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The European Union (EU) wants to create new sustainability ratings for all consumer goods. The aim is to inform consumers about the environmental impact of their choices. Postdoctoral researcher Alejandro Hirmas studies whether consumers indeed react differently when the quality of the product is compared to its environmental impact. For his research he received an A Sustainable Future grant for young UvA Economics and Business researchers.

The already existing EU energy ratings provide information regarding both the environmental impact of the products and their cost efficiency (a private benefit). Whether the new sustainability ratings could create a similar, positive impact on consumer behaviour, is not clear yet. Hirmas: ‘This is because we are not sure whether people use the labels to find the most sustainable product or the one that benefits them the most. That is why we want to know whether consumers react differently to ratings that tell consumers about the quality - such as the star ratings for hotels – than to ratings that tell them about the environmental impact of the good.

The role of environmental impact information

In addition to the above, Hirmas and his research colleagues have a second goal with their study. ‘Nowadays, consumers are exposed to multiple sources that inform them about the environmental impact of consumption, the newest environmental policies, or even about companies engaging in greenwashing. That is why we also want to understand how consumers adapt their usage of the sustainability ratings when they receive this kind of additional information.’

Incentivised economic experiments

For their research, the team uses incentivised economic experiments, that simulate the consumer experience of online shopping. Participants have to purchase different products that yield private benefits, but also have an environmental impact. The information about the quality and sustainability of the products is displayed in different ratings. In the middle of the experiment, the participants receive credible and understandable negative information regarding the quality or sustainability of some of the products.

Hirmas: ‘The participants receive different information. In this way, we can assess if and how reactions based on information about the quality differ from reactions based on information about the environmental impact of these products.

People use the information to their own advantage

The results show that participants use both quality and sustainability ratings. They also show that consumers are willing to pay for both the quality and sustainability of a product. Nonetheless, when new negative information comes to light, participants react differently. Hirmas: ‘Their reaction depends on whether the quality or sustainability of the product has been affected. To be more specific, when they learn that a products’ sustainability is less than what they expected, they buy less sustainable products. When they learn that a product’s quality is less than expected, they buy higher quality products.

Valuable insights

According to Hirmas and his team these results provide valuable insights for policymakers regarding the development of new sustainability ratings. They also show the potential impact of new, complementary information regarding sustainability.