Lu Sha of Tongji University: Expanding green consumption has become the driving force for companies to promote ESG
In August 2024, the Central Committee of the Communist Party of China and the State Council issued the "Opinions on Accelerating the Comprehensive Green Transformation of Economic and Social Development", proposing to actively expand green consumption, improve green consumption incentive mechanisms, optimize government green procurement policies, and guide enterprises to implement green procurement guidelines. Support qualified regions to encourage enterprises to adopt methods such as "trade-in" to guide consumers to purchase green products by issuing consumption vouchers and green points. So, can green consumption become the driving force for companies to practice ESG?
The definition of green consumption is not completely unified. Referring to the "Notice on Guiding Opinions on Promoting Green Consumption" issued by China in 2016, green consumption refers to "consumption behaviors characterized by saving resources and protecting the environment, mainly manifested in advocating diligence and thrift, reducing losses and waste, selecting efficient and environmentally friendly products and services, and reducing resource consumption and pollution emissions during the consumption process." From the perspective of enterprises, green consumption is not only a change in consumers 'product choices, but also a deep reflection on the entire production chain and business model. This consumption model requires producers to pursue economic benefits while reducing potential negative impacts on the environment and society.
With the increasing global attention to environmental, social and governance (ESG) factors, products with ESG-related labels have shown significant sales increases in multiple consumer areas. For example, in the food and personal care category, sales growth rates for products with "plant-based" or "environmentally friendly" labels far exceed those of similar products without these attributes, a trend that is particularly evident in high-income households and families with children. Major e-commerce platforms at home and abroad have made green commitments and advocated consumers to practice green behaviors. Therefore, green consumption is not only reshaping companies 'market performance, but also pushing companies to adjust their long-term strategies to adapt to changes in the market. This article will focus on analyzing the deep connection between green consumption and ESG.
1. The interaction between green consumption and green production
Green consumption and green production are mutually beneficial and have become the driving force for the green transformation of the economy and society. When the concept of green was not introduced, consumption and production were a set of interactive forces. Production refers to the process in which people create material materials that meet society and their own needs, and consumption refers to the process in which people consume material materials to meet needs. In the process of positive material flow, production is the starting point and consumption is the end point. In the reverse material flow process, consumption is the starting point, production is the intermediate link, and re-consumption is the end point. Therefore, production determines the object, content, form, etc. of consumption, and consumption affects the purpose, method, motivation, etc. of production. This cyclical process greatly affects economic and social development. After the concept of green is superimposed on this set of relationships, the process is given new dimensions and the boundaries of the cycle are expanded.
Green consumption promotes investment in environmental protection technologies by guiding companies to optimize production processes. The electric vehicle industry is a typical case of green consumption promoting production innovation. In July 2024, the retail penetration rate of domestic new energy vehicles reached 51.0%. Consumers are not only satisfied with the transportation function of cars, but also put forward higher requirements for the intelligence, humanization, and experience of cars. In order to respond to the diversified demands of consumers, companies invest heavily in the improvement of new energy technologies, which not only reduces carbon emissions in the production process and improves the energy-saving effect of products, but also provides energy consumption support for the realization of other functions. This demand-side reversal mechanism has promoted the rapid development of new energy technologies and also promoted the reform of enterprises in green supply chain management.
Green production in turn promotes the further expansion of green consumption. By adopting sustainable production methods, including shifting to green production models, deepening the green attributes of products, and reducing the cost of green products, enterprises enhance their brand image and transform them into both tangible and intangible green assets. On the one hand, the green attributes of products and the resulting increased costs translate into effective premiums and increased consumption of products. On the other hand, the company's environmentally friendly approach has won the trust of consumers, strengthened positive purchasing attitudes, brought about extensive social communication effects, and precipitated into the company's green intangible assets. In addition, as an important tool connecting production and consumption, the green product certification system provides consumers with information transparency on product environmental performance, helps make reliable consumption decisions, and also encourages companies to self-evaluate and improve environmental impacts at the production end., promoting the application of green equipment and green technologies.
From the perspective of supply and demand, the positive interaction between green consumption and green production has laid the foundation for the sustainable development of the entire market. Consumers are increasingly concerned about the environmental protection performance of products throughout their life cycle, and expect companies to fully implement green concepts in design, manufacturing, transportation, use and disposal. Companies must not only achieve breakthroughs in environmental standards on individual products, but also integrate green concepts into the entire supply chain and production system. This greenization of the entire chain from upstream production to downstream consumption has accelerated the green transformation of the two.
2. What are the motivation for enterprises to promote green production and green management
In promoting a green economy, the ESG (Environmental, Social, Governance) framework provides companies with core guidance for sustainable development. Based on Freeman's stakeholder theory, companies not only create value for shareholders, but also need to be accountable to various stakeholders, including consumers, employees, suppliers, communities, etc. Consumers 'expectations for companies have long exceeded the products and services themselves, prompting companies to invest more in ESG practice.
Green production is an important indicator in the ESG framework. It not only focuses on traditional production efficiency, but also incorporates the balance between environmental protection and social responsibility. Especially under the "double carbon" goal, a company's green total factor productivity (GTFP) becomes the basis for measuring its sustainable development capabilities. Green technology innovation is the core driving force for promoting the improvement of green productivity, including renewable energy technologies, carbon capture and storage technologies, and solid waste resource utilization technologies. Its innovation is driven by many factors, including policy support, scientific and technological progress, market demand, etc. Through carbon taxes, emission quotas, green subsidies and other means, the government not only enables companies to improve environmental compliance, but also provides economic incentives for them to invest in green technologies.
Green management is an integral part of ESG actions, and green marketing (also known as low-carbon or ecological marketing) is the catalyst. One end of green products is connected to production and the other end is connected to sales.
First of all, green marketing attempts to establish a closer spiritual bond with consumers through media, public relations, activities, etc. to guide purchasing decisions. Secondly, green marketing should build an upgraded version of marketing channels, that is, focus on carbon reduction, inspire suppliers, manufacturers and middlemen to have green awareness, and reduce environmental impact from aspects such as green warehousing, green transportation, and green management. Finally, green marketing should provide support for the establishment of a product price system. Generally speaking, green products will incur more research and development expenses, raw material expenses or new process expenses in the early stage than ordinary products. In other words, before large-scale cost reduction, how to allocate these costs, reflect them in product prices, and avoid phenomena such as "fake things" and "green bleaching" needs to be reasonably calculated. In addition, in this low-carbon value chain, e-commerce platforms assume the role of chain owners and need to shoulder more social responsibilities and take green consumption guidance actions.
An enterprise's ESG performance is not only related to its internal green management effectiveness, but also affects its external social and environmental management effectiveness. Good ESG management can help companies integrate resources more effectively and reduce environmentally related operational risks. Especially in the face of environmental responsibilities and social expectations, companies can gain more social trust and attract more green investment through transparent governance mechanisms and compliance operations. This not only enhances the company's brand reputation, but also obtains long-term market returns from the interaction between green consumption and production. In addition, enterprises 'commitment to social responsibility is not limited to the environmental level, but also reflected in support for employee welfare and community development, thereby achieving the dual goals of social responsibility and economic benefits.
3. Factors that promote green production and consumption: policy incentives, digital technology, green finance
Policy incentives advocate green behavior, and multi-party actions are incorporated into the ESG evaluation system. A series of policies such as "trade-in" have effectively activated market stocks and driven new volumes.
Consumers can purchase new items and replace old items more conveniently by receiving online qualifications, verifying subsidy discounts, and making an appointment for door-to-door replacement. This measure not only achieves accurate recycling of waste materials, but also turns waste into resources and returns it to the production process. Recycling companies earn profits from the difference by providing services. By recycling used products and reintroducing them into the production process, production companies save investment in primary resources and reduce carbon emissions. Service companies gain higher customer stickiness through value-added services such as maintenance and upgrades, increasing profit points.
Digital technology helps trace the system and lays the foundation for quantifying ESG indicators. The deep integration of the digital economy and the real economy has become a key strategy to promote green transformation. In the early days, the development of the platform economy helped merchants and consumers match demand more quickly and accurately, remove redundant production capacity, and reduce production waste; the development of the sharing economy helped consumers share and share material materials, reducing repetitive goods. Production and expansion of carbon reduction behavior from a single enterprise to the entire industry. In the near future, with the continuous development and iteration of the digital economy, new consumption formats such as green consumption and experiential consumption have continued to emerge. If digital technology gave birth to the first step from offline consumption to online consumption, then the emergence of traceability systems and digital platforms has further promoted the cross-scenario integration of online and offline consumption. For example, offline green behaviors such as the release and recycling of plastic bottles have been transformed into online green carbon points, which in turn gain offline rights such as exchange for green goods, tree planting, and community interaction, achieving the mutual integration of different consumption scenarios. At the same time, green behavior in every link will be recorded and quantified, becoming direct or indirect proof that enterprises promote ESG.
Innovate green financial instruments to broaden financing channels and increase the scale of ESG investment. First, the increase in green investment may promote green consumption. When green investment in enterprises increases, more environmentally friendly and related employment opportunities are usually created, and the resulting increase in labor income can indirectly drive the improvement of consumption power in this field. Secondly, the targeted guidance and expansion of green investment can reduce the supply price of green products, dispel consumers 'price concerns, and further stimulate green consumption. Finally, financial instruments such as green credit, combined with incentives such as tax incentives and special subsidies, can reduce the innovation costs of enterprises and promote the transformation of green innovation results, thereby completing the closed loop of "green capital guidance-green production-green consumption-green reproduction".
The author is an associate researcher at the School of Environmental Science and Engineering, Tongji University
