In a joint effort, PricingForThePlanet and the Pricing Professional Society (PPS) conducted an insightful survey/workstream focusing on the involvement and capability in monetizing sustainability initiatives. The results and analysis are included here. Fabien Cros is co-Founder of Pricing for the Planet (www.pricingfortheplanet.com), which specializes in the monetization and the pricing of sustainability. Currently serving as Data and Measurement Lead at Google France, he leverages his expertise in data and AI to drive growth and analytics. He is a recognized thought leader in pricing and sustainability, dedicated to building a more sustainable future. Stephan Liozu ­­­is Founder of Value Innoruption Advisors, a consulting boutique specializing in industrial pricing, XaaS pricing, and value-based pricing. He is also the co-Founder of Pricing for the Planet, which specializes in pricing for sustainability. Stephan has 30 years of experience in the industrial sector with companies like Owens Corning, Saint-Gobain, Freudenberg, and Thales. He has authored and edited 13 books on value and pricing management. Stephan sits on the Board of Advisors of Professional Pricing Society.

The Pricing Advisor, October 2023

We are finally getting there. Sustainability is going mainstream. After decades of spotlight and trillions of dollars of investment on digital transformations, we see a major shift on priorities for medium and large companies. Sustainability and social impact have become a main area of focus in strategic development and in financial reporting. In a 2022 study of 850 companies worldwide, 80% said they plan to increase their investments in sustainability. See: What companies are doing to become more sustainable (wework.com).

Every functional area is impacted by this massive shift in priorities. Pricing teams are not immune to the shift. We propose that sustainability is a tremendous source of differentiation, customer value, and eventually of pricing power. We posit that these investments in greener products, recyclability, circularity, and socially responsible development efforts can be translated into financial value and eventually some form of revenues. For that, sustainability must be considered as a strategic innovation that must be strongly tied to go-to-market strategies. It cannot be just a cost of doing business or a compliance play. Sustainability, like digital transformation, is an organizational innovation requiring the mobilization of all go-to-market experts, including pricing and monetization teams.

The purpose of the survey was to understand the pricing function’s involvement in, and capability for, monetizing sustainability initiatives within their companies. It also aimed at gaining insights into their customers’ willingness to pay a premium for sustainable products and services, as well as to understand the methods used or considered for estimating the value of sustainable engagements. The feedback gathered through this survey is vital for shaping future strategies related to sustainable pricing and revenue management.

About the Research

In a joint effort, PricingForThePlanet and the Pricing Professional Society (PPS) conducted an insightful survey/workstream focusing on the involvement and capability in monetizing sustainability initiatives.

This collaborative research reached out to 170 professionals, spanning diverse regions and industries in June and July 2023. The participants were from Americas (53%), EMEA (43%), and APAC (4%), representing a wide range of sectors: Industrial and Manufacturing (51%), Retail and E-commerce (7%), Services including healthcare and finance (12%), Software and Technology (13%), and Other industries (17%).

The participants’ roles in their respective organizations were also diverse, including General Management such as CEO, COO, Partner, Head of Business Unit (8%), Pricing/Revenue Management roles like Pricing Director, Pricing Manager (72%), roles in RSE, ESG, and Sustainability Management (0.6%), Marketing and Sales (11.4%), and others (8%).

Are You Involved In The Monetization Of Your Company’s Sustainability Engagements Today?

When the professionals were asked about their involvement in the monetization of their company’s sustainability engagements, 24% reported being involved, 15% said they were very involved, 30% were somewhat involved, while 28% of the respondents indicated that they were not at all involved in the process.

Are Your Customers Willing To Pay A Premium For Sustainable Products And Services?

When queried about whether their customers are willing to pay a premium for sustainable products and services, the responses varied: 49% of the professionals affirmed that their customers are willing, 24% indicated a negative response, and 27% expressed uncertainty, stating “I don’t know.”

 

If Yes, What Type Of Premium Are They Willing To Pay?

When asked “If yes, what type of premium are they willing to pay?” for sustainable products and services, the responses were varied: 46% of professionals reported that their customers are willing to pay a premium of 0-5%, 35% mentioned a willingness for a 5-10% premium, 14% indicated a 10-20% premium, and only a small fraction, 5% stated that their customers would be willing to pay a premium of more than 30%.

If Yes, How Did You Gather These Insights?

In response to the question, “If yes, how did you gather these insights?” regarding the willingness of customers to pay a premium for sustainable products and services, professionals used a variety of approaches. 21% relied on external market studies, 37% followed their gut feeling, 29% utilized internal market studies, and 13% mentioned other, unspecified methods.

How Capable Is Your Company At Monetizing The Following Sustainability Initiatives?

In the survey, professionals were asked about their company’s capability in monetizing various sustainability initiatives, with options ranging from “not capable at all”, “somewhat capable”, “capable”, “very capable”, to “I don’t know.” This question was asked for seven different sustainability aspects: Sustainability services, Green/Sustainable products, New sustainability business model(s), Quantification of sustainability value drivers, Quantification of the impact of sustainability on the brand, Monetization of sustainability labels and certifications, and Monetization of social impact (e.g., job creation).

Interestingly, “somewhat capable” was the most frequent response for six out of the seven categories. However, when it came to the monetization of social impact, such as job creation, “not capable at all” took the lead with 35% of responses.

For five out of the seven categories, the combined responses for “very capable” and “capable” usually constituted less than 40%, except for Green/Sustainable Products and Quantification of the impact of sustainability on the brand where it exceeded 40%.

Overall, the results indicated a discernible lack of capability within organizations when it comes to monetizing sustainability initiatives, particularly in areas related to social impact, sustainability labels and certifications, and the introduction of new sustainability business models.

CONCLUSION

The survey conducted jointly by PricingForThePlanet and the Pricing Professional Society (PPS) generated significant insights regarding the involvement and capabilities in monetizing sustainability initiatives.

1. Involvement in Monetization: Professionals demonstrated varied involvement in the monetization of their company’s sustainability initiatives. The responses were almost evenly distributed, highlighting a lack of uniform involvement across sectors.
2. Customer Willingness to Pay Premium: There is a general perception that customers are willing to pay a premium for sustainable products and services, with 49% affirming this. However, a quarter of respondents disagreed, and a substantial number (27%) were unsure.
3. Premium Range: Among those who confirmed customer willingness to pay a premium, the most commonly accepted premium range was 0-5% (46%), followed by 5-10% (35%). Only a small portion (5%) indicated a willingness for a premium exceeding 30%.
4. Insights Gathering: Professionals used a mix of gut feelings (21.76%), internal (17.06%) and external market studies (12.35%), and other methods (7.65%) to gather these insights, indicating a need for more systematic and data-driven approaches.
5. Monetizing Sustainability Initiatives: The respondents indicated they were “somewhat capable” in monetizing most sustainability aspects. However, when it came to Monetization of social impact, most professionals (35%) indicated they were “not capable at all.”
6. Capability Gap: The combined responses for “very capable” and “capable” were less than 40% for most categories, indicating a capability gap in monetizing sustainability initiatives. Particularly in areas of social impact, sustainability labels and certifications, and new sustainability business models, the lack of capability was pronounced.

The survey underscores the need for increased focus on and resources for monetizing sustainability initiatives, given the identified capability gaps. It also suggests that firms could benefit from more structured ways to assess customer willingness to pay premiums for sustainability.

RECOMMENDATIONS

1. Invest in robust willingness to pay assets: Given the fact that 49% of surveyed professionals reported their customers’ willingness to pay a premium for sustainable products and services, it’s indeed beneficial to invest in robust tools that can accurately capture customers’ willingness to pay. This will allow firms to align their pricing strategies with customer expectations and sustainability goals.
2. Upskill your team around the monetization of sustainability: The survey revealed a capability gap in monetizing sustainability initiatives. Upskilling existing teams can help address this gap, equipping them with the necessary skills and knowledge to effectively monetize sustainability efforts. Training could focus on topics such as quantifying sustainability value drivers, assessing the impact of sustainability on brand value, and understanding how to monetize sustainability labels and certifications.
3. Build a dedicated function around the monetization of sustainability: The creation of a dedicated function or team could provide the necessary focus and expertise for monetizing sustainability initiatives. This team could work on developing new sustainable business models, identifying, and quantifying the value of sustainable engagements, and driving the implementation of sustainability pricing strategies.
4. Start implementing test and learn sprints around this topic: Given the relative novelty of monetizing sustainability initiatives in many industries, a “test and learn” approach would be beneficial. This agile methodology allows companies to experiment with different strategies, learn from their successes and failures, and iteratively improve their approaches to the monetization of sustainability.

In addition to these steps, it might also be worthwhile to consider cross-industry collaborations or partnerships. Learning from and sharing best practices with others in the business community can accelerate progress in this important area.

FINAL THOUGHTS

The pricing profession is well positioned to lead the monetization efforts for sustainability. That means accepting the responsibility and taking immediate actions to connect with the sustainability team. It is much more than being passive and waiting to be contacted. We recommend a very proactive and transformational approach in efforts and engagement. We also recommend a systematic monetization approach injected in ESG reporting to demonstrate the value of the pricing team but also the impact we can have besides traditional core activities. Pricing teams can help demonstrate the impact of sustainability investments, which is a significant preoccupation for the office of the CEO and the CFO. It is early enough. Let us show what we can as a profession!