The rise of the green consumer

The pandemic introduced many new things into our lives, and for a lot of us that included a shift in the way we think about sustainability.

At the moment, purpose-driven customers, or customers who choose products and brands based on how well they align with their values, represent 44% of the market.¹ This means that customers who value sustainability will seek it out in their shopping. 

How do we move along with this shift in sustainability and align with these values as mortgage advisers? Green consumerism is on the rise and we want to keep up.

What is a green consumer?

As a whole, green consumerism advocates for the sustainable use of products and asks for services that don’t harm the environment. A green consumer is particularly interested in maintaining a healthy and safe lifestyle without compromising the health and safety of the environment. 

We’ve come a long way already, but recent financial, social and economic shifts have changed the way people think about sustainability. One of the largest shifts came from the pandemic and its rippling repercussions.

How the pandemic changed consumer focuses

The pandemic caused a significant shift in consumer mentality, and many had to change their ways and form new routines in order to adapt to this new way of life. To highlight this, we took a look at PricewaterhouseCoopers’ (PwC) consumer reports. PwC introduced their first consumer report in October 2020, right in the thick of global turmoil. 

They later released the March 2021 edition and the change in consumer behaviour was stark, even after six months. Many consumers claimed to be more data-conscious, price-oriented, health-conscious and more aware of the need for sustainable living².

What consumers expect from businesses

Following the pandemic, many consumers saw a shift in their mentality, with a lot of people demonstrating more interest in sustainability and eco-friendly products and practices. While PwC’s report states that sustainable experiences aren’t right at the top of the list of what consumers want, they sit at a solid 19%. 

Sitting right at the top is reliability, which goes hand in hand with delivering on one’s promises. 

Jessica Sansom says that in cases like sustainability and green promises, “businesses need to adopt a model of complete transparency and honesty. So many companies are still trying to use green initiatives as a marketing tool rather than just seeing it as a better way of doing business.”

Sansom goes on to say that if we “move beyond marketing messages to simply being honest and transparent about current performance and targets and where you are on that journey, you'll gain consumer trust.”

Supporting the green consumer

Some of the most consistent barriers to sustainable shopping include a lack of options, awareness and time. Let’s put this into perspective, referencing back to the PwC report: 

• 32% of consumers say they lack sustainable options

• 20% say they don’t have time to look

• 15% say they are not aware of sustainable products and practices. 

In the context of the housing market, these are problems easily remedied with good advice, information packs and support. As advisers, it is our duty to provide consistent, reliable and easy to understand information to our clients. 

As of 2020, 43% of consumers had never heard of a green mortgage³. At the time of publishing, nearly 20% of consumers were also willing to pay an extra £100 a month for a green mortgage, though it’s difficult to say what that figure looks like now with the current financial crisis. 

However, Sansom states that making the move to sustainability doesn’t have to be considerably more expensive than sticking to the status quo. She notes that “the payback periods for sustainability-related investments are getting shorter and shorter,” and that ultimately, “the cost of doing nothing will be far more expensive.”

A new build buyer may not know they have access to green mortgage products, so they won’t be looking at them as options. With this in mind, we could introduce the option. Similarly, many don’t know how they can adapt their current living situation and improve their EPC rating, and this could be what it takes to open up new mortgage deals for them.

Why does this matter? 

The UK’s net zero goal is written in law. As a country, we must hit net zero by 2050. This leaves no room for compromise, and while we know there are obstacles, with the right support it’s an achievable target. 

This support must come from the government passing and maintaining regulations, from lenders and suppliers ensuring their products and services support sustainable practice, and from us, who educate and inform our consumers of their options. 

At the end of the day, green must start at home. The small steps we take now, both in our personal lives and within our businesses, have the potential to make a difference. 

¹IBM Institute for Business Value, 2022

²PwC Pulse Survey, 2021

³Intermediary Mortgage Lender Association, 2020

The four principles of sustainability

Sustainability isn’t just a buzzword, though if you browse through any newsfeed online you’ll see business leaders, politicians, and journalists mentioning the term. They could be talking about anything from sustainable business and commerce to sustainable energy. However, it’s important to note that half the time, the word is not being used in the right context. 

The reason for this is that, at its core, sustainability has four basic principles, and while they’re linked, they also have their own foundations and pillars. So what exactly does sustainability mean and how can we incorporate it into not only our personal lives, but our business ethos too?

What is sustainability?

We can trace the term back to the 90s, from a report distributed by the United Nations Brundtland Commission¹. The report focused on the importance of meeting current needs without compromising the needs of future generations. 

It mentioned key phrases like sustainable development and even touched on topics like sustainable industrial development in a global context. Imagining these developments isn’t possible without tapping into each of the four principles of sustainability. Today, we see sustainability as a holistic approach to lasting prosperity but let's look at what that means in a business context.

Social sustainability

Social sustainability relates directly to people and what some may call human capital. This is where institutions and businesses don’t stand in the way of a person's universal human rights. That’s why this particular principle is often most closely associated with health, safety, inclusiveness, wellness, and community empowerment.

Environmental sustainability

We typically consider a product, intervention, or program environmentally sustainable when its environmental resources or ‘natural capital’ are preserved, maintained, and not overexploited. This could include investing in sustainable homes or ensuring the energy we use in our offices is clean. What this means is that any new products or services should carefully consider how they interact with the environment, to avoid degrading or further depleting its resources.

Economic sustainability

Economic sustainability is something that humanity has its head well wrapped around for some time, as it's so closely linked to economic growth. With economic sustainability it's all about aiming for profitability and completing short and long term actions - without running out of money. 

This is a concept that not only applies to businesses, but families and individuals too. We all want to improve our standard of living, we just don’t want to run ourselves into the ground trying to do it.

Cultural sustainability

Cultural sustainability is a more recent addition to the principles, and that’s widely because of how much more receptive people are now to talking about inclusivity, diversity, and equality. Cultural sustainability can only happen when our beliefs, processes, and practices are nurtured and respected.

Applying the principles of sustainability to business practice

Ultimately, what these all mean is that as leaders and workers in the financial industry, we have an obligation to ensure sustainable practice for our clients. Whether that’s keeping up with what’s going on globally, or recognising patterns in local trade and applying that to the advice we give. 

It’s also about understanding the impact that our actions have on the world around us, both in an environmental sense and a social one.

Jessica Sansom, Sustainability Director of Huel, says that “if we can understand where the impacts of the business are, quantify them, and then put in place a plan to considerably reduce them, then you’ll be on the right track.

With the shift in the UKs thinking towards the green agenda and net zero, it only makes sense that we need to adapt the way we handle mortgages, the advice we’re delivering, and the services we provide to our clients.  

Sansom further notes we should “think about where we can make positive contributions - either to communities or to the environment.”

Offering sustainable advice

We’re not just talking about offering green mortgages here, though that’s ultimately where we’d like the housing industry to head. When we talk about offering sustainable advice, it’s about understanding a client’s individual needs, what they are or cannot take on, and what steps and services you can offer as a broker to them.

While Sansom says that “connecting action with results in this area is hard, we all need to improve the sustainability of our homes.” This comes down not only to seeing a drop in energy costs but rather contributing to a greater whole.

Sustainability is all about protecting and maintaining our resources, all while having as little negative impact as possible. Are there areas in your business where you feel you could be more sustainable?

¹The United Nations Brundtland Commission, 1987

The UK’s path to net zero: what are the obstacles?

The UK announced its 2050 net zero goal in 2021, and while this news was met with applause, there was also a healthy level of concern, especially in the housing industry. 

The UK is the first major economy to commit to net zero by 2050 as a matter of law and are leading international efforts to set the bar. They say they have hit every carbon budget to date. The Climate Change Committee (CCC)¹ notes that this may not be true and that while getting to net zero is “technically feasible,” it is “highly challenging.” 

Jessica Sansom, Sustainability Director at Huel, says the government needs to “pick up the pace.”

What are the government’s net zero promises and legislations? 

While there is, of course, consideration for net zero goals outside of the housing industry, the UK have made a few key changes² related to housing and mortgages, including:

• Grants to help some households upgrade their gas boilers

• Overall changes to EPC regulation and deadlines for all homeowners and landlords

• Allowing access to loans via the Green Deal, which aims to help with home improvements

• Implementing green home schemes and grants to help with installing, buying, or building green homes

• A promise to raise standards for heating and power costs and set a precedent across the board for lower CO2 emissions³

One of the most notable legislations the government has put in place is the EPC band regulation, which will affect landlords sooner than everyone else. This legislation says that all new tenancies must have an EPC rating higher than C by 2028 and all existing tenancies by 2035. 

Lenders have also begun implementing green mortgages, which encourage homeowners and buyers to improve their home’s energy efficiency in order to unlock lower rates.

The government has also: 

• Stated that from June 2022, all new homes must produce 30% less CO2 than current standards

• Put into place the Climate Change Levy, which is paid by polluters in the business sector

• Promised to reduce emissions by 78% by 2035⁴

With all this mind, we can’t say that the government has made no moves to reach the 2050 goal, but is it enough? 

Jessica Sansom, the Sustainability Director at Huel and one of our keynote speakers has said that she “believes the UK has to be applauded for introducing a wide range of new zero targets and a lot of policies and programs to try and deliver them.” 

She notes that their level of commitment was world leading but recent progress reviews have pointed out “a number of policy gaps and a lack of delivery on many commitments.” 

Are their net zero goals achievable? 

Leading the charge on the drive towards carbon reduction is the Government Property Agency (GPA). They currently manage around 700,000 square metres of office space across the UK, and in just a year of its net zero programme release, the GPA has made carbon savings to the equivalent of around 47,000 trees, or about 2,000 flights from London to New York⁵. 

Some other initiatives they’ve started that have seen some success include: 

• The Croydon new build hub, which generates solar gain through its facades

• Titchfield lighting replacements that forecasts a 75% energy reduction

• Lagging installed in over 2,000 metres of pipework in Whitehall, with an expected 17% carbon reduction

This comes along with other initiatives already underway, though it’s unclear where they are in these processes. They include lighting project upgrades, heat pump installations, and smart metering installations. 

The government claims that many of the unique challenges in the journey to net zero come from the property industry and while this is certainly true, there are other obstacles we need to address.

What’s standing in the way of the housing industry meeting net zero targets? 

There are, unfortunately, a great deal of things standing in the way of the net zero strategy. The Cambridge Centre for Housing & Planning Research, along with Places for People, states that cost is a major barrier for many, either in building energy efficient homes, or retrofitting existing properties⁶.

In fact, Sansom states that low income households may struggle to meet the government’s green home targets without consistent support in the form of “grants, delayed payment schemes, and lower interest rates.”

There’s also concerns in the construction industry about potential supply chain demands, as well as access to alternative, carbon-friendly materials. This comes from a construction sustainability report conducted by Patrick Parsons⁷. They also state that 68% of their participants said existing planning regulations needed to change to support the necessary changes in the sector. 

However, 68% also say they expect the value of developments with sustainable design to increase in value by 10-20% over the next three years alone and a further 83% state that projects with green credentials and infrastructure have given them a notable competitive advantage, meaning that there is consumer demand for sustainability.

What this means for you as a broker

While there isn’t much we can do outside of our industry, we can push for change in the housing market and talk to our consumers about their options for sustainable and green housing. This largely comes in the form of green mortgages.

Sansom notes that brokers can make it simpler for homeowners to achieve sustainability by ensuring their customers know about green mortgages, as “surveys have shown that very few consumers even know what they are. They then need to ensure that the mortgage conditions are results focused and accompanied by information and services to achieve the targets.”

¹The Climate Change Committee, 2020

²GOV.UK, 2022

³GOV.UK, 2021

⁴GOV.UK, 2021

⁵GOV.UK, 2022

⁶Places for People, 2022

⁷Patrick Parsons, 2022