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Forget retail therapy - this is the age of the conscious consumer

Shoppers walk on Oxford Street during Boxing Day sales in central London, Britain, December 26, 2019.

Changing attitudes to consumption around the world are a force for good Image: REUTERS/Henry Nicholls

Philipp Rickenbacher
Chief Executive Officer, Bank Julius Baer & Co. Ltd
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Future of Consumption

This article is part of: World Economic Forum Annual Meeting
  • Today's younger generations are taking an ethical approach to shopping.
  • Conscious consumption is having widespread and positive effects.
  • Ethical consumers will next turn to their investment portfolios.

Published in 2000, the novel Confessions of a Shopaholic sold three million copies and was even turned into a Hollywood blockbuster. Only two decades later, the obsession with treating oneself by buying luxury items, which was at the core of the story, feels terribly outdated. Even the most extravagant consumers have become more discerning about the impact of their choices on the environment and on societies.

Perhaps it is because today’s youth has grown up with an abundance of (often cheap) products. Take fast fashion – the wear-it-once culture of high-street brands and their just-in-time manufacturing at the expense of low labour costs leads to untold waste in production and disposal of unsold stock. It is no surprise then that my children's generation is attracted to the idea of minimalism – owning less and wasting less, not simply to tidy up their closet, but to pursue what they call true meaning and happiness.

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While this may sound idealistic and a bit extreme, it is probably true that humanity has always valued experiences as much as things. This includes the appreciation of the craftsmanship, premium materials and processes behind the production of an item – something that has made luxury goods appealing since they came into being. Today, however, whom you are buying from is just as relevant as what you are buying.

For instance, 81% of consumers globally feel strongly that companies should do more to preserve the environment, according to the Global Confidence Survey conducted by The Conference Board. Surprisingly, this is particularly the case in emerging economies, where people are more inclined than individuals in richer nations to choose – and in some instances even pay a premium for – a product that is produced fairly or with minimum impact on the environment. This actually applies across continents. Part of the reason may be the stricter environmental, labour and product safety regulations in place in many Western and Northern countries, making even ordinary goods less of a guilty pleasure. People in developing economies, in contrast, are experiencing the negative, often man-made effects of rapid economic growth first-hand, and are therefore more sensitive to them. What is even more remarkable is that the conscious consumer has reached the corporate world, as seen by calls for public commitments by business leaders to improve their sustainability practices. A case in point is the Global Fashion Agenda for CEOs in the apparel industry.


What is Loop and how does it work?

Conscious consumption is not just about what we wear. It is all encompassing: where we live, how we move, the food and drink we consume, how its ingredients have been grown, processed, and packaged, and what happens to the leftovers when we are done consuming. It has reached fast-food behemoths as much as fine dining; as the award-winning chef Mauro Colagreco told us: “We must rethink the concept of expensive or cheap. Behind a cheap meal we can find a huge cost for the planet in terms of the resources needed for this product to arrive on our plate.” For him, the era of indulgence when it comes to unsustainable ingredients is over. He is a firm believer in the notion that chefs around the world should develop their kitchens in greater dialogue with the region and local producers.

This new consciousness is also affecting how we travel. Beyond the growing pressure to fly less, those who need to and can afford it increasingly ‘offset’ the carbon footprint of their flights by contributing to schemes that either replant forests or invest in energy-efficient products or renewable technology. Our research department, however, does not expect changes in travel habits or airplane technology to have a meaningful impact on oil demand. A reduction will most likely come from the electrification of road transport – which is, again, a result of shifting consumer preferences. That said, without more efficient batteries and a proper recharging infrastructure, electric cars are likely to remain premium products in the years to come.

What may have begun with the millennial generation has become a powerful and lasting intergenerational trend. Is it the start of a virtuous circle? Not yet.

Earth Overshoot Day marks the date when humanity’s demand for resources in a given year exceeds what Earth can generate. That day is occurring earlier each year. In 2019, Earth Overshoot Day was on 29 July, two months earlier than 20 years ago. We are still accelerating towards a point beyond which nature will have lost its ability to mend itself.

Could more conscientious consumption begin to reverse this trend?
Could more conscientious consumption begin to reverse this trend? Image: Earth Overshoot Day, Global Footprint Network

After consumers have made strides in choosing goods and services that are less damaging to other humans and the environment, they will now inevitably focus on their investment portfolios. I firmly believe it is the role of the financial services industry to give their clients the means to invest in sustainability if they choose to do so. Rather than a moral stance, responsible investment is a rational and deliberate decision to allocate capital where it promises superior long-term risk-adjusted returns – not just with the benefit of hindsight, but with forward-looking intelligence. The UN Principles of Responsible Investment has almost 2,500 signatories to date, representing over $80 trillion in assets under management. Their goal as financial investors should be to understand which corporate practices today can put future earnings at risk, but also to allocate capital where change towards more sustainability is visible. And financial intermediaries must be clear to their clients about how their services create value for society and the environment – which is the objective of the UN Principles of Responsible Banking, launched by 130 banks from 49 countries in September 2019.

I have no doubt that as long as individuals have the disposable income, they will want to buy luxury products, take flights to enjoy a holiday or see their friends, as much as savers and investors will demand decent financial gains on their capital – not in the distant future, but while they can still reap the rewards. Being a responsible investor or a conscious consumer is not about recanting capitalism, but about making informed choices. And corporations, including banks, are required to give their customers the clarity and transparency needed to make those choices wisely and, well, consciously.

If our lifestyle decisions are supposed to make us feel good and actually be good, now and into the future, we simply have to try harder. We have the means to do it. And we can start today.

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