Sustainability is a word that resonates with an ever growing segment of the population. From a Toyota Prius to a Trader Joe’s, the growing desire of people in America and throughout the Western to place a focus on ‘sustainable living’ is growing. It’s to the point where sustainability is actually trendy; it’s the ‘in’ thing.
(Note: I see the word sustainable replacing the word green because green had too much of an environmental/hippie connotation. Sustainable is a much more palatable word for the general public that cares about the environment in some form, but does not want to be associated with a political movement.)
Investors must realize the sustainability trend is not only real; it’s here for the long-term. These choices being made by consumers are deeply rooted philosophical beliefs that are guiding their purchasing decisions. In some regards it could be compared to a religious movement and for some of the more ardent supporters sustainability/being green is a form of religion. In either case, it is important to understand that a growing segment of the population is having the notion of sustainability influence their purchasing habits.
When evaluating companies that derive their revenue primarily from retail consumers, you must pay attention to how they are marketing themselves. What image are they portraying? Think of how sustainability focused consumer is going to perceive their brand. Conversely, what other competitors are present and how do they position themselves? Are they mixing a message of sustainability into their image or not?
From a strictly financial standpoint, many businesses that pride themselves on providing sustainable products or services are doing so at a higher cost than what they would realize if they did not place such a focus on their business operation. Yet, this is only part of the picture. What investors must realize is that businesses can position themselves through sustainable messaging, products and services that allow them to receive a premium for what they provide to their customers. Customers are willing to pay a premium and/or show an increased amount of loyalty to companies that understand and deliver on the concept of sustainability.
Do not sleep on the growing trend of consumers considering a company’s sustainability quotient when choosing to purchase a product or service stock.