By Martin Gronemann

In recent decades, social scientists have identified a long list of human biases that distort our ability to make sound decisions. The issue of climate change touches upon quite a few of those. In this article, we present five biases that significantly complicate consumers’ adoption of environmentally friendly solutions. By thoroughly understanding these biases, businesses can turn human shortcomings into a source of competitive advantage while working for a greener tomorrow.

The bandwagon effect: We do what other people do

People tend to stick to a predefined, static version of consumption (the kind of behavior that is broadly considered normal), and this can lead to collective sanctions against individuals who try to go green. We have found that those who are willing to make lasting green commitments and change their lifestyles tend to be ridiculed as radicals or eco-fanatics. Most people desire to fit in: when faced with the risk of being scoffed at for purchasing green power or organically produced vegetables, the majority of people will tend to stay with their old utility provider or buy the same types of vegetables they always have.

The Giddens paradox: We struggle to act on the things we can’t see

British sociologist Anthony Giddens has shed light on the negative consequences of the intangible nature of climate change and CO2 emissions. The Giddens paradox states that “since the dangers posed by global warming aren’t tangible, immediate, or visible in the course of day-to-day life, however awesome they appear, many will sit on their hands and do nothing of a concrete nature about them. Yet waiting until they become visible and acute before stirring to serious action will by definition be too late.”[1]

Evolution has taught us to act on the basis of our senses. For example, when we see a tiger we become afraid, and when we smell smoke we know we need to get out of the building. What Giddens tells us is that since climate change and CO2 emissions can rarely be heard, smelled, or seen, we don’t become alarmed enough to actively try to eliminate the threat.

The endowment effect: We demand much more to give up an object

People tend to value an object more once it is in their possession. Consequently, in order to give up an object already in their possession, consumers demand a higher compensation than they would be willing to pay in the first place.

In one of our projects on consumers’ perception of their energy consumption, the endowment effect significantly influenced purchasing logic.[2] People were inclined to stick to older, more expensive solutions even when better alternatives existed. For example, many consumers wanted to stick to their oil-based heating system once they had put in the time and money to install it—even when it was clearly more economically and environmentally advantageous to invest in a new ground-source heat pump. This “emo-rational” argument stems from a cradle-to-grave logic: when the old furnace breaks down, it can be replaced with a newer, more efficient, and environmentally friendly model, but until then it would be a waste of money to just toss it out. It has to “serve its time,” even in cases where there is a clear economic upside to switching to another product.

Delayed gratification: We prefer immediate payoffs to delayed payoffs

Psychologists have revealed that people tend to favor the offer of $50 today over the offer of $100 a year from now. Similarly, our projects have repeatedly shown that people tend to prefer immediate, smaller payoffs, to delayed, larger payoffs. [3] This bias toward instant gratification makes it difficult to motivate people to make decisions that will be rewarded in the long run—for example, to begin contributing to a retirement fund at the start of their working life. The bias also explains why many homeowners are discouraged from investing in a heat-pump system despite evidence that it would generate substantial long-term savings.

Single-action bias: We ignore obviously negative situations

The complexity and overwhelming consequences of climate change result in an ostrich effect for many people—they don’t want to fully acknowledge the problem. In this state, they tend to do very little. For many consumers, purchasing environmentally friendly light bulbs is not the first step in a journey toward a greener lifestyle but merely a quick fix that brings peace of mind. In our studies, we have observed that people enthusiastically stick by green measures that produce little impact, like avoiding wasting water when washing hands, while paying little or no attention to more impactful measures like changing their heating system or insulating the attic.

Make human biases work to your advantage

For businesses, the question becomes how to guide consumer preferences in the right direction—that is, how to help customers contribute to a greener future while sustainably enhancing growth potential. At ReD Associates, we have designed a number of solutions that can help businesses get around the individual and collective barriers that stand in the way of consumer adoption of green products and practices.

For example, securing an immediate payoff to customers to supplement the delayed, larger payoff can mitigate the bias against delayed gratification. A large utility company recently applied this strategy when we helped them design a new service that will allow consumers to save money on their energy bill from day one by avoiding an up-front payment.

The barriers imposed by the bandwagon effect can likewise be overcome. In fact, used proactively, the need to fit in can serve as a catalyst for change. A good example is organic milk in Denmark, which after many years of slow growth has finally been accepted as mainstream. Organic milk tripled its market penetration within just three years, from just 7 percent to 21 percent of the total milk market. This development was largely thanks to the main player in the Danish milk market, Arla, which successfully marketed organic milk as an everyday product, actively working against the perception that organic milk is “radical.”[4] In this case, targeting the perceptions of the average consumer proved more effective than trying to appeal to and extend the influence of green consumers.

References:

[1] Giddens, Anthony. “The Politics of Climate Change,” Polity Press, 2009.

[2] Ariely, Dan, “Predictably Irrational: The Hidden Forces That Shape Our Decisions,” HarperCollins Publishers, 2009.

[3] This is also referred to as “hyperbolic discounting,” cf. Laibson, David. “Golden Eggs and Hyperbolic Discounting,” The Quarterly Journal of Economics, MIT Press, Vol. 112(2), pages 443–77, 1997.

[4] A continued increase has put organic milk at approximately 30 percent of total consumption in 2008. For a statistical presentation of this development, please see: “Markedsudvikling for Økologiske Mælkeprodukter,” Dansk Kvæg’s Kongres, 26. Februar 2008.

[Banner image by Zachary Staines, via Unsplash]