{"id":1652951,"date":"2026-06-05T11:00:10","date_gmt":"2026-06-05T15:00:10","guid":{"rendered":"https:\/\/observer.com\/?p=1652951"},"modified":"2026-06-05T10:54:46","modified_gmt":"2026-06-05T14:54:46","slug":"end-of-the-sustainability-premium","status":"publish","type":"post","link":"https:\/\/observer.com\/2026\/06\/end-of-the-sustainability-premium\/","title":{"rendered":"The End of the Sustainability Premium"},"content":{"rendered":"
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Businesses that treat sustainability as a source of innovation rather than a marketing message are gaining a durable competitive advantage. Unsplash+<\/span><\/figcaption><\/figure>\n

For years, executives were sold a compelling idea: doing good would also mean doing well. Surveys suggested that consumers were increasingly willing to pay more for products seen (or marketed) as better for the planet. Consultants reinforced the message. Investors rewarded ambitious environmental commitments. Companies launched wave after wave of sustainable products, expecting customers to reward their efforts at the checkout counter.<\/span><\/p>\n

The research seemed to justify the confidence. In 2020, consulting firm Kearney reported that <\/span>70 percent of consumers<\/span><\/a> said they were willing to pay up to 10 percent more for sustainable products. Another consultant, Bain, surveyed more than 23,000 consumers across eleven countries in 2023 and found that <\/span>64 percent reported high levels of concern<\/span><\/a> about sustainability. McKinsey went further, declaring that consumers not only cared about sustainability but were <\/span>backing those concerns<\/span><\/a> with their wallets.\u00a0<\/span><\/p>\n

The problem is that they weren’t. When McKinsey tested actual willingness to pay using an auction-based methodology, consumers were willing to pay an <\/span>average premium of just 2.2 percent<\/span><\/a> for sustainability across three everyday products: yogurt, shampoo and T-shirts. Similarly, a study by European e-commerce firm Zalando involving 2,500 consumers found that while 60 percent said sustainability transparency was important to them, only <\/span>20 percent actively sought that information<\/span><\/a> during a purchase. This is what researchers call the say-do gap: the distance between what people tell pollsters and what they actually do in stores.<\/span><\/p>\n

The gap reflects a fundamental truth about how people buy things: customers buy products to get a job done. Nobody buys dishwasher tablets to save the planet. They do so to clean dishes. Nobody buys farm equipment to reduce carbon emissions. They want to run a more productive farm. Sustainability may be a <\/span>reason to care<\/span><\/i>, but it is rarely a <\/span>reason to buy<\/span><\/i>. The two are not the same thing, and conflating them has been one of the most expensive strategic errors of the past decade.<\/span><\/p>\n

This is the central finding of <\/span>our research<\/span><\/a>. But the story does not end with failure. The more interesting finding is that many of the most commercially successful sustainability strategies of recent years have quietly abandoned the premium model altogether and have replaced it with something considerably more durable: using sustainability to improve customer outcomes.<\/span><\/p>\n

For most of its history, John Deere sold farm equipment. But more recently, it has moved to selling farm productivity. Through precision technologies, farmers can now reduce fuel consumption, fertilizer use and herbicide application, thereby simultaneously improving yields, lowering costs and simplifying regulatory compliance. While the environmental benefits are substantial, sustainability isn\u2019t the driver behind the purchase. Farmers adopt these technologies because they help them run better businesses.\u00a0<\/span><\/p>\n

This represents a fundamentally different logic from the one that dominated sustainability thinking for most of the past decade. The older model assumed that environmental benefits themselves would create enough value to justify higher prices or, in some cases, lower performance.\u00a0<\/span><\/p>\n

John Deere’s approach does the opposite. It uses sustainability to <\/span>improve<\/span><\/i> performance, so that customers receive better outcomes and environmental gains follow automatically. The company does not need to persuade farmers to care about the planet. It needs to persuade them that the technology works. Sustainability is not just optional; it\u2019s invisible to those who don’t care about it.<\/span><\/p>\n

We encountered this same pattern repeatedly. Take Finish dishwasher detergent. Even with a machine, dishwashing used to be a chore. For years, consumers routinely pre-rinsed dishes before loading them into the dishwasher, a habit that can consume up to 75 liters (19.8 gallons) of water<\/keyword> per cycle, compared to ten liters (2.6 gallons) during the machine wash itself.\u00a0<\/span><\/p>\n

Finish’s engineers developed a tablet effective enough to eliminate the need for pre-rinsing altogether, saving customers an average of 57 liters (15.1 gallons) of water<\/keyword> per wash, along with time and money. The product is simply better, whether any given customer cares about water<\/keyword> scarcity or not. Finish significantly increased its sales volume and regained market share. Here too, we see that while the environmental benefit is real, customers bought the product for the convenience.<\/span><\/p>\n

Electrolux offers a consumer version of the same logic. The company’s care drum, a cushion-like mechanism inside its washing machines, is designed to be gentler on garments and reduce wear and tear, helping garments to last longer. For customers, that means lower replacement costs and the ability to keep the clothes they value for longer.<\/span><\/p>\n

The environmental benefits are also real, though that\u2019s not their main selling point. Electrolux estimates that extending the lifespan of clothing by just nine months <\/span>reduces emissions, waste and water<\/keyword> footprints<\/span><\/a> by 20 to 30 percent. While the care drum costs more than a conventional washer, its benefits make up for it over time. Critically, those benefits (whether financial or emotional) appeal to every customer, regardless of their views on sustainability.<\/span><\/p>\n

This is what we call resonance: leveraging sustainability to <\/span>increase<\/span><\/i> customer value rather than simply to signal environmental commitment. Resonant companies understand something that eludes most conventional sustainability strategies: that not all customers care about sustainability, and it\u2019s not their job to change that. What they can do is use sustainability as a lens for innovation, finding ways to improve what customers already value while reducing environmental impact. The best sustainability strategies embed environmental gains inside outcomes customers already want.<\/span><\/p>\n

The same principle operates in business-to-business markets. Schneider Electric has built much of its value proposition around helping customers reduce energy consumption and improve operational efficiency. Its customers are not purchasing sustainability credentials. They are purchasing lower costs, greater resilience and better performance. Sustainability is the consequence of solving those problems. This is one reason sustainability has proved more commercially durable in industrial markets than many expected: when environmental improvement is structurally tied to economic outcome, the business case becomes very difficult to challenge.<\/span><\/p>\n

The experience of plant-based meat illustrates the opposite dynamic. Consumer interest in reducing meat consumption remains significant. Yet growth slowed sharply as many products struggled with a familiar set of challenges: higher prices, questions about taste and concerns about the degree of processing involved.\u00a0<\/span><\/p>\n

Customers were often sympathetic to the environmental mission. They were simply less willing to compromise on the attributes that drove the original purchase decision. The lesson is not that sustainability doesn’t matter. It is that sustainability matters most when it improves the things customers already value and fails when it asks them to accept less of those things in exchange.<\/span><\/p>\n

This shift may ultimately be healthy for the sustainability movement itself. For years, the dominant question in business has been: <\/span>how much extra will customers pay for a more responsible product?<\/span><\/i> Increasingly, the companies that are winning are asking something more productive: <\/span>how can sustainability help us create more value<\/span><\/i>?<\/span><\/p>\n

Framed that way, the question leads to very different answers. It encourages companies to act differently, focusing on eliminating waste or improving product performance, or in some cases, reducing the cost of ownership or strengthening customer loyalty. These actions aren\u2019t seen as trade-offs for sustainability, but as expressions of it. This new lens transforms sustainability from an add-on feature to a source of competitive advantage.<\/span><\/p>\n

This is where the next phase of sustainable business will be won or lost. The future does not belong to companies that ask customers to choose between sustainability and economics. It belongs to companies that have made sustainability the reason economics improve.<\/span><\/p>\n

Clean Winners: Sustainability Strategy That Puts Customers First<\/span><\/a> by <\/span><\/i>Goutam Challagalla\u00a0and Fr\u00e9d\u00e9ric Dalsace\u00a0is out now, published by Harvard Business Review Press.<\/span><\/i><\/p>\n","protected":false},"excerpt":{"rendered":"

IMD Business School\u2019s Goutam Challagalla and Fr\u00e9d\u00e9ric Dalsace challenge a persistent business assumption: that consumers will pay a premium for sustainability. They argue that successful companies are not selling sustainability as a virtue. Instead, they\u2019re using it as a catalyst for innovation<\/p>\n Read More<\/a>","protected":false},"author":177935337,"featured_media":1653043,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"apple_news_api_created_at":"","apple_news_api_id":"","apple_news_api_modified_at":"","apple_news_api_revision":"","apple_news_api_share_url":"","apple_news_cover_media_provider":"image","apple_news_coverimage":0,"apple_news_coverimage_caption":"","apple_news_cover_video_id":0,"apple_news_cover_video_url":"","apple_news_cover_embedwebvideo_url":"","apple_news_is_hidden":"","apple_news_is_paid":"","apple_news_is_preview":"","apple_news_is_sponsored":"","apple_news_maturity_rating":"","apple_news_metadata":"\"\"","apple_news_pullquote":"","apple_news_pullquote_position":"","apple_news_slug":"","apple_news_sections":[],"apple_news_suppress_video_url":false,"apple_news_use_image_component":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpas_customize_per_network":false},"post_tag":[423982984,423983108,423804738],"company":[424001844],"channel":[186,16897],"location":[],"nyo_column":[423982261],"person":[],"nyo_post_hidden":[],"coauthor":[424014497,424014498],"class_list":{"0":"post-1652951","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"tag-business-experts","8":"tag-economic-experts","9":"tag-sustainability","10":"observer_company-john-deere","11":"channel-business","12":"channel-climate-change","13":"nyo_column-expert-insights","14":"style-expert-insights"},"acf":{"homepage_position":"","homepage_title":"","homepage_excerpt":"","alternative_og_image":"","headline":{"seo_headline":""},"subheadline":{"optimized_seo_description":"","optimized_social_excerpt":""}},"apple_news_notices":[],"parsely":{"version":"1.1.0","canonical_url":"https:\/\/observer.com\/2026\/06\/end-of-the-sustainability-premium\/","smart_links":{"inbound":0,"outbound":0},"traffic_boost_suggestions_count":0,"meta":[],"rendered":"","tracker_url":"https:\/\/cdn.parsely.com\/keys\/observer.com\/p.js"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/observer.com\/wp-content\/uploads\/sites\/2\/2026\/06\/alex-shuper-gCI1twuzTZ8-unsplash.jpg?quality=80","coauthors_byline":"By Goutam Challagalla and Fr\u00e9d\u00e9ric Dalsace","display_channel":"","thumbnail":"\"A