CONSUMER INDUSTRY
EMERGING TRENDS AND
ISSUES
Report of the 2010-2011
consumer industry
agenda council
October 2011
World Economic Forum
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Contents
Foreword 5
Members of the 2010-2011 Consumer Industry Agenda Council 6
Introduction 7
Executive Summary 8
Weak Signals to the Consumer Industry
9
Policy Signals
Public Policy Innovation 9
Re-envisioning Growth 11
Success through Sharing 13
Emerging Information Sharing Models
16
18
20
Consumers Signals
Collectively Thoughtful Consumption
Consumer Backlash on Privacy
Contextual Signals
The Quantified Self More Meaningful Life 23
25
Consumer Industry Issue Matrix 27
World Economic Forum Contacts
28
Endnotes 29
3
Foreword
The last two decades have brought dizzying change. The era of globalization, digitization and economic turmoil has
rendered the concept of “business as usual” a quaint – and irrelevant – concept. It is evident that the success of
both individual enterprises and the private sector as a whole increasingly depends on anticipating how technology,
environmental imperatives, social norms, demographic change and other developments will reshape the economy.
Over the past year, the World Economic Forum’s Consumer Industry Agenda Council, which I have been privileged
to chair, has considered how to maximize a range of changes that have the potential to reshape the consumer
economy in the years ahead. We considered changes in consumer attitudes, external forces shaping markets,
technological innovation and other factors that have the potential to grow quickly from being at the margins of
business to dominant drivers of the consumer economy. For this reason, the council, which consists of leading
voices from business and civil society, determined that listening to “weak signals” provides a crucial window into
the future of the consumer economy.
These changes are of essential importance. Innovative products and business models focused on rising economies
have lifted living standards for hundreds of millions of people, and there is an opportunity over the coming decade
for business to contribute to improved living standards for more of the world’s people than ever before. At the
same time, natural resources are under extreme threat; climate change and rising economic inequality threaten to
reverse the historic gains of the past quarter century and halt progress in its tracks.
This report presents brief profiles of several weak signals that have the potential to move quickly from the fringe of
business to the centre. We explore ideas from the sphere of public policy, new patterns of consumption and new
contexts for the consumer economy. We look at topics such as collaborative consumption, the quantified self and
new visions and measures of growth.
We hope that this report provides insight into tomorrow’s solutions and game changers, and that companies,
government officials, civil society organizations and, importantly, consumers capitalize the potential these changes
have to realize a vision of a truly sustainable and inclusive economy.
Aron Cramer
President and Chief Executive Officer, Business for Social Responsibility (BSR), USA
Chair, 2010-2011 Consumer Industry Agenda Council
5
Members of the 2010-2011 Consumer
Industry Agenda Council
6
Natalia Allen
Founder and Chief Executive Officer, Design Futurist SM, USA
Jean M. Brittingham
Strategic Adviser, North America, Cambridge Programme for Sustainability Leadership,
University of Cambridge, United Kingdom
Sonia Chapman
President, Espaço Eco Foundation, BASF, Brazil
Aron Cramer*
President and Chief Executive Officer, Business for Social Responsibility (BSR), USA
Liz Goodwin
Chief Executive Officer, WRAP, United Kingdom
Robert Hahn
Executive Director, Sustainable Consumption Institute, University of Manchester, United
Kingdom
Ted Howes
Head, Sustainable Business, IDEO, USA
Hannah Jones
Vice-President, Sustainable Business and Innovation, Government Public Affairs, Nike,
USA
Michael Kuhndt
Head, UNEP/Wuppertal Institute Collaborating Centre on Sustainable Consumption and
Production (CSCP), Germany
Mindy S. Lubber
President, Ceres, USA
Helio Mattar
President and Board Member, AKATU Institute for Conscious Consumption, Brazil
Kalendu Patel
President Asia, Enterprise Executive Vice-President, Best Buy Co., USA
Bjarne Pedersen
Director, Operations, Consumers International, United Kingdom
Andrea B. Thomas
Senior Vice-President, Sustainability, Wal-Mart, USA
Olivier M. Weber
President, South America Foods, PepsiCo, Brazil
Peter R. White**
Director, Global Sustainability, Procter & Gamble Technical Centres, United Kingdom
John Wilbanks
Vice-President, Science Commons, Creative Commons, USA
* Council Chair
** Council Vice-Chair
Introduction
Over 2010-2011, the World Economic Forum’s Consumer Industry Agenda Council was challenged to produce
an “Industry Issue Matrix” that presents a map of visible trends that will shape the operating environment for
companies in the sector over the coming years. Under an umbrella of sustainable growth and prosperity, there
is focus on three industry imperatives – environment, social and health, and two underlying industry trends –
changing dynamics of consumers and markets – that drive change in these.
The interrelationship between the overarching goal of sustainable growth and prosperity, and the influencing trends
of the changing dynamics of consumers and markets can be pictured as below:
In addition to the findings presented in this matrix (box above, which is detailed on page 27), the council sees
a range of emergent trends with the potential to be game changers that will have transformative impact in the
medium to long term. These are micro-trends, or “weak signals”. A weak signal can be defined as “an early
warning of change, which typically becomes stronger by combining with other signals.”1 The transition from a
weak to a strong signal — positive or negative — can become visible too late for chief executive officers and other
leaders to react, especially if one considers the intense speed at which new developments go
from invisible to ubiquitous, often through new or barely visible networks.
It is important for the council – a network of experts who spend much of their time immersed in the world
catalysing these micro-trends – to raise awareness of the emerging new trends and the possible impacts they may
have. The council believes that these signals have value in themselves and, more importantly, present an illustration
of how leadership is being redefined to include attention to information and signals from sources traditionally
outside the flow of information on which companies rely.
The content presented in the following pages continues to form the foundation for engagement with business and
governments through ongoing work by the Sustainability Initiative of the World Economic Forum as well as the
Global Agenda Council on Sustainable Consumption.
Sarita Nayyar
Managing Director
Head of Consumer Industries
Randall Krantz
Director, Sustainability Initiative
Environmental Initiatives
Florian Reber
Senior Associate, Environment and Sustainability
Network of Global Agenda Councils
7
Executive Summary
The council identified eight trends that were judged as being largely “under the radar” of executives in the
consumer industries. These were initially discussed at the Summit on the Global Agenda in Dubai in November
2010. They were then expanded into a short paper which was delivered to the Governors Meeting for Retail &
Consumer Goods during the World Economic Forum Annual Meeting 2011.
Since the Annual Meeting 2011, individual council members have expanded each of the eight ideas into two- to
three-page essays that are presented in this report. The weak signals identified can be placed into three loose
categories: policy signals, consumer signals and contextual signals.
Policy signals
1. Public Policy Innovation: With national and global legislation increasingly slow to develop, policy innovation
continues to emerge from less traditional locations. In addition, the governments of emerging markets are now
more dynamic sources of regulation and incentives focused on sustainable consumption. Global companies
once looked to Brussels and Washington as the most important capitals. Now, dozens of jurisdictions, both real
and virtual, are shaping the rules of the global marketplace.
2. Re-envisioning Growth: New patterns of consumption are emerging at the same time that new questions
are being asked about the nature and value of growth. While debates proceed on the relationship between
economic vitality and well-being, there is increasing consensus that growth needs to be economic; models
currently measure volume and output rather than value, quality and well-being, and it is highly likely that in the
years ahead there will be challenges to the “exclusively GDP” model of measuring economic vitality.
Consumer Signals
3. Success through Sharing: The emergence of collaborative consumption, peer to peer sharing, presents a
21st century challenge to the planned obsolescence models that in many ways marked the post-war economy.
The combination of rapidly changing technology, rising interest in sustainability and the increased value placed
on experiences over the ownership of things is creating fertile ground for the companies that embrace these
developments – and a threat to those that do not.
4. Emerging Information Sharing Models: Considerable experimentation is underway to develop tools that
enable consumers to manage the purchase and use of everyday items and durable goods. The arrival of smart
products, smart appliances and energy management systems will enable consumers to understand the impacts
of their choices and enable them to manage their spending and use it more effectively.
5. Collectively Thoughtful Consumption: A myriad of lifestyles are being tried in communities or groups of
communities. Today’s economy has multiple lifestyles with different sets of needs and aspirations. Anticipating
and meeting these needs creates unprecedented complexity and opportunity – and places a premium on
innovation.
6. Consumer Backlash on Privacy: Providing targeted information to enable Internet commerce depends
on the availability of information on consumer habits and choices, based on tracking consumer behaviour
on the Internet. At the same time, there is a nascent backlash that calls for voluntary or regulatory limits on
communications to consumers and the tracking of consumer information.
Contextual Signals
7. The Quantified Self: Technology is enabling average persons to understand the impact of their choices on
everything from their genetic code to their daily health, their household budget and the social and environmental
impacts of consumption. Combined with information sharing, this will usher in an era of informed and
empowered consumers who will ignore – and challenge – marketing messages aimed at a mass audience.
8. More Meaningful Life: In tandem with the demand for a work/life balance, there is an increasing
preoccupation with ways to make life more meaningful. This may mean new patterns on community relations,
with great business opportunities for services that could facilitate and strengthen the development of links
between people and groups of people.
8
Weak Signals to the Consumer Industry
Policy Signals
Public Policy Innovation
With national and global legislation increasingly slow to develop, policy innovation continues to
emerge from less traditional locations. In addition, the governments of emerging markets are
now more dynamic sources of regulation and incentives focused on sustainable consumption.
Global companies once looked to Brussels and Washington as the most important capitals. Now,
dozens of jurisdictions, both real and virtual, are shaping the rules of the global marketplace.
Introduction
Sustainable growth and prosperity will be driven by individuals, businesses, communities and governments at all
levels, advanced by both isolated actions of inspired individuals at a collective level that achieves a change of scale
that is necessary to build a sustainable future. Sustainable growth requires rethinking growth patterns to factor in
the impacts of growth on the environment and, thus, the environmental resources that fuel the economy.
Despite leadership focused on efficiency by some consumer companies, truly sustainable growth requires
action on the part of all sectors, all players and all institutions, and demands action in the short term. To assure
change at scale at the pace required, clear and specific policy signals that address the true cost of pollution and
environmental degradation, of waste and of diminishing natural resources (including those required to sustain life:
air and water) are emerging from cities, states and regions, filling in gaps left by national and international policymakers and demonstrating innovative structures that can unleash the creative solutions required.
Trends affecting policy innovation
Investors and businesses require clear, consistent signals that result in a level playing field – consistent
requirements for individuals, corporations and governments – to have the base required for large-scale investments
in innovation. As time is not on our side, local and sub-national governments have recognized that scalable change
requires new mandatory standards – a set of standards that factor the costs (and opportunities) of unchecked
consumption and standards that will have a marked impact on building an economy based on sustainable growth.
Given population growth around the world and economic growth driving consumption and increased production,
policies are needed to ensure that economic development will be environmentally sustainable. The past axiom
of “grow first, clean up later” cannot apply in a world that has limited natural resources and a rapidly growing
population directly dependent on those natural resources. In light of the recent fuel, food and financial crisis, it
is imperative for countries, states and municipalities to reassess their development paths and to design (legal)
imperatives that allow us to build a global, sustainable economy that provides prosperity for the world.
No signals to scalable change are perhaps more impactful than international policy changes that assure not only
environmentally sustainable economic progress and allow for economic growth but that also foster low-carbon,
resource conscious and socially inclusive development.
For example, while a strong international climate agreement – as well as national climate legislation in the United
States – may be stalled, cities and regional governments are critically advancing low-carbon, sustainable growth
policies at state and local levels. There are key policy battles that are underway for improving vehicle mileage
standards, energy efficiency, protecting clean water and accelerating renewable energy, as well as defensive
actions needed to preserve existing laws such as the Clean Air Act in the US. Companies and investors are making
it clear in Washington and around the globe that strong clean energy policies are in their best long-term interests.
Sustainable development, water shortages, climate change and other environmental trends are having profound
impacts on the future of our cities. The potential for success in dealing with this depends on bringing together
leaders of every major sector of the community and the economy. While cities and regions alone cannot alter
patterns of consumption or solve climate change, in individual circumstances around the globe, they are
developing a cleaner, greener and more prosperous urban model that is inspiring other cities, regions and national
governments across the country and around the world to take action.
9
In the US and around the globe, cities are enacting local sustainable development action plans, developed in detail
by civic leaders, as a blueprint for engagement, at all levels, in addressing sustainability and climate change while
maximizing quality of life. Innovative cities recognize the value of such action plans and challenge the citizenry to be
creative and resourceful in reducing waste while improving streets and neighbourhoods, shorelines and harbours,
homes and skyscrapers. The leading international network of local governments, ICLEI - Local Governments for
Sustainability, now counts over 1,200 local governments as members and continues to grow and help cities move
from local agenda 21 to local action 21.2
Relevance for the industry
These developments are perhaps harbingers of what is to come – following the most energy-intensive industries,
the consumer industry is most impacted by inevitable changes in the development, production and consumption
of consumer products. Though there is no longer an environmental imperative, consumer industry leaders must
shape the policy debate in a way that addresses trends that society will adopt, doing so in a way that allows the
economy to grow, while seeking to harmonize economic growth and environmental sustainability.
Implementing improved eco-efficiency measures of the production and consumption of goods will contribute to
this objective. However, a more ambitious objective, consisting of economic growth completely decoupling from
resource consumption, is an economic and environmental necessity in the long term. This will require a systemic
shift along the value chain, including closed-loops systems, according allocation of capital (one might start with
reinvesting financial benefits from implemented eco-efficiency measures) and an enabling system to minimize
externalities of consumption.
Government could influence consumption patterns both by raising revenue (taxation) and by spending revenue
(budget expenditure). While “green” purchasing has been the focus of recent policy developments, the role
of public investment in development of infrastructure for sustainable consumption choices, such as public
transportation, has been little discussed. Taxation is also a powerful tool in improving the eco-efficiency of
consumption patterns.
The work of expert committees convened by the World Economic Forum to frame the debate, define the
opportunities and assure adoption is crucial to generate strong market signals. For the consumer industry,
rethinking business models and designing public policies before they are imposed makes sound business sense.
Responding to the policy change
Industry leaders need to be at the front of the line calling for policy changes – readjusting the debate and making
it clear that rather than opposing mandates, they recognize the imperative for developing standards. Leaders of
commerce are most able to begin to reframe the conventional environmental management approach focused
on improving environmental performance by controlling and regulating pollution and effluents from production
processes to a conversation that promotes development to meet the needs of the present generation without
compromising future generations. To build a sustainable economy, it is imperative to also improve the way natural
resources are being used.
Regulation is necessary to ensure improvement in eco-efficiency, with regard to pollution prevention and control.
There are many ways to do this and many of the options can be done without policy changes; however, to assure
widespread adoption, policy change is essential. Consumer industry leaders need to consider policy change to
extend producer responsibility for efficiency (mandating eco-efficient products, energy efficiency, demand side
management) life-cycle thinking (requiring product design and recycling), end of life processes (pricing waste and
full cost pricing) and market performance and pricing externalities (feed in tariffs, pricing pollution and carbon, price
of scarce natural resources, government support for adaption and transfer of technology).
Mindy S. Lubber
President, Ceres, USA
10
Policy Signals
Re-envisioning Growth
New patterns of consumption are emerging at the same time that new questions are being
asked about the nature and value of growth. While debates proceed on the relationship
between economic vitality and well-being, there is increasing consensus that growth needs to
be economic; models currently measure volume and output rather than value, quality and wellbeing, and it is highly likely that in the years ahead there will be challenges to the “exclusively
GDP” model of measuring economic vitality.
Introduction and context
History is rife with anomalies becoming legacies. One of those is that economic production became synonymous
with public benefit; for most of the 20th century, GDP dominated as a metric for economic production and is still
commonly misused as a proxy for economic well-being. This shortcoming was identified concurrently with its
introduction by none other than one of the originators of GDP, Simon Kuznets.3 It is easy to see how this transpired
– GDP emerged at the height of the Great Depression in the US, a time when economic failures were structural, the
result of poor understanding of systems and design. Between the long boom of recovery, a world war and postwar prosperity, economic production measured as growth in GDP became correlated with public benefit; as the
economy grew, jobs grew and this ensured the success of the model of increasing consumption of resources to
fuel growth.
Structural challenges and emerging trends
That model is nearing its useful end. We are once again confronting structural challenges on a global scale – only
this time, the issues include surging populations, diminishing natural capital, food and water insecurity, climate
weirding, growing income disparity and other social pressures. In conjunction with these disruptive forces, there are
also cultural trends and emerging research on happiness that call into question consumption driven by growth. In
the 20th century model, well-being and quality of life were equated with making more money and acquiring more
stuff; yet, consumption is saturated in the developed world and happiness is not increasing – a recent Princeton
study looked at a sample of almost half a million Americans and found that happiness increases with salary to a
point, after which they were less happy even while earning more.4
In the developing world, the globalized consumptive model has become associated with a strong perception of
negative environmental impact and the escalating concentration of wealth. The old system of pushing growth as a
way to further economic well-being is not leading to the expected results. Confusing economic growth with benefit
even extends to businesses. A landmark 2002 study of 2,156 companies over a 10-year period demonstrated that
maximizing growth can come at the expense of long-term financial sustainability – “empirical results indicate that
maximizing growth does not maximize corporate profitability or shareholder value. On the contrary, companies with
moderate growth in sales or earnings show the highest rates of return and value creation for their owners.”5
Maximizing economic growth no longer translates into maximizing benefit at an organizational, societal or individual
level; our need to redefine economic production to reflect public benefit has never been greater. There is an evergrowing call to redefine what progress looks like and efforts such as those of the Stiglitz Commission concur that
“choices between promoting GDP and protecting the environment may be false choices, once environmental
degradation is appropriately included in the measurement of economic performance.”6 It is time to rethink what
growth means – decouple it from the consumption of resources, unlever it from economic production and enhance
quality of life with no growth in the use of resources. What matters gets measured; key to this effort is finding the
right metrics to describe this new way of progress for policy-makers and business leaders.
Metrics and assessment methodologies that encompass environmental concerns, social responsibility and
well-being as well as economics have been around for almost half a century. These efforts have resulted in
the proliferation of alternative indicators and indices – Genuine Progress Indicator (GPI)7, Index of Sustainable
Economic Welfare (ISEW)8 and dozens of other indicator systems have been developed to overcome the
shortcomings of GDP. In spite of this growing number of tools that can measure environmental and social impacts,
none have been broadly accepted. The challenge appears to be not one of creation, but one of acceptance,
adoption and scaling. What are the ways around the barriers to acceptance?
11
Industry relevance and responses
Start small. There will always be strong cultural resistance to the new, whether it is a country adopting a new
currency or companies adopting new metrics for growth that include environmental and social impact. Part of
the challenge for many organizations is becoming comfortable with new indicators which may currently lack the
precision of GAAP accounting standards. That has not slowed prototyping new metrics at the apparel company
Puma; they recently issued their first environmental profit and loss statement (P&L statement), which seeks to
measure the economic impact of Puma on water and greenhouse gases and will eventually address social and
other environmental metrics. The goal is fully integrated P&L that accounts for comprehensive economic, social
and environmental impacts of the brand.
Do not let perfect get in the way of good. People are comfortable with existing financial metrics and resist social
and environmental indicators that can be a little fuzzier. Replacing that uncertainty by increasing infinite complexity
can stall any internal efforts to test new measurements for social and ecological impacts. The methodologies will
be refined through iteration and will not be perfect at the start.
Build on other experiments. It is hard in many company cultures to experiment outside the norm. Alternative
corporate structures such as B-Corps (that meet comprehensive and transparent social and environmental
performance standards as well as higher accounting standards) will test alternative indicator systems that go
beyond GDP. Academic institutions have also been prototyping alternatives to GDP. Learn and adapt from these
efforts and test them in other organizations.
Integrate efforts to test new business models. If economic growth is to be unlevered from consumption,
organizations will need to adopt new business models. Testing those models in conjunction with testing new
indicators for environmental and social impacts will facilitate better integration of efforts and ground the business
in the new methodologies. Quantifying the environmental and social impacts in economic terms will also hasten
adoption within organizations.
Partner within industries to develop a common language. What if organizations within an industry start to
monitor and test alternative indicators for their industry? Working within a sector would reduce the challenges of
harmonizing across industries. Once an industry has developed and adopted its best methodology, it is time to
share it across sectors.
Tell the story. New ways of measuring and assessing public benefit will eventually require new regulations and
policies, and public buy-in to move from adoption to scale. Translating prototypes into policy will require the
systems of indicators to be told as a story – taking these efforts and telling them with compelling narratives that
resonate with a broader audience will hasten adoption and regulatory changes.
These are some ways that the anomaly of equating growth in economic development with growth in public
benefit can be overcome. There is a historic opportunity to prototype, adopt and scale metrics that reflect the
reality that we cannot continue to consume resources at an increasing rate and hope to have a sustainable world
economically, environmentally or socially.
Ted Howes
Head, Sustainable Business, IDEO, USA
12
Consumer Signals
Success through Sharing
The emergence of collaborative consumption, peer to peer sharing, presents a 21st century
challenge to the planned obsolescence models that in many ways marked the post-war
economy. The combination of rapidly changing technology, rising interest in sustainability and
the increased value placed on experiences over the ownership of things is creating fertile ground
for the companies that embrace these developments – and a threat to those that do not.
Introduction: Moving towards functional thinking
Products that are used and shared between several people might at first look like a contradiction to business’s
constant efforts to increase the number of sales. If several consumers use one product, fewer products will be
sold in the market. But what if revenues are not earned from the sale of a physical product but rather from the sale
of the service behind the product? For example renting a product to customers shifts the value preposition from
the physical object to the service or function that benefits the customer. It certainly changes the role of companies
– they maintain ownership over their products over the entire life cycle from production to distribution and from
maintenance to disposal/recycling.
Sharing practices or collaborative consumption is a trend, which is rapidly gaining importance all over the world.
For most sharing items, this trend can still be defined as a weak signal. The stories behind some products however
already send out strong signals, reaching broader consumer groups and spreading to different places. The most
popular example of a product service system based on sharing is car sharing. The market for car sharing is rapidly
growing all over the world. A system, which slowly emerged in the late 1980s, grew to almost 350,000 members
and 11,700 cars in 18 countries by 2006.9 In 2009, there were 1,000 cities worldwide that offered car sharing. And
still, the growth of car sharing is increasing: Paris, for instance, will introduce 3,000 electric cars for sharing from
October 2011 onwards.10 In 2016, about 10 million car sharing members are expected in North America, Europe
and Japan alone.11 Drivers for this particular sharing product are participant cost savings, convenience (locations
and use) and guaranteed parking especially in cities where parking might be difficult or costly.
Car sharing, sharing of tools or office equipment and most other sharing practices can be divided into two principal
types: sharing of a product whose ownership remains with the company offering it and peer to peer sharing
where consumers share their personal belongings with other consumers. Obviously, the first type offers far greater
business opportunities for companies willing to support this new model.
Sharing models are one form of product service systems in which the business opportunity does not lie in selling
a product but in selling a service to fulfil the needs of the customers. The customer, who can be either a private
consumer or a company, pays per use. The concept reflects the current economic growth model and fulfils the
demand of consumers while having the potential to respond to current challenges such as the impacts of the
economic crisis or environmental concerns. Against the background of the economic crisis, new customers can
be attracted by product service systems, which allow them to pay per use instead of having to invest heavily at
the beginning and can reduce risks connected to the costs of repairing or upgrading. The environmental impact of
consumption is likely to decrease because the amount of products, which are used by consumers, can be reduced
and producers can establish closed-loop systems. Additionally, impacts can be reduced in the use phase, through
the use of more efficient products or through companies providing information and guidance for better use.12
For developing countries, sharing and product service systems can be the key to leapfrogging to a higher level of
development. One example is the “village phone” – a mobile phone, which can be used by the entire village so that
communication is ensured and no personal landlines need to be established. Companies can support consumers
to directly enter the stage of a more advanced service economy instead of supporting development characterized
by individual consumption and ownership of mass-produced goods.
13
Trends supporting the emergence of sharing practices
Three main trends support the current emergence of sharing practices in different areas of life. First, awareness
about the availability and benefits of sharing is growing among consumers. Large investments are considered more
carefully in the aftermath of the economic crisis. Consumers are aware of the potentials for costs saving and of
having many different options at the same time without bearing the risks of ownership.
A second trend supporting the emergence of sharing schemes is a change of values: New status symbols are
arising while the well-established ones are becoming less attractive. At the same time, the urge to own things in
developed countries is replaced by considerations about using the functions these goods offer. Sharing schemes
allow convenient access to a need fulfilment: bike sharing for example is available in many public places and close
to public transport, shared cars have reserved parking spaces where space is limited or expensive and video on
demand can be watched instantly without having to leave the house.
The emergence of new smart and real-time technologies is the third trend that enables easy sharing practices
between different people. This ranges from Internet-based services, such as renting a movie online, to shared cars,
which can be operated without a key or calculation of the time and driving distance of each customer. Similarly,
smartphone applications can show the closest drill available in the neighbourhood and allow the customer to
reserve it for the time needed. These technologies form the basis for sharing practices, as they enable smart
metering of individual consumption, reduce the costs for sharing and make finding and using a shared product
easy.
Product groups suited for sharing
Many different goods are suited for product service and sharing systems: The concept is most suited for
sporadically used products, especially if they require high investment. It runs counter to increasing sales of
disposable, smaller and less capital-intensive products. Areas where sharing schemes have high potential in
industrialized countries can be seen in the graph below.
14
In developing countries, sharing practices also offer business opportunities. To reach the very poor, a strong service
component as well as the provision of needs fulfilment is more suited than selling a product to attract people
as customers. If there is no market for selling a telephone or a computer because it is too costly for the local
customers, offering a service such as a village phone or a computer and an Internet hub in rural areas can be a
suitable business model.13 Communication equipment has an especially high potential. The conditions for emerging
markets sharing models differ to the ones in industrialized countries. The most influential factors are infrastructure
and availability of technical support equipment and labour costs.
Business opportunities through sharing
Offering products for sharing instead of selling them to customers can have several benefits for companies. First,
companies offering sharing schemes can reach new customers who otherwise would or could not buy a product.
This is especially relevant for environmentally sound products, which allow for low-impact consumption, but range
in a price segment that would be too high for most consumers to buy. If all aspects (such as distance to the
sharing point, frequency of use, rebound effect) are considered carefully, sharing practices have a high potential for
overall improvement of the environmental performance of a shared product and can be marketed as such. New
markets in developing countries can also be assessed where customers cannot afford to buy certain products but
are willing to pay for the services.
Second, sharing schemes can help companies improve and establish long-term relationships with customers. The
close work with customers and information about the use of a product allow the company to get early insights into
future tastes and preferences. Such insights will also make it easier for companies to develop the correct sharing
schemes to meet the needs and cultural contexts of customers. The direct feedback that the business receives
on customers’ habits or problems they might face with the product can be used for the constant improvement of
the offer. Product service systems also have the advantage that consumers can be won over by the quality of a
product which they might otherwise not have tested.
Finally, as the ownership of raw materials embedded in products remains with the company that produces it,
they can establish closed-loop systems to conserve the virgin material in the products. By producing high quality
goods for sharing purposes their lifespan can be increased and upgrade options can be included. The sharing or
replacement of spare parts and reuse can be optimized, reducing the resource needs for consumer goods which
are becoming scarce. As companies and not consumers own the product over its entire life cycle, it becomes easy
for companies to take best advantage of the end of life phase.14
Michael Kuhndt
Head, UNEP/Wuppertal Institute Collaborating Centre on Sustainable Consumption and Production (CSCP),
Germany
15
Consumer Signals
Emerging Information Sharing Models
Considerable experimentation is underway to develop tools that enable consumers to
manage the purchase and use of everyday items and durable goods. The arrival of smart
products, smart appliances and energy management systems will enable consumers to
understand the impacts of their choices and enable them to manage their spending and use
it more effectively.
Introduction: Capturing consumer data and preferences
The emergence of ubiquitous, miniaturized technologies for data capture and communication presents an
opportunity for consumer companies to develop tools that enable three-way communication between purchasers
of consumer goods, the goods themselves and the manufacturer. There is considerable experimentation underway
to develop tools that actually exploit these potential communication channels, whether to perform post-sale
surveys and analysis of product function to enable consumers to manage their inventory of physical goods in ways
inspired by their inventories of digital goods and more. This sharing of information among devices, each connected
to a user-owner or a group of user-owners, holds enormous power to create changes in individual preferences that
could, if knit together collectively, change society. Eating habits are already known to be affected simply by a daily
moment on the scale – imagine the impact of more shared information and of the knowledge of the relationships
between the data and its owner.
The weak signal here is the stirring of cross-platform integration of data and services. One example is obvious –
where a bathroom scale can talk to a running shoe and cross-reference to the contents of a refrigerator, all in the
service of making sure the owner is staying on track for a plan to which he committed when he bought the shoe.
Right now, the shoe and the music player sync, and the scale sends out short text messages via WiFi and the
refrigerator can be hacked to read its interior with open source hardware. The integration is possible but difficult.
More complex and less obvious is the integration of data and services that can be transformed from social
artefacts shared without much thought (such as photos on Facebook) into elements of socio-economic value
(as when social epidemiologists run software to look for red plastic cups in photos on Facebook, which when
correlated to time of posting and keywords for college, give very strong evidence of binge drinking). The impact
of ubiquitous information capture and distribution is its inevitable leakage onto the open Web, where it will be
transformed into new kinds of analysis and value. The primary question is whether the sharing will be purposeful
and designed or whether it will be an underground activity that is “allowed” to happen through benign neglect.
Significance to the industry and consumers
Consumers are becoming more and more accustomed to just-in-time, personalized systems; at the moment we
also see an overall increase in the capacity of industry to make and sell goods at low prices that approximate
the qualities of high-priced goods. Having something rare is better than something mass market. Leveraging
information sharing among “aware” devices makes it easier to enable the consumer to drive the customization
process and will enable the emergence of a consumer company as a platform, not just a producer – as products
can be copied. This is a very different approach than thinking about “surveilling” the customer to make better
products; it is one in which the customer is at the centre of the graph and the company’s relationship to the
customer becomes one of enablement, not feeding.
Another area of significance is in the ability to create brand separation through radical corporate transparency. We
live in an era where the ability to capture data does not only mean that consumer companies can learn about their
customers but the customers can also learn about the companies, and rapidly, globally, permanently distribute
what they learn. Adopting transparency initiatives across corporate data on sustainability, supply chain, energy
use and more is unlikely to hurt the company who shares and brings the added benefit of drawing a crowd of
interested parties, who want to improve those processes, from companies in different business sectors to nonprofits and governments to start-ups.
16
Risks and opportunities for the industry
Early integration is being driven more by obsessed users, willing to endure poor user interfaces and design their
own tools than by companies who have fully internalized the reality of information creation and sharing. Even rarer
are fully designed business models that are able to capture the value inherent in the shared information flows and
user-centric innovation systems. Most analyses predict that newer companies, which have less internal inertia
against recognizing the value in information sharing economies, will often grab market share and mind share faster
than large existing consumer companies, just as Google noted the possibilities of the Internet before Microsoft,
and Facebook noted the possibilities of social before Google. We can see early signals in the advent of hyperspecialized clothing manufacturers such as Threadless for t-shirts, open source hardware platforms to add novel
networked capacity to “normal” items such as toasters and refrigerators and the emergence of movements such
as quantified self (self-tracking of health and other data). As these movements demonstrate value, elements of their
ethos will be abstracted into tools and applications that move into the mainstream through consumer products.
Another risk/opportunity is posed by the ability noted above of users and consumers to discover and publish
information about companies. When this function is used in the service of creating and maintaining the community,
it is a net positive but when turned against the company it can be deeply difficult. Traditional “branding”
approaches are not likely to work here – companies that thrive in the information sharing economy will not have to
just invoke the semiotics of sharing, but actually “walk the walk” by publishing data, exposing carbon footprints,
engaging their users in the process of manufacture and distribution and design, and in general thinking of
themselves as a platform for creation rather than one for distribution of mass product.
Finally, novel approaches to intellectual property will be needed. Open source software, free culture, open
educational resources and open access to research literature are all movements that are being driven by loosely
coordinated communities of consumer-owners fed up with a hierarchical control culture. But in consumer goods,
manufacturing aspects have prevented most of the disruption seen in more digitally delivered industries. And the
intellectual property models have thus not seen much disruption by open or standard patent licenses or copyright
licensing. This lack of disruption is notable but the weak signal may face not simply inertia but the active resistance
of business models that are inherently control-driven and create friction in the system that either slows information
sharing or attempts to exclude innovative reuse through aggressive intellectual property protection.
Industry responses
One immediate response to the emergence of information sharing is to look within and identify some basic
knowledge assets that are of low risk and can be shared quickly to begin developing experience with sharing
– “muscle memory for open” as Henry Chesbrough has said. Examples can include data or processes related
to corporate and social responsibility, sustainability, energy and water consumption, or similar. These are data
frequently promoted in annual reports and there is typically low risk to the enterprise in disclosing. However, in
disclosing, it is essential to truly share the information by using an open license – either a Creative Commons
license for copyrightable knowledge or an Open Source Initiative-approved license for software. Claiming the
mantle of the information sharing movement without taking this final step is a guaranteed way to attract negative
attention.
A second immediate step is to begin examining how the company interacts with its customers – in particular,
if there are systems and processes by which the company can transition from thinking of its customers as
consumers of products to thinking of them as users with the potential to innovate on the company’s behalf. This
is not a recommendation for immediate change but instead one for some self-reflection: a place for study and
analysis. There are emerging capacities in the consulting space to perform this type of analysis and some good
baseline studies of companies such as HP, Nike and more from which to draw first lessons.
In general, the emergence of the information sharing economy now is extremely powerful in digital goods and
a weak signal in consumer goods. This is a ripe moment to let 1,000 flowers bloom, to run small projects and
pilots, to expect and welcome evolutionary failure and natural selection, and to watch and to learn. We have yet to
discover the true impact of information sharing on consumer goods and to know the models by which that sharing
can convert into sustainable business models. But what we do know from the digital world is that the transfer of
power from consumer to user can grind slowly; it grinds exceedingly fine. Once the pieces of the infrastructure
exist to allow users to begin wiring their products together, to begin critically examining their sources and origins,
those users will do so – and in droves.
John Wilbanks
Vice-President, Science Commons, Creative Commons, USA
17
Consumer Signals
Collectively Thoughtful Consumption
A myriad of lifestyles are being tried in communities or groups of communities. Today’s
economy has multiple lifestyles with different sets of needs and aspirations. Anticipating and
meeting these needs creates unprecedented complexity and opportunity – and places a
premium on innovation.
Introduction and Context
The growth of micro-communities is sometimes considered as a replacement for the neighbourhoods and
organizations many of us grew up with in the last century in a very different time and place. The world was not
globalized and homogenized, and local communities provided our identity.
As the world has become global and, in particular, as online communities have become ubiquitous, the trend to
micro-communities has increased. Macro-community sites such as Facebook have acknowledged this trend by
allowing the creation of sub-communities on the Facebook platform through the creation of community pages or
individual “Facebook groups”. The use of micro-communities for consumption is a misnomer at one level. These
communities are not making their purchasing decisions for the community; rather they are developing a shared
ethos about consumption and making agreements – sometimes broad, general, ambiguous and sometimes quite
detailed and defined – as to the kind of products, brands and goods they will purchase. They share preferences in
their social and economic role as consumers. While some groups organize to shape a demand for consumption of
local products15, others organize in communities to bring their products to the market16 or organize a community to
purchase locally produced goods and handicrafts.17
The trend for more social organization on the net is growing and many online brick and mortar businesses are
capitalizing on the movement. This trend largely benefits local, regional and sustainable, or other “special category”
businesses or products.
The most interesting sub-trend within micro-community consumption is the creation of metrics to counter the
primary counter-argument to community-driven intentional consumption, which is price. For instance, there is
a “calculator” for discovering the savings related to buying a handmade local item over a similar imported item.
The calculator is meant to measure embedded costs (carbon, water, etc.) as well as the benefit of buying locally
produced products. There are currently three or four companies/non-profits working on these calculators.
Industry relevance
As a consumer trend, it can well have considerable impact not only on consumption assumptions in general
but in particular on the major consumer brands and outlets. The influence of micro-communities cannot be
underestimated; all political and affiliation bodies are essentially micro-communities. When combined with other
trends – such as a desire for a quantified life and the questioning of growth and consumption in general, which has
accompanied the economic downturn, this trend carries an even stronger potential influence on consumption.
The micro-communities of/for consumption trend intends to be a consumer advocacy movement. It not only
questions the role and goal of consumption but also seeks to tie consumption to a more meaningful life and a value
set that is no longer the purview only of the LOHAS (Lifestyle of Health and Sustainability)18 consumer. For instance,
recent movements in the very conservative mid-west of the US to “buy local” and “know your corn” demonstrate
that this trend is gaining a broader audience. A recent educational series within the Mormon Church, a typically
conservative, pro-big business community, was focused on the use of sites such as Etsy and Daily Grommet as a
way of not only making money but also better supporting local communities and reducing the impact of enduring
unemployment.
18
The movement will have the highest impact on categories that lend themselves to local production and/or have a
high likelihood of personal (values or health) impact (food and agriculture, clothing, personal and home accessories,
baby products). But to the degree that strongly affected micro-communities are able to organize and gain more
resources to affect consumer understanding of the trend, we could also see a general trend towards specific
categories of providers. Women-owned businesses and American-made products for instance are developing
stronger stories and gaining commitments for support.
The rejection of globally sourced and hard-to-track products is the greatest threat to major consumer brands.
The greatest opportunity lies in understanding the trend and shifting more than just how products and brands are
discussed. A genuine conversation with a broader group of collaborative communities could easily form the basis
for creating and piloting business models that would provide the products and services these communities seek. It
will, in any case, be difficult to address the trend without rethinking the values behind most consumer products, as
they currently exist.
A co-design opportunity for business and consumers
The most immediate and important thing is to understand that marketing and consumer conversations are
switching from “mass” to “micro”. Creating process to engage with and tap into the intelligence of these microcommunities likely represents the single greatest opportunity for co-design that has been presented so far.
Designing for a community will at any rate be more efficient than extensive customization and could represent a
bridging mechanism as the technologies for localization, individual design and manufacture improve.
Businesses that do leverage this trend and engage with specific micro-communities/sites to understand the
conversation they have with consumers will create new selling and marketing opportunities or decide to new
produce more sustainably. Business will have an incentive to better understand the true costs of their products
and can use the increased transparency to actively engage the communities in the design of micro-communities
focused on products that matter for their long-term sustainable growth.
Jean M. Brittingham
Strategic Adviser, North America, Cambridge Programme for Sustainability Leadership, University of Cambridge,
United Kingdom
19
Consumer Signals
Consumer Backlash on Privacy
Providing targeted information to enable Internet commerce depends on the availability of
information on consumer habits and choices, based on tracking consumer behaviour on the
Internet. At the same time,there is a nascent backlash that calls for voluntary or regulatory limits
on communications to consumers and the tracking of consumer information.
Introduction
Consumers often are powerless to protect their own privacy online. When they fill in forms on websites, they soon
find their in-boxes choked with spam. When using a social networking service, they find “targeted” advertisements
that show the advertiser’s awareness of the consumer’s private browsing habits.
Even governments are intruding into consumers’ personal online habits, with action against security, terrorism and
piracy often being used as pretexts to justify privacy intrusions. For example, the US government recently asked
Twitter.com to provide the details of all those who viewed Twitter accounts associated with the disclosure of data to
WikiLeaks.19
Consumers do not know how much of their information is being collected online, or by whom, or what they can do
to stop it. They are quickly becoming fed up with privacy infringements by governments and big business alike and
are looking for ways to fight back.
Tracking consumers on the Web
The protection of the privacy of consumers online is actually not a new concern – Consumers International
reported it a decade ago in their Privacy@Net study.20 However, until now there has not been a satisfactory legal,
self-regulatory or technical solution. As far as legal mechanisms are concerned, the main problem has been the
differences in the legal treatment of privacy in different jurisdictions, with the EU in particular having much stricter
standards than the US.
Self-regulatory mechanisms include privacy certification schemes of the private sector, the best known of which is
TRUSTe, a private non-profit organization founded by the EFF and Commerce.Net, which certifies online business
for their adherence to privacy standards.21 These schemes have been criticized by privacy advocates for being too
solicitous of the interests of business, by allowing businesses to easily derogate from consumers’ privacy rights as
long as the consumers’ consent can be obtained.22
Technical mechanisms, until now, have been limited to the P3P (Platform for Privacy Preferences) recommendation
of the World Wide Web Consortium (W3C). P3P is an XML-based language in which a website’s privacy policy
can be expressed in computer-readable form. This can be automatically read by an access device that supports
P3P (such as a compliant Web browser or mobile phone) to regulate a user’s Internet use in accordance with their
expressed privacy preferences in an automated way. However, P3P never came into wide use. One factor may be
that P3P software was not simple and transparent enough to use and that only a small number of websites ever
bothered to publish P3P-compatible privacy policies.
The latest development has been on a combined technological and legal front. First, a new and much simpler “do
not track” technology has been incorporated into mainstream Web browsers. This option is already included in the
Firefox 4.0, Internet Explorer 9.0 and Safari 5.1 browsers and is available as a plug-in for Google Chrome.23
However, without legal backing to require website owners to observe the “do not track” request, the technology
will fail in the same way as P3P. This gap could be filled by a bill to be introduced in the United States Congress
that would give the Federal Trade Commission (FTC) the authority to enforce action against companies that do not
honour consumer requests.24
20
Disclosure of personal information online
Another related area of concern for consumers relates to the use and ownership of personal information given
to online businesses. Facebook has raised particular concerns because of repeated changes of its privacy
policy. Dissatisfaction with Facebook’s record on privacy has been one of the factors behind the development
of alternative, decentralized social networking services that do not require members to give up their personal
information to a third party. The most well-known of these is the open source Diaspora project, which boasts, “You
maintain ownership of everything you share, giving you full control over how it’s distributed.”25
One of Facebook’s latest privacy faux pas has been to roll out a feature that will automatically identify you in
photographs that your friends upload to Facebook. If your friend accepts the identification by “tagging” the photo
with your name, then this tag can be seen by any of their friends, including those who are strangers to you. Youth
are particularly vulnerable to the misuse of this feature, which can allow embarrassing photographs of their life to
be seen by family and prospective employers.
Consumers’ personal information was also placed at risk by Sony, which recently suffered a privacy intrusion by a
computer hacker in which details of 100 million consumers were stolen. The hack was facilitated by Sony’s poor
maintenance of its website,26 and may even have been executed in revenge against Sony’s previous mistreatment
of consumers – namely a lawsuit against a user who provided a technical means to reverse Sony’s removal of a
feature from its PS3 gaming console, allowing consumers to install third-party software on the console.
Location privacy
Today’s GPS-equipped smartphones are silently collecting and storing information about the location of their
owners. Earlier in 2011, Apple was forced into damage control mode when it was revealed that its iPhone was
storing the approximate location of its users for up to a year in an unencrypted file on the phone. Worse, the file
was backed up to the owner’s PC where anyone with access to the PC, such as a co-worker or PC repairer, could
read it.27
Although Apple may have a robust privacy policy that would prevent it from misusing such location information, its
iPhones (along with other smartphones) also share the location data that they collect with third-party apps running
on the device, many of which send that information across the Internet without the owner’s consent.28 Apart from
the simple loss of privacy experienced by a tracked user, the sharing of location can facilitate the more sinister
crimes of stalking and identity theft.
Online anonymity
For a long time, posting on the Internet could be done anonymously or by using pseudonyms that were not
personally identifying. This offered users more freedom of expression, if less accountability. One example is the
collaboratively crafted online Wikipedia encyclopaedia, written mostly by authors with unidentifiable pseudonyms or
IP addresses.
In recent times, it has become increasingly difficult to maintain online anonymity. IP addresses can be tracked,
making it possible to track from which computer or network a certain post was made – though not the actual user.
Some countries have tightened their laws on Internet use, aggravating the problem. For example in July 2010,
China revealed its plans to require Internet users to register their real names before posting online.29
There are however some “anonymizing services” such as I2P and Tor, which are designed to bypass IP tracking
technologies. It is believed that their distributed technology approach might offer better security than centralized
anonymizing services, where a central point exists and could disclose one’s identity.
Law enforcement
Many countries have either legislated or introduced “voluntary” codes of practice to require Internet service
providers (ISPs) to retain a variety of data recording their users’ activities on the Internet. The EU data retention
directive (2006/24/EC) applies to both voice and data communications. As far as Internet access is concerned,
it requires ISPs to retain the ID of users, e-mail addresses of senders and recipients, the date and time that users
logged on and off from a service, and the IP address (whether dynamic or static) applied to their user ID.
21
This directive is implemented in the United Kingdom in the form of a Voluntary Code of Practice on Retention of
Communications30 which took effect in 2009, and which requires logs of e-mails and websites visited to be retained
for between four days and six months. In February 2010, the FBI was reported to be seeking similar requirements
of US ISPs.31 An equally stringent data retention regime is proposed for Australia.32
Surveillance and IPR enforcement
One particularly worrying application of the practice of surveillance and data retention by ISPs is for the purpose
of identifying users suspected of intellectual property infringement. It is quite simple for rights holders to obtain
the IP address of those who participate in file sharing over the Internet. It is also relatively simple for the ISP who
controls that IP address to provide the personal details of the customer who was using it at the time of an alleged
infringement.
While almost all ISPs will require a subpoena or court order to release customer details, there are ways that rights
holders can get around this. In April 2010, the Irish High Court determined that a private “graduated response”
regime that formed part of a settlement agreement between the Irish Recorded Music Association (IRMA) and
its largest ISP, Eircom, did not infringe its users’ privacy, despite the fact that IRMA and Eircom would be dealing
in users’ IP addresses. The reason is that the personal details associated with a given IP address would not be
disclosed to IRMA and an IP address alone does not constitute “personal information”. In the month following the
judgment, Eircom commenced its policy of disconnecting users.33
Another privacy concern for the access to knowledge movement (A2K movement) is deep packet inspection (DPI),
a technology by which Internet traffic generated by a user is monitored for certain characteristics: for example, to
detect whether the connection is being used for file sharing. Since November 2009, United Kingdom ISP Virgin
Media has been using DPI to measure copyrighted material passing through its network, without informing its
users. This led to a complaint from Privacy International34 to the European Commission, which remains pending.35
Conclusion
Evidence of consumers’ disquiet about the collection and misuse of their personal information is mounting, from
the clamour for a simple “do not track” mechanism for the Web to the stream of public donations to support
the development of a more privacy-friendly alternative to Facebook to the growth in the use of anonymizing
technologies such as Tor and the waves of online protest against privacy slip-ups by Sony, Skype and other big
businesses. If this discontent is not managed, it may explode into online revolt. Businesses and governments need
to take consumer online privacy more seriously to avoid this outcome.
Bjarne Pedersen
Director, Operations, Consumers International, United Kingdom
22
Contextual Signals
The Quantified Self
Technology is enabling average persons to understand the impact of their choices on
everything from their genetic code to their daily health, their household budget and the social
and environmental impacts of consumption. Combined with information sharing, this will
usher in an era of informed and empowered consumers who will ignore – and challenge –
marketing messages aimed at a mass audience.
Introduction and Context
Technology enables anyone to understand the impact of his or her choices on everything from their genetic code
to their daily health, their household budget and the social and environmental impacts of consumption. The rise
of information technologies now enables people to understand his or her calorie consumption, energy use, sleep
patterns and intake of information. The average person has at his or her disposal information tracking ability that
only a generation ago would have been limited to the most sophisticated research laboratories.
This development has given birth to a virtual community “the quantified self” movement. This movement, which
emerged in Silicon Valley, is defined as follows: “Quantified Self is a collaboration of users and toolmakers who
share an interest in self-knowledge through self-tracking.” The concept has attracted diverse interest from
individuals and investors in start-ups such as Greengoose, which aims to produce wireless sensors that allow
people to track all aspects of their lives and create prizes for certain achievements. Others are also aiming to spark
acceleration of this trend. The Robert Wood Johnson Foundation, which focuses on health, has partnered with the
Institute for the Future on a portal that aims to gather all self-tracking tools to accelerate uptake.36
Development of the trend
The question of how far and how fast this trend goes depends on a variety of factors, including the pace of
technology, questions about privacy of data and the translation of raw information into useful insight. As the brief
description above indicates, there is an extremely wide range of ways in which this concept is being tested and
implemented. It is almost certainly premature to determine how it might play out. However, it is clear that this
concept, especially when coupled with tools enabling augmented reality and the Internet of Things (see chapter
“Emerging Information Sharing Models), will enable a reality that brings to vivid reality Socrates’ statement that “the
unexamined life is not worth living.”
More practically speaking, the rise of the quantified self movement will further advance consumer choice and
individuation of products and services. Better and more credible data will make visible highly personal impacts
that today have little or no impact on consumer decisions. This will usher in an era of informed and empowered
consumers who will ignore – and challenge – marketing messages aimed at a mass audience and also vastly
increase the degree of consumer choice based on individual well-being and social/environmental stewardship.
Industry relevance
The rise of the quantified self movement will both reinforce existing trends and create new opportunities and
disruptions.
This trend will reinforce and extend the empowerment of consumers. The last two decades have seen the steady
increase in information available to consumers about products. This is now being combined with information about
consumers themselves and the impacts of products on them.
The rise of the quantified self movement will also accelerate the expectation of transparency, shifting it from
company level to product level, to the level of the individual user of a given product.
23
In doing so, this movement will reinforce the trend towards fragmentation of consumer cohorts based on microcommunities of interest who make purchasing decisions based on a highly personalized view of their interaction
with a product or service. This leads directly to new concepts of product development, as companies will aim to
meet the needs of consumers who are more interested in understanding how products will affect them – positively
or negatively – in unique ways. Companies that develop products targeted at people falling into new categories will
succeed as surely as those that have found ways to focus on traditional demographic categories.
At the most fundamental level, the quantified self movement further erodes the one-way model of marketing and
communications from companies to consumers.
This movement is also likely to reinforce the broad trend, particularly in mature economies, towards a greater
emphasis on health, nutrition and well-being. The natural logic of the trend also suggests that products and
services that have the greatest “body proximity” will be the ones most affected by greater uptake of self-tracking.
Product categories most likely to be affected, therefore, are food, pharmaceuticals, cosmetics, clothing and home
care products. But it is possible that this will extend even further, for example, enabling the concept of personal
carbon allowances to take hold.
New product development opportunities will also emerge for companies that can create offerings that enable
self-tracking. This opportunity likely falls into two broad categories: (1) products and services that are designed
explicitly to enable consumers to track their impacts and (2) products that provide additional information about their
impacts on consumers to facilitate their self-tracking. An example in the first category is the Nike-Apple partnership
to create the Nike + iPod sensor that enables tracking of exercise (tagline: “Meet your new personal trainer”) or the
Zeo sleep tracker, which styles itself in marketing material as “the personal sleep coach.”
The rise of this movement will also create privacy dilemmas for companies. If, as expected, peoples’ genetic
identities become more readily available and visible commercial opportunities will be created for personalized
products. Companies such as 23andMe and Genomera are making it possible for people to understand their
genetic makeup. As companies offer personalized products tied to individuals, however, they are likely to obtain
highly private data that must be guarded, thus raising – further – the premium on protecting privacy. This reinforces
the need for companies in the consumer goods sector to develop new norms on maintaining personal information;
otherwise, the license to operate will be undermined.
Industry responses
There are three broad categories of steps business can take to address this trend. First, they should inventory
their current activities to understand better how existing products and services could be affected by a widespread
adoption of self-tracking. Second, there are product development opportunities; opportunities to “unlock”
information about product attributes that facilitate self-tracking; and adaptation of market research to enable
integration of quantified self thinking into business planning. In addition, business leaders can work with the public
sector to understand and manage credible and effective systems of gathering and maintaining data in a manner
that also protects personal privacy.
Aron Cramer
President and Chief Executive Officer, Business for Social Responsibility (BSR), USA
24
Contextual Signals
More Meaningful Life
In tandem with the demand for a work/life balance, there is an increasing preoccupation with
ways to make life more meaningful. This may mean new patterns on community relations, with
great business opportunities for services that could facilitate and strengthen the development
of links between people and groups of people.
“We must rapidly begin the shift from a thing-oriented society to a person-oriented society…. A nation can flounder
as readily in the face of moral and spiritual bankruptcy as it can through financial bankruptcy.”
Martin Luther King
4 April 1967
Introduction
Six decades of growing consumerism have resulted in increasing preoccupation with ways to make life more
meaningful with less consumption. Material consumption has gone too far in its promise of happiness through
consumerism. It appears that consumers start to realize that there is “tension towards continuous consumption”
given by almost immediate obsolescence of products in terms of design and features.
This has led consumers to perceive that the direct and absolute correlation between consumption and the
satisfaction derived from it, even for a short period of time, is far from being true. Much to the contrary, anyone who
tries to be “up to date” in terms of products and services bought, has found out that this leads to continuous lack
of satisfaction and to meaningless effort to attain what others value instead of identifying what is really important
and relevant for one’s life.
Faced with continuous innovation, especially those of irrelevant changes from a functional point of view, consumers
start to realize that this is an endless game in which lack of satisfaction is the rule and not the exception.
Given the strong perception that there is a direct relation between work and consumption, and especially in face
of the intense insecurity by the absence of long-term work relations, consumers move into a transition period in
which there is a desire for a more human balance between work and life, and where the meaning in life is found in
rich relationships and where consumption becomes, almost exclusively, instrumental to attain it. The success of a
myriad of (so-called) self-help “spiritualized” books is a strong sign of this search for a lifestyle which is substantially
different from those of the consumerist society.
Trends
A new era where relationships are most valued (called “family and friends around the table” in an Annual
Meeting 2011 workshop on new lifestyles) directs societies to look for alternatives to the stressful, consumerist,
meaningless life in which consumption has gone far beyond the needs for well-being and the psychological needs
of belonging to a certain group. Excess of consumption tends to be gradually more and more rejected, and a “less
is more” type of movement takes place in trend setting societies.
In terms of consumption, the emergence of this new society will show a tendency to gradually move (a) towards
durable rather than disposable products, (b) towards renewable rather than fossil raw materials, (c) towards shared
use rather than individual property of products, (d) towards virtual rather than material products, (e) towards more
local rather than global production, (f) towards non-toxic rather than toxic raw materials, (g) towards reutilization of
products and recycling of materials rather than discarding them as garbage, (h) towards integral rather than partial
use of products and materials, and (i) towards sufficiency rather than excess in consumption.
Examples exist, and are expanding in number and intensity, showing that some of these possible trends are
already present in our society: the sharing of bicycles and small cars in several cities in the world; the existence of
plastics derived from sugar cane and corn; the substitution of certain artificial pigments for natural ones; the several
examples exchange markets of used products on the Internet; the tendency towards collaborative consumption;
the fast rate of substitution of material for virtual books, CDs, DVDs among others.
25
A growing consciousness about the limits of material consumption in providing effective material and psychological
well-being is the main element to provoke and conduct change. There is also a growing lack of satisfaction with a
life focused on work and consumption, which tends to lead people to experimenting with other equations in terms
of work/life balance. Growing importance is given to relationship spaces, real and virtual, that connect people
around shared interests and values.
Significance to the consumer industry
As in any important transition, people will feel “lost” in terms of what direction to go, and corporations will have an
important opportunity to help nurture human feelings by facilitating this transition to a new society. There will be
enormous opportunities for corporations to provide relationship spaces for people to connect, services to identify
groups with shared interests around the world and, most especially, ways to reorganize work in space and time,
allowing people to have more freedom to choose how and when to work, while at the same time being able to
enjoy family, friends and relationships in general.
In supporting a change to a more meaningful life, the consumer industry will be faced with the following
opportunities and alternatives:
• concentration in offering new functionalities in products which are actually effective and objectively needed by
consumers
• offering of products aiming essentially at the effective well-being of consumers
• identifying products and services that will facilitate new patterns of community relations which are more present
in the day-to-day life of people and that will strengthen the development of links between people and groups of
people
• identifying products and services related to new patterns of education for self-knowledge and self-expression,
such as in arts
• facilitating and providing services that will aid new patterns of mobility and travelling
• offering opportunities for being emotionally engaged in activities that help bring more meaning to life, such as
those of deepening the reflection by groups about the experiences of one or more people
• developing new policies for work/life balance within the company structure, allowing employees to increase
the time available for relationships and deriving enormous benefits in terms of increased productivity, reduced
absenteeism, leading to lowered turnover and improvement of the health of workers
Risks, opportunities and responses by the industry
The main risk for companies, especially the larger ones, will be to keep the same pattern of products, services and
relationship to consumers and employees, which can lead to losing competitiveness and reputation in relation to
companies which are already aligning themselves to the new trends towards a more sustainable lifestyle, even if
these trends are still indicated by weak signals.
The real opportunity will be to create products and services that facilitate and accelerate the transition of individuals
to a new lifestyle within a more meaningful and significant life.
Given the fact that this will represent a transition to a new economy, industry leaders should focus on identifying
and disseminating the concepts of a way of life where sustainability of the environment and society join hands with
an emotionally driven, more immaterial society.
The most important leaders in this transition will be those who experiment with products and services for small
groups of consumers in a way that helps society understand the new elements of consumption that lead to
sustainability and a more meaningful life.
Helio Mattar
President and Board Member, AKATU Institute for Conscious Consumption, Brazil
26
Consumer Industry Issue Matrix
Primary Drivers
Possible risks
Possible responses
Changing Market Dynamics
• Growing middle class
in developing markets/
stagnant developed
markets
• Lack of infrastructure
(or lock-in of wrong
infrastructure)
• Cost of entry to new
markets
• Shift in consumer
purchasing power
• Differentiation from private
label
Desire to go into “white
space” and meet the needs
of more of the world’s
consumers; increasing
affluence; rapid urbanization
and economic development;
need for different business
models for sustainability
and emerging markets;
competitiveness; diminishing
brand power
Unpredictability of regulatory
landscape; unsustainable
growth; geopolitical instability
— business cannot succeed
in a society that fails; too
much focus on technology
instead of business models
and supply chain innovation
“Localized” innovations
via deep consumer
understanding; new
partnerships to work
with other stakeholders;
infrastructure and policies
to support sustainable
consumption
Changing Consumer
Dynamics
• Technology — Social
media/growing global
access to e-retailing
• Challenge of continuous
consumer engagement/
loyalty
• Dilemma of low cost option
• Demand for transparency
by NGO/individual
consumer voice
• Lack of organized
consumer voice in
developing markets
Increasing awareness
of social/environmental
issues; consumers are
easily organized with social
media given increasing
availability and relative low
cost; increase in leisure
time to become influential on
consumer matters; increased
transparency makes it easier
to purchase according to
values
Ability of business to adapt to
the “new reality”;
inability to get new and
retention of talent; losing
connection with the
consumer if not in the
“space”
Increase company’
responsiveness and
understanding of the “rules
of the game”; partnerships
with local NGOs; increased
transparency through
integrated reporting
The Environment Imperative
• Scarce resources: water,
energy, land — need to
decouple resource use
from consumption
• Need for alternative
sources of energy
• Ambition of zero waste:
supply chain waste,
air and water pollution,
carbon, toxins, end of life
waste
Increasing population; oil
pricing and issues with
alternatives; ability to source
raw materials; waste;
biodiversity; rising demand
for sustainable products;
need for different business
models for sustainability; new
opportunities in emerging
markets
No sense of urgency;
operational continuity; raw
materials sourcing and
related supply chain risk;
reputational risk; regulatory
risk; transparency and ecolabels; understanding the
future of consumption
Assessment of the
sustainability of current
business models; focus on
whole lifecycle of products
and services; enlightened
business models; ecoefficiency: creating more from
less; eco-effectiveness: shift
from less to better; consumer
engagement; collaborative
innovation
The Social Imperative
• Inclusive growth:
Promoting equity in
developing markets
• Opportunities for
excluded populations/
gender equity opportunity
• Equity gap between rich
and poor within and
between countries
Need for social innovation
in addition to technical
innovation; unequal
access and capacity for
innovation systems (tech
is one); products and
services created by and for
underserved communities/
ageing population
Risk of missing consumer
opportunities; risk of
becoming irrelevant ; social
(and political) unrest; loss
of faith in trade/capitalism/
brands
Open innovation systems;
programmes to harness
collective innovation;
BOP business and social
entrepreneurship
The Health Imperative
• Price points/value and
quality issues
• Tension between health of
products and services and
value, quality, taste
• Limited understanding of
the value of good health/
what a healthy product is
Ageing population; inability
of public policies to keep up
with science; importance of
health for consumers; rising
obesity and need to make
healthy lifestyles mainstream
Regulatory risk; confusion
over what is a healthy
product; lack of demand
/ expectation of trade-offs/
risk of turning consumers off;
need to “sell” short to long
term; perceived value
Industry collaboration
with associations and
governments; development
of healthy mass products;
Educating consumers
on long-term impact of
consumption
27
World Economic Forum Contacts
Sarita Nayyar
Managing Director
Head of Consumer Industries
sarita.nayyar@weforum.org
Randall Krantz
Director, Sustainability Initiative
Environmental Initiatives
randall.krantz@weforum.org
Florian Reber
Senior Associate, Environment and Sustainability
Network of Global Agenda Councils
florian.reber@weforum.org
28
Endnotes
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study). Futura, Vol. 2., 78 - 92
2
http://www.iclei.org/
3
Simon Kuznets (1934) “National Income, 1929-1932”. 73rd US Congress, 2d session, Senate document no. 124,
page 7.
4
http://wws.princeton.edu/news/Income_Happiness/Happiness_Money_Summary.pdf
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Jung, Alan, Ramezani Cyrus A. and Soenen, Luc. Growth (2002) Corporate Profitability, and Value Creation
6
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7
http://en.wikipedia.org/wiki/Genuine_progress_indicator
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can business value be increased through sustainable consumption business strategies? Wuppertal.
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1
29
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