Shanghai, China – April 16, 2009 – April 22nd is Earth Day, an annual environmental event during which people celebrate the Earth's natural environment and promote environmentally healthy practices. L.E.K. Consulting, the leading global strategy consulting firm, today released the results of a survey amongst industry leaders in China as well as over 600 consumers across China to understand the importance of environmental protection on customer behavior and business strategy. The research reveals that Chinese consumers hold a positive attitude toward energy saving products and are willing to pay a premium for the products. To cater to the consumer trend, companies are taking a more active action in carbon emission management, however local companies still lack awareness in this area and lag behind multinational companies (“MNC’s”) in this aspect.
Over the last few years, the Chinese government has elevated ‘sustainable development’ as a cornerstone off industrial development policy making. The government has increasingly strengthened regulations regarding pollution control and also introduced measures to stimulate the development of renewable energy sources.
“In western countries, this government-led phase was also the first phase in the ‘green evolution’. This was followed by a second phase were consumers became more actively concerned about the environment and more importantly they changed their consumer behaviour purchasing more environmentally friendly products and services, even at a price premium. This then led to a third phase were companies pro-actively adapt their business strategies, product offering and marketing to align themselves with the new market reality and take advantage of the business opportunities created,” says Michel Brekelmans, a Partner with L.E.K. Consulting based in Shanghai.
According to L.E.K.’s survey, over 80% of respondents claim that they are willing to buy energy saving products. And even for those who said “no”, 2/3rds said they will do so when the economic conditions are improved reflecting that the current economic turmoil is clearly a key factor for those consumers who are currently not interested in purchasing environmentally friendly products.
The survey was conducted along with market researcher CTR. It had a sample of over 600 consumers and covered 4 cities representing different tiers -- Beijing, Nanjing, Zhengzhou, and Zhongshan and a wide range of consumer products.
“Our data shows there is a clear relationship between people’s willingness to invest in energy saving products and their socio-economic status. Respondents in Tier 3 cities clearly showed less interest than more wealthy consumers in the cities in Eastern China,” according to David Xu, a Manager with L.E.K. Consulting.
The premium that people are willing to pay for energy saving products is still low. ~75% of all respondents indicates to be willing to pay no more than a 10% premium – this picture does not change much even if the economy resumes its rapid growth experienced over the past decades.
“The important take-away from the consumer survey is that we are witnessing a gradual shift in the mentality of the Chinese consumer, just like we have seen in other markets. China is only at the start of this shift but it is clear that consumers are no longer just going for the cheapest or most famous brand but that for a specific segment of the market ‘green considerations’ are gradually being factored into the decision making process,” according to Michel Brekelmans.
L.E.K. also conducted discussions with senior business leaders in China to assess whether companies are adapting their strategies to take advantage of this emerging consumer trend.
Most respondents admit that concerns for the environment has impacted their business. As for the key factors that drive these changes, government requirement is consistently viewed as the fundamental driver. This is particularly true for the domestic companies.
Economic incentives, meaning the ability to reduce cost or increase revenues, are also important factors in driving decision making around green investments. It is interesting to note that domestic firms even scored slightly higher than MNC firms on this dimension. “There is definitely a group of local business leaders that understands the economic benefits that can be derived through a focus on environmental products and strategies – there is increasing awareness about this,” according to Brekelmans.
The overall awareness around carbon reduction initiatives in China is still limited with MNCs typically having a higher awareness and often following global corporate practices in this area. Awareness amongst domestic business leaders is still low: 75% of the local companies report no or limited consciousness about this topic.
“The higher awareness of MNCs is mainly due to their global efforts in carbon management – some of the MNCs will set specific emission standards, including for their operations in China; MNCs are also more diligent in internal education on carbon emission reduction initiatives to stimulate active participation of the staff,” according to David Xu.
Despite MNCs admitting that specific concerns on carbon emissions in China have had a limited impact on their industry, 80% of them claim that they are managing their carbon emission in a “pro-active manner”. On the contrary, more than 80% of local companies are doing “nothing” or “just enough” in the area.
About L.E.K. Consulting
L.E.K. Consulting is one of the leading strategy consultants around the world with 900 staff across 20 offices around the world. L.E.K focuses on helping clients in solving complex business problems including development of growth strategies, evaluating investment and acquisition opportunities, privatisation of state-owned assets and organisational and operational performance improvement projects. A large proportion of our work is focused on alternative energy technologies, carbon management and developing customer focused strategies. L.E.K. is recognised internationally as one of the leading advisors to the industry with clients served around the world by a dedicated team of experienced professionals. More information can be found on www.lek.com.
To learn more about the survey and more detailed results, please contact: Stella Chen, email: firstname.lastname@example.org or phone: +86 21 6122 3922.
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