Over the last few years China has implemented a number of ambitious climate-friendly policies. Many of the these policies were part of China's National Climate Change Program, released in June 2007.
The country's recent economic stimulus includes the largest green package in the world. And the government has created attractive opportunities for businesses providing industrial products that reduce environmental pollution or generate safe energy such as flue gas desulfurization, variable frequency drives and biomass power.
To the average Chinese consumer they undoubtedly remain complex names for confusing technologies that don't really touch their daily lives. But whenever our firm, LEK Consulting, has surveyed consumers, asking them in layman terms if they are worried about the environment and if they would do something to protect it, we have seen a different, positive, response.
Besides, the local media are providing more and more space and time to issues such as global warming and ecology. The trend may have started later than in Western countries, nevertheless it is getting stronger. Green reporting peaked around Earth Day (April 22) last year, after which the devastating Sichuan earthquake, Beijing Olympics and the global economic crisis took center stage. But environment remains a major issue for the media.
To measure the changes in consumer attitudes more accurately, LEK surveyed more than 600 people across China to see what type of consumers were willing to buy energy saving and other eco-friendly products and the amount of premium they would pay for them.
More than 80 percent of the respondents said they were willing to buy energy saving products. Interestingly, 66 percent of those who said "no" were willing to buy green products during better economic times. This means the impact of the global economic crisis is influencing consumers' decision to buy the relatively expensive environmentally friendly products.
The premium consumers are willing to pay, however, is not large, with 75 percentage of the respondents saying it should not be more than 10 percent. Judging by global standards this is not surprising because a higher percentage of consumers are driven by prices in China.
But the upside is that 15 percent of consumers are willing to pay more than 20 percent premium, which is quite high even by global standards because such customers' percentage is just 5 to 10 in the developed countries.
The survey has thrown up an interesting generational trend. New parents appear the most concerned about the environment and show a higher propensity to pay a relatively high premium for green products.
Generation Y are the best potential "green" consumers, although they seem less worried about the environment and exhibit few eco-friendly habits. But they make up their lack of concern with their buying habits and their willingness to pay higher premiums for trendy products.
The survey shows environmental awareness is increasing. But factors such as price and health often play a more important role in influencing consumers' decision.
To be successful, companies have to target specific segments of consumers with their green products and services. Food, personal care and household products are areas in which local firms have employed this strategy successfully, often by combining a "green" message with other key benefits, especially health.
In other categories, companies have to emphasize the benefits of eco-friendly products by comparing them with the other key criterion for consumers: cost. This strategy can be of special importance to makers of home appliances and electrical goods, including energy saving bulbs.
Another interesting result of the survey is that being green is associated with being better for some products and it allows companies to charge a premium for them. That is especially the case with fresh food products such as meat, seafood, fruits, vegetables and dairy products.
Soaps, detergents, disinfectants, floor and toilet cleaners and other home cleaning products, and paper and garbage bags will not make people pay a premium.
Luxury items such as fashion accessories, clothing and footwear are not seen as high-quality stuff when they are projected as green products. But consumers still pay a high premium for them for their brands.
The survey shows a gradual but measurable shift in Chinese consumers' attitude toward the environment. This has started translating into willingness of consumers to change their buying habits and even to pay a slight premium.
This premium may not be high now, but the trend indicates the shape of things to come and will prompt eco-friendly product makers to serve a growing category of consumers to earn higher profits.
Michel Brekelmans is a partner with LEK Consulting based in Shanghai and David Xu is manager of LEK.
