Businesses scramble to keep up with green product demand

Green businesses are being urged to overhaul their design and supply operations, after a new report by consultancy Accenture revealed that many firms selling environmentally-friendly products are struggling to keep up with consumer demand.

The new survey of 250 senior executives in the U.K., U.S., Japan, Germany, France, China, Brazil and India, asseses the extent to which companies view sustainability as a driver of growth.

Eighty-three percent of respondents viewed spending on sustainability as an investment rather than a cost, although around half claimed it is currently more expensive to be a sustainable business and that consumers are not willing to pay a premium for green products.

Nevertheless, 60 percent admitted to charging more for sustainable products and services, most of which charge a premium of between five and 20 percent compared to "non-sustainable" goods. Some companies charged up to 25 percent more for greener goods, the survey revealed.

However, in an encouraging development for the green economy, more than one-third of surveyed businesses said they could not keep up with customer demand for sustainable products and services. The lack of supply was even higher in emerging economies, with 44 percent struggling to keep up with demand.

"Companies are trying to meet consumer demand for sustainable products and services, but many cannot keep up," said Bruno Berthon, managing director, sustainability services at Accenture.

"Businesses will have to look beyond adapted or customized products, short runs and premium pricing. Now is the time to get closer to consumers, embed sustainability early in the innovation and design process and put in place the operational capabilities to meet market demand at scale and profitably."

Accenture made three recommendations for those companies struggling to keep up with demand, including embedding sustainability early in the design process, investing in research to better understand the market and developing means of creating a more resource-efficient supply chain.

The report also found that the vast majority of businesses view sustainability as a key to future growth, rather than a response to regulatory and reputational pressure.

The vast majority of businesses said sustainability was vital to future growth and around 62 percent said their sustainable investments were motivated by customer expectations for sustainable products and services and the opportunity to drive growth. Just over 40 percent of those surveyed were motivated by regulatory compliance and 29 percent by the need to reduce energy and material costs.

"The good news is that companies now systematically see sustainability as being vital to their future growth and core to their business," said Berthon.

"Sustainability has broken free from the realm of regulatory pressure and reputation management, and is now rising into a virtuous circle of commercial opportunity and investment growth. Businesses must now industrialize and scale production in order to drive higher levels of productivity, operational discipline and cost optimization into what can often be immature operating models in high growth sustainable markets."

In related news, consultancy Deloitte this week launched a study revealing that 90 percent of companies have now set targets to reduce energy consumption, primarily driven by the need to cut costs during the economic downturn.

Deloitte's reSources 2012 Study, of more than 600 senior executives, also found that 49 percent of companies have formalized their energy saving goals, compared to 45 percent in the same survey last year.

The survey found that cutting costs was still the primary motivator for adopting energy management plans, although nearly half also said it was "just the right thing to do."

A growing number of businesses also cited existing or upcoming regulation, with around one-third saying they were driven by legal obligations to reduce energy and carbon consumption, up from 24 percent in last year's study.