Game Changer

CHAPTER 23Green Premium: How to Shape Demand for Sustainable Solutions

With contributions from John Pineda and Lauren Taylor

Business leaders are realizing they have a responsibility to address significant environmental challenges, such as climate change, pollution, and resource depletion. Sustainability has become an imperative, as consumers and investors are increasingly pressuring them to reduce environmental impacts and contribute to the efforts to meet those challenges.

If businesses successfully develop and market green solutions – ones with an improved environmental impact compared to their legacy offers – they could bring economic and environmental benefits into alignment and create incentives to scale green options to more customers and sectors.

Some green offers have sold well but have struggled to generate a profit. Green products usually cost more than traditional products, and the average consumer's willingness to pay – their Green Premium WTP – does not always recover the incremental costs. When it does, the segment is usually too small to justify the at‐scale investments needed to transform operations.

That difficulty has created a belief among many leaders that, in general, consumers are not environmentally sensitive enough for green products to scale. This is the Green Premium Quandary: the green premium average willingness to pay is inferior to the green ...