to encourage them to look for ways to offset their carbon emissions and to reassure themselves that their experiences are not coming at a high environmental cost. The easy ability to calculate and offset carbon emissions is an obvious example.

Transparency and choice editing

People want transparent information on the sustainability of an item or service they are purchasing.

Communicating information about a product by describing the context of its background can become a learning tool, examples are nutritional facts on food labels, or dolphin-safe tuna. over time, this kind of educational communication can change consumer purchasing patterns.79

often they do not feel it is their responsibility to make green, choices, rather it is the responsibility of government or business.80 Purchasers want to be empowered by the knowledge of what the best choice is, not confused. A number of retailers are currently acknowledging their role as editors of consumer choices. For example in the UK (New Zealand’s fifth biggest export nation) Asda (a Wall-mart owned retailer) no longer sells endangered swordfish and North Sea cod. Marks & Spencers (M&S) and Waitrose have also limited consumer choice by taking eggs from caged birds off the shelves and now only sell free-range eggs (M&S since 1997, Waitrose since 2001). Sainsbury’s, the Co-op and Morrison’s are pledged to follow suit and remove battery hen eggs within two years before the 2012 EU ban on battery cages comes into force.81

There is the risk that media and NGos will pressurise retailers and government to further edit consumer choices. If New Zealand exports do not meet acceptable standards they could find themselves off supermarket shelves.

77 TGI. (october, 2007), Green Values: Consumers and Branding. p. 16. (UK/GB/FR the 3 countries identified with highest transport related carbon emissions)

see www.tgisurveys.com.78 The Future Foundation. (2005). The World of Travel in

2020. p.5., The Future Foundation.79 Rich, S. (2007, March 6). Background Stories building

context connection. Worldchanging, [online]. Retrieved July 10, 2007 from http://www.worldchanging.com/archives//006243.html

80 Nielsen. (2007, June 5). Global Nielsen Survey: Consumers look to Governments to act on Climate Change. London: Nielsen. Retrieved July 20, 2007 from http://www.nielsen.com/media/pr_070605.html. online survey April 2007, 26, 486 internet users polled in 47 countries.

81 Hastings, K. (2008,January 7). All eggs to be free-range within two years., The Telegraph [online]. Retrieved January 18, 2008 from http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2008/01/07/nfood107.xml

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In February 2008 Wal-Mart Stores82 announced they would buy their produce, meat and seafood only from suppliers accredited by private inspection organisations. The largest of these GlobalGap, has 81,000 farms and plants in 76 member countries, a massive increase from 18,000 in 2004. We expect a dramatic increase in the adoption of global non government standards as frustration grows with the slowness and political nature of standard setting at the national government level.

Trends and tipping points summary

There is a complex array of trends that are influencing consumer behaviour in a manner which makes marketing challenging for New Zealand exporters who are distant from their major markets. one factor stands out. The role of retail leaders in influencing consumers towards sustainable choices is already significant and will escalate. Whether this pattern comes from a deeply held company philosophy about making the world a better place (such as Whole Foods Markets), from a belief that sustainable development can drive down costs and therefore enhance profitability (such as at Wal-Mart) or from the pursuit of a source of competitive advantage and differentiation (such as at Marks & Spencer, Tescos and Waitrose), the effect will be the same. Consumer choice will be edited by the retailers and all other things being equal consumers will choose the option they perceive as being healthier and safer.

82 Miller, J.W. (2008). Private Food Standards Gain Favor, The Wall Street Journal, 11 March, B1.

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Expert opinionsQuantitative surveys of existing consumer opinion such as those reported above are helpful in obtaining an understanding of existing attitudes. They are less useful in discerning actual behaviours, trends and tipping points. In order to obtain a qualitative understanding of emergent trends we approached four leaders in the USA, UK and Europe with backgrounds in communication, Fast Moving Consumer Goods manufacturing and marketing and Supply Cycle. In each case we have cited their full response to three key questions:

(1) Has media coverage on sustainability issues translated into significant changes in actual consumer behaviour and tourism?

(2) What sustainability issues or factors are having the most impact on consumer behaviour

(3) What changes in consumer behaviours do you foresee in the next few years?

Peter Corijn

Peter Corijn is a General Manager at Procter & Gamble responsible for emerging markets.

Last week I went on a business trip to the US. What struck me in the Delta flight to Cincinnati is that the business class sachet (with products) had environmental messages all over it. This was not the case before. The paper was recycled and care was taken to convince me that Delta was a responsible carrier. Then when checking in at the Westin (completely smoke free now), I noticed the leaflets on the counter. They were all about ‘feed the body, nourish the soul’, in other words they had messages around personal sustainability. P&G also talked extensively in the meetings about our sustainability strategy. And so did GE, Wal-Mart and in an earlier event Tesco. Sir Terry, the CEO, clearly called out the emergence of the ‘green consumer’ as a key trend. Tesco is getting ready for it. When we do interviews for recruits, young people ask about our sustainability strategy. I am struck by how important the topic has become.

A question I have always asked myself is “what does it take for a sustainability strategy to work?” Let’s be brutally honest here, just saying “it is better for the environment” does not do the trick. If it did, we’d all be driving a Toyota hybrid. But the vast majority of people do not.

I have come to the conclusion that one needs four core elements.

(1) One cannot ask the consumer to compromise

(2) The sustainability strategy must be directly linked to the corporate strategy and mission

(3) Breakthrough is good, but one cannot underestimate the power of incrementalism.

(4) It must be real, not fake, not a marketing gimmick

Let’s take each one in turn.

(1) Some greens advocate that we all go and live in the Stone Age again. But people will not. They want their air travel, their PC, their internet, their car. Hence, the name of the game is to give people what they want but in a way that the environmental footprint is manageable. So one needs to offer the same consumer experience, or a better experience. Toyota is doing that with their new engines for instance

(2) Corporations need to do stuff that is in line with their core mission. When Wal-Mart does something for sustainability it must lead to lower prices for their customers. If not, it will not work, get no inside support and certainly no support form shareholders.

(3) Obviously we all want breakthrough but incrementalism works as well, simply because of the law of big numbers. The UK spends £150million each year to remove chewing gum. So the small action of not throwing chewing gum has a big effect. A lot of these small things make a huge difference once millions of people do them.

Expert opinions

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Adam Werbach is CEo and founder of Act Now, a sustainability consultant for Wal-Mart.

(1) As of yet, sustainability has not translated into significant changes in actual consumer behaviour in tourism, however changes will be felt in the next five years. The main sustainability factors that we expect to see manifesting lie within the area of fuel costs. Our perspective is that within the next five years a global regulatory framework on climate change will increase fuel costs related to air travel significantly. This, on top of oil that might hover near US$150 a barrel, may seriously change the way that people view air travel. For countries and businesses that require air travel as a part of their business model (like New Zealand), we recommend immediately initiating offsetting activities at the national level that will turn the risk into a competitive advantage. These activities might include hybrid-only national rental car fleets, increasing cruise-ship opportunities, on-land public-transit-only packages, and ‘flight forests’ that each traveller contributes to in the price of their ticket.

(2) Carbon will have the largest effect on consumer behavior as the costs of global warming become even more visceral for the average consumer. Issues like fair trade and genetic engineering will be transmogrified to communicate in the terms of climate change. So, therefore, a consumer might reject all GMOs because they represent that the product is not local, and therefore produced with more carbon.

(3) As with any crisis there will be a mix of dark and light. Some people will turn inward, barricade themselves into a safe mansion far from the sea and drive their SUV as if nothing were happening. Others, including the poorest on our planet, will either have no choice or will choose to respond to climate change in their own lives. Meat consumption and air travel are two of the most egregious users of carbon and will face some of the largest challenges. Likewise, coal will begin to maintain a stigma from its enormous use of atmospheric resource. People will attempt to maintain their lifestyle and expect that national and corporate leaders will implement policies that will share the burden equitably.

Adam Werbach

(4) Consumers know that a lot of people now use ‘sustainability’ as a gimmick. We were in Australia, we saw nothing but mass tourism ‘have your picture taken with a koala’ type of stuff, yet everything was branded ‘eco’. Frankly we saw that as a negative, because we did not believe it. Maybe that is an unfair feeling, but we had it nevertheless. Everything was massively exploited, yet eco... But how are the buildings managed? If you want to be eco in tourism have buildings that are photosynthetic, that make more energy than they consume, have all public transport on hybrid or electricity; Make it real.

I foresee that sustainability will become even more important.

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John Duggan

John Duggan is Chairman, formerly CEo of Gazeley Limited a global developer of distribution hubs and supply chain logistics to supermarkets.

(1) I sense that the extensive media on coverage is being received differently by consumers in different countries and in different social and economic groups. My sense is that the biggest impact is in the changing consumer spending patterns of the middle class. Let me illustrate this point with the following examples:

The demand for organic and healthy food that is more expensive and preferably locally grown, is increasing, eg farmers’ markets, Marks & Spencers and Waitrose. Customers are increasingly not using plastic bags still provided by main food stores, Tescos, Asda, Morrisons etc., preferring to provide their own reusable bags. There is increasing demand and availability of low energy light bulbs There is increasing demand for cars that are hybrids eg Toyotta Prius or cars with smaller engines, often diesel rather than petrol and ones that have auto stop features eg Mini diesel, that have better fuel consumption.

(2) Reducing carbon footprint is at the top of the list. Consumers have started to become more aware that changing their patterns of behaviour and consumption patterns to consume less energy can not only reduce their carbon footprint, but also can save them money. The next area of increased awareness is likely to be health and wellness. Media attention in the UK has increased significantly bringing consumers’ attention to increasing levels of obesity and associated health risks. Consumers are increasingly understanding that they can improve their health and reduce their chances of contracting diabetes, heart disease and cancer by exercising and eating the right foods. Awareness of fair trade issues, such as fair pricing and child labour, is being demonstrated, for example, by an increase in demand for fair trade coffee and bananas.

(3) I believe that consumer attitudes and behaviours related to sustainability are likely to change significantly over the next few years. There is an increasing awareness that accelerating climate change and a shortening timescale for significant impacts is likely to be dangerously dysfunctional. There is a dawning realisation that time is running out and the impact of the way we choose to live and in particular, the way in which we spend our money will have an impact on the planet’s ability to sustain future generations. The world population after the Second World War was around 2.5 billion, today it is over 6 billion and it is realistically forecast to rise to over 9 billion by 2050. In addition the emerging economies of China, India and others with populations that aspire to the same consumption levels of the people of the USA and Europe is not sustainable. The level of demand on resources and in particular oil and water is not sustainable. People are beginning to realise that we have to find ways to re-make the way we make things so as to enable future generations to live within the biophysical limits of the planet and to enjoy a reasonable quality of life. Consumption, the way we spend our money, is increasingly being seen as a political act that could be, if orchestrated through the Internet, have more power than the government of the largest nation states. There is an increasing realisation that time is running our and the issue of sustainability, enabling future generations to enjoy a reasonable quality of life within the biophysical limits of the planet, affects global security and could become a major political issue that dwarfs other issues such as national defence and terrorism. The systemic relationship and economic, social and political impact of the realisation that the only people who can change things quickly enough is each and everyone of us could have far-

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reaching and significant implications. The way in which we spend our money, and the way in which this could become orchestrated to bring about change could become one of the most powerful political drivers for change in the first quarter of the twenty-first century. If this is so, the demand for new products and services that are eco-efficient, make the world a less worse place and those that are eco-effective, make the world a better place are likely to increase. The demand for those goods and services that do not meet these criteria is likely to decrease.

Maurice Levy

Maurice Levy is President and CEo of the Publicis Groupe, the world’s third largest communication group, based in Paris.

(1) ‘Significant’ changes might be today overstated as a typical French consumer has only spent 2.5 euros in products or services labelled as respecting ‘sustainable development’ in 2005, according to the latest statistics available... Yet things are changing fast and, moreover, a clear distinction must be made between the situation in the food and in tourism. In food, the market for ‘ethical’ products has been estimated at €1.8 billion for Europe and North America. But it has grown by 36% every year between 2001 and 2006. Coffee and bananas are the most popular products.

There are two main actors that have fostered the development of such products:

forerunner brands that operate on niche sectors but prod the rest of the market to upgrade their products and make them more respectful of sustainable development; retailers that see a way to differentiate their own products and brands by embracing sustainable development objectives.

Traditional brands appear to be lagging in this field and most seem not to have found yet the right attitude and language about sustainable development. It is a real issue as this concern is clearly growing bigger and consumers are more and more interested and informed about this kind of product. In 2006, an Ipsos study shows that 74% of French consumers had heard about ‘commerce equitable’ (fair trade) against only 51% in 2004.

Regarding tourism, sustainable development issues appear clearly marginal for the consumers right now. The recent trend seen in this market – going farther, more often but for a shorter time and at the cheapest price – is clearly at odds with sustainable development requirements. Yet there are some signs that prove that consumers care more and more about the impact of their travels on the environment and also on the populations they visit. For example, a major French online travel retailer has created an Internet tool that helps its clients to compare the impact of different travel options in terms of CO2 emissions. Some airlines go even further and give their clients the opportunity to calculate the CO2 emissions generated by their trip and, even, in some cases, to offset these emissions by investing in some ‘green’ projects.

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(2) By summing up different studies and pieces of research, the issues that matter can be classified into four categories.

At the top of the list come the issues related to the quality of food and tap water. Water pollution (oceans, rivers, springs…) appeared as the main environmental concern of European citizens in a 2006 poll. When it comes to making up their mind, consumers care more and more about provenance and traceability of food, the use of pesticides or genetically modified food. Here the sustainable development concern seems driven by personal health and integrity considerations.

We see the fairness of trade, especially when it regards southern countries producers, as the second most important issue for consumers. In a 2006 survey, 69% quoted ‘unfair international trade practices’ as a factor that has influenced their purchasing behaviour. Pauperisation of small farmers is another source of concerns.

A third category of issue that seems to drive consumer behaviour relates to their immediate environment and the risk of pollution affecting their everyday life and places. In this respect, packaging and its consequences on waste disposal appear to be very significant for a majority of consumers. Also related to this category is every issue that involves the situation of animals (conditions of husbandry, the loss of biodiversity…).

Lastly, more general issues that can seem more abstract for consumers play a lesser role than those already mentioned. In this category, we find overfishing, tropical deforestation. Global warming should fall into this category, though given the recent extensive media coverage it has been given, its importance should certainly grow in the very next years.

(3) There is no doubt that sustainability will matter more and more in the purchasing decisions of consumers in the future. The question is to what extent they’ll be ready to accept higher prices for the sake of sustainable development. The fact that they don’t have the answer to this question yet explains part of the current wait-and-see attitude of big brands.

Obviously, in food, one can expect some convergence between environmental concerns and the attention given to personal health and wellbeing. Consumers will probably look for products that not only protect or improve their own health but also the ‘planet’s health’. There should also be more and more pressure about packaging, with maybe a reverse in the trend of individualized packaging that has been observed until recently.

In tourism, it seems rather unlikely to see a major change in the current trends. Therefore, offsetting the eco-impact of individual travel by investing in ‘green’ projects will certainly increase, as consumers will be keener to avoid damaging the environment without changing their habits and without reducing their travel purchasing. At the same time, the niche market of eco-tourism will certainly grow but will stay confined to the wealthiest or the most concerned consumers.

In conclusion, we believe that sustainable development issues are going to be more and more important for consumers. Yet, the tipping point in this evolution will only be reached when the landscape of ‘sustainable’ products and services is clearer and more reliable for consumers, who are often confused by the profusion of designations and concepts (‘fair’, ‘sustainable’, ‘eco-something’…). Some form of label that consumers can trust without hesitation would certainly help this market to grow faster.

There is a synergy of opinion across all four of these expert opinions, from different countries, companies and backgrounds. At this stage we will leave readers to draw their own interpretations from these insights.

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Sustainability and quality

Sustainability can be seen in a similar light to the quality movement of the closing decades of the 20th century. The story of the quality pioneer, W Edwards Deming is well known in the annals of business. Unable to make himself heard in his home country of the USA, Deming83 became the leading light of the transformation of the Japanese economy in the years following the Second World War with his pioneering quality principles. His ideas were rejected in his home country with claims that there was nothing wrong with American products, and even if there was, quality costs more; that people did not want quality and even if they did they would not be prepared to pay for it. Far from costing more, Deming demonstrated that by building in quality, costs both of manufacture and re-work were reduced, often dramatically. His work laid the foundation for the dominance of Japanese manufacturing methods to this day. It is no coincidence that Toyota who were at the forefront of the quality movement, were early adopters of environmental sustainability as a core strategy nearly ten years ago. The Prius Hybrid has given Toyota an image of green leadership as well as a brand that commands high premiums.

We can expect sustainability to follow a similar pattern as quality. Those who claim it can’t or shouldn’t be done will be forced out of the market by those who are already doing it. Like quality, sustainability is a state of mind as much as it is a set of management practices. It is this state of mind that will reveal opportunities where others only see risks.

By using the analogy of quality we can make a number of predictions:

(1) people will come to expect sustainability; they will not be willing to pay a premium for it in the long run; instead they will reject companies that fail to deliver sustainable products and services

(2) the transition towards sustainability will take several years; it will move more quickly than the quality transition because of the speed with which unsustainable practices can be revealed through the web and citizen media

(3) it will be difficult for companies that are late adopters of sustainability to catch up with the leaders because of the self-generating cycle of efficiency gains, brand enhancement, technological development and staff engagement that comes with the adoption of a sustainability paradigm.

(4) those who embrace sustainability at the heart of their business models will discover that it saves rather than costs money and enhances rather than reduces profitability.

83 The W. Edwards Deming Institute see http://www.deming.org

Sustainability and quality

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Conclusions

84 New Zealand Herald. (2007, April 5). NZ’s water pollution record slammed in international report., New Zealand Herald [online]. Retrieved January 25, 2008 from http://www.nzherald.co.nz/feature/story.cfm?c_id=26&objectid=10432796. organisation for Economic Co-operation and Development (oECD). (2007). OECD Environmental Performance Review of New Zealand: Conclusions and Recommendations. oECD. Retrieved from http://www.oecd.org/document/10/0,3343,es_2649_34307_37915274_1_1_1_1,00.html

The food and beverage and tourism industries provide more than half of New Zealand’s exports. All of these exports are affected to some extent by rapidly changing consumer and business attitudes towards sustainability.

The majority of our food exports is commodity in nature and will therefore become ingredients in the products of other manufacturers. Such commodities have less of a premium to be gained through sustainability positioning and are at less risk of attack. However, the increasing expectations and concerns of consumers about health and safety issues and the consequential desire to understand the backstory behind their food purchases will involve increasing scrutiny of all our food exports.

Global demand for food products is escalating because of rising incomes in developing nations especially China, rapidly increasing global population, reduction in food productive land because of conversion to bio-fuel crops, and droughts and other climate change impact on production. This is likely to provide support for New Zealand’s terms of trade in commodity food exports for the foreseeable future, although health and safety concerns will remain of paramount importance. The potential for environmental legislation affecting trade, and changes by those managing supply channels is already fundamentally affecting business risk and opportunity for New Zealand food producers and will continue to do so. For commodity exporters it is mostly about managing risk.

For exporters of branded food products that attract a price premium (for example Zespri kiwifruit) opportunity and risk are seen as simply the flip side of the same coin; these have to be looked at together. The situation is changing fast (25% annual growth rates in organic and natural foods for example), driven by changing consumer preferences and choice editing by the retail trade. Price premiums can be generated through authentic sustainability claims and destroyed through unsustainability actions.

Consumer concern about carbon emissions caused by airmiles is currently not as strong as concern about the environmental issues around food. A rising middle class in emerging economies such as China, escalating global population and ageing demographics in developed economies are fueling air travel. However, risks to tourism exist if perception shifts around airmiles (the British media is starting to tip in this direction - holiday local), and if New Zealand’s clean green brand is perceived to be false. The tourism industry has identified the necessity to move urgently to address key issues such as the ability to offset carbon emissions on air travel and the need for low emissions ground transport. Recognition must lead to comprehensive action.

New Zealand is fortunate in possessing a 100% Pure, clean, green image or brand. This is a valuable, even essential underpinning for our export economy of food and tourism. But the brand is at risk. New Zealand has some of the worst statistics in the developed world for soil pollution, pollution of waterways and emissions standards.84 our tiny population relative to our

Conclusions

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To contact the authors please email mike@sustainableenterprise.org

land area enables us to preserve the image for the time being, but the authenticity of 100% Pure does not bear close scrutiny. We have a lot to lose from the increased scrutiny that is emerging from the issues outlined above.

The current high prices for commodity products could cushion us in the short term from the worst effects of consumer expectations in regard to sustainability, safety and quality of food products, but the trends are clear. To continue to sustain premium prices for premium products and experiences, our food and tourism sectors need to embrace sustainability at their core both in strategy and practice.

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