Transparency in the Marketplace: Opportunities for Business

By Douglas Miller*

hen consumers make a purchase, it serves as a vote in favor of a companys products and the way in which they produce them. Because consumers continue to purchase products made in an unsustainable manner, their choices are not sending signals to businesses to change their practices. This loop drives ecosystem degradation and resource depletion. The continued purchase of environmentally degrading products is largely a result, however, of the lack of knowledge consumers have relating to the ecological impacts of the products they buy (Goleman XI). It is difficult for individuals to determine how much energy, water, and raw material was used to make the products on store shelves, as well as how much waste was generated through production. Consumers may not know about ingredients and products that are harmful to their own health, the environment or communities. The complex and ever-changing issues in supply chain, ingredients and resources use are beyond many consumers capacity or interest. Thus, products that are toxic to health, home or environment are continually purchased . Studies show, however, that about twothirds of consumers weigh factors such as sustainability in their purchasing decisions, but will only go so far to find this information (Goleman 120). Hence, greener purchases will be made if the related information is easy to find and understand. While people must remain free to choose what they believe is the best choice given the information they have available, for the purpose of mitigating environmental problems it is legitimate for policymakers and businesses to influence consumers in such a way that promotes healthier and more sustainable decision-making. Individuals often make decisions not in the best interest of their health, wealth, and surrounding natural environment. Such decisions, however, would not have been made if individuals were provided the necessary tools. How can businesses and policymakers help consumers become better decision-makers in the marketplace? Consumers can be presented with a nudge toward optimal choices (Thaler 3). A nudge, a term coined by Richard Thaler and Cass Sunstein, is a method for presenting choices to individuals to modify their decision-making in a predictable manner without restricting their choices or changing their economic incentives. (Thaler 6).

For example, providing environmental impact information about a product in the form of color will give consumers feedback on their choices and encourage them though not force them to make more sustainable choices (Miller). Similarly, putting fruit at eye level is a nudge, but banning junk food is not (Thaler 6). To benefit from this concept, companies must provide transparent product information in a simple, easy-to-understand format. Furthermore, radical transparency must be authoritative, impartial, and comprehensive to gain consumer trust. Certifications, bar codes that lead to websites with product information and eco-labels can help in information organizing and dissemination. One of the best ways for a company to nudge consumers is through Radical Transparency (Goleman). Radical transparency involves tracking the various impacts of an item from creation to disposal and then providing information about these impacts to consumers in an understandable manner (Goleman 79). Transparency transforms the perception shoppers hold about the ecological impact of products they purchase and provides consumers with a tool for making sustainable choices (Goleman XII, 120). Further, by encouraging consumers to make more sustainable choices, businesses adopting sustainable practices will establish a competitive advantage.
*Douglas Miller is a senior at the University of Pennsylvania pursuing a double major in Philosophy, Politics, Economics (PPE) and Environmental Studies. At Penn, he founded Green Acorn Business Certification & Eco-Consulting and serves on the board of several sustainability-related organizations. **IGEL is a Wharton-led, Penn-wide initiative to facilitate research, events and curriculum on business and the environment. IGEL Research Briefs are written by students on relevant issues in business and the environment. Learn more at http:// environment.wharton.upenn.edu

How can businesses and policymakers help consumers become better decisionmakers in the marketplace?
Consumers, upon having understandable information about what it takes to produce the products they buy, would be able to vote for sustainable goods with their purchases. Information about products could encourage collective consumer action by which groups of consumers could establish demand for sustainable products and in so doing could shift markets to adopt the sustainable production processes they advocate (Goleman 139). Studies have shown that goods with eco-labels outsold those without the label by a factor of 2:1 when competitively priced (Goleman 118). Companies can also leverage their sustainable practices in comparison to others in the market in order to gain competitive advantage. An expansion in information availability can encourage more sustainable decision-making by both producers and consumers. By providing both consumers the necessary informational tools and businesses the incentives they need to adopt more sustainable behavior, interests will be aligned for consumers and businesses with sustainability. Moreover, increased information availability will spur positive feedback: as consumers continue to raise their expectations for sustainable products, businesses will have the incentive to continue to progress in developing products in a sustainable manner to meet these demands. Some examples of transparent firms include Patagonia and Whole Foods. Likewise, GoodGuide.com serves as a source of information for consumers on the environmental, health, and social impacts of the products they purchase.
Works Cited Goleman, Daniel. Ecological Intelligence - The Hidden Impacts of What We Buy. New York: Broadway, 2010. Print. Miller, Douglas J. "A Study on Sustainable Behavior Inducement: The Role of Information and Feedback." (2011). Wharton School of Business. Initiative for Global Environmental Leadership (IGEL), 15 Sept. 2011. Web. 4 Oct. 2011. <http://environment.wharton.upenn.edu/pdf/Oxford% 20Study-Sustainable%20Behavior%20Inducement.pdf>. Thaler, Richard H., and Cass R. Sunstein. Nudge - Improving Decisions About Health, Wealth, and Happiness. New York: Penguin Group, 2009. Print.

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