Carbon footprints and product pricing

August 2020: Companies aiming to decrease their carbon footprint often face challenges when demand for ‘green’ products increases as rising sales often lead to increased carbon footprints of the company. Dynamic pricing based on carbon footprints combined with strategic marketing campaign may help close the carbon footprint gap.

Information

Projected impacts of climate change can pose significant risks to businesses and increasingly raise concerns with consumers, investors, and government throughout the world. However, many companies face a conundrum when trying to reduce their carbon footprint as increased sales of ‘green’ products can lead to an increase in their carbon footprint based on sales. Evidence now suggests that dynamic product pricing based on carbon footprints combined with strategic marketing campaigns can mitigate the carbon footprints associated with an increasing quantity of ‘green’ products.

Implications and opportunities

Strategic marketing campaigns can support how companies use cost and demand effects to reduce carbon footprints. It requires identifying designs that determine ideal pricing of products to avoid increasing the company’s carbon footprint due to rising sales. Such campaigns could allow climate concerns to be channelled into the organisation and incentivise pricing strategies that balance product design, price, climate impact, profitability of carbon reducing measures such as carbon offsetting and green technology adaptations to position climate friendly products on the market. Strengthening these efforts could have a positive impact on long term compliance costs as governments and markets are moving towards net zero economies.

Limitations

The studies’ results should be seen within its methodological context and require adaptation prior to its application in business.

Sources

Bertini, M., Buehler, S., Halbheer, D., & Lehmann, D. R. (2020). Carbon Footprinting and Pricing Under Climate Concerns. Journal of Marketing, 002224292093293. doi:10.1177/0022242920932930 

Halbheer, D., (2020). The role of marketing in climate change: Carbon footprinting and pricing. Retrieved from https://www.hec.edu/en/knowledge/articles/role-marketing-climate-change-carbon-footprinting-and-pricing