The market for personal care items that claim to be environmentally or socially responsible has exploded in the past decade. However, eco-friendliness and ethical considerations aren’t the primary concerns of most shoppers, despite what they tell pollsters about a desire to live a more sustainable lifestyle.
That’s one of the key findings from a study of sustainable health and beauty care products conducted by Yewon Kim, an assistant professor of marketing at Stanford Graduate School of Business, and Kristina Brecko, PhD ’17, an assistant professor of marketing at the University of Rochester.
For years, brands have made eco-friendly claims, often without substantiating them; only recently has increased government oversight begun to ripple through the sector. “We wanted to study how companies behave in the absence of regulation – whether firms have an economic incentive to invest in marketing sustainable products,” Kim says.
The researchers analyzed six terabytes of sales data for 30,000 products – from cosmetics and deodorants to shampoo and toothpaste – sold at U.S. retailers between 2012 and 2019. By reviewing information included in the products’ packaging, they found that one-third of the products made at least one environmental or social claim. Nearly 29% were labeled “cruelty-free,” meaning they were not tested on animals. About 14% mentioned eco-friendly packaging, such as recyclable or low-waste materials. Less than 3% mentioned environmental sustainability, such as reduced greenhouse emissions, or social responsibility, such as fair-trade certification.
Although 78% of respondents in a 2022 survey stated that a sustainable lifestyle was important to them, the researchers found that consumers’ in-store behavior tells a different story. “It turns out that package size, ingredients, and brand name are much bigger drivers of purchases than sustainability,” Brecko says. She and Kim also found that sustainable products are often less expensive than comparable products, suggesting that sustainability claims are not their primary selling point.
Small brands step up
Their findings also revealed that large brands offered fewer sustainable options than smaller “fringe” brands. A similar pattern holds even among brands owned by a single company. “We observe that large manufacturers provide sustainable options through their smaller brands rather than adding them to their established brands,” Kim says.
Kim and Brecko suggest two reasons for this. First, adjusting an existing product line to conform to sustainability claims can be expensive, especially when big manufacturers know their regular customers aren’t as concerned about sustainability as other features.
Second, consumers tend to be more suspicious about larger companies engaging in greenwashing – making false or misleading claims about their products’ sustainability.
As a result, big companies tend to introduce sustainable products by launching or acquiring smaller brands, which are seen as more authentic. Unilever, for example, now owns Schmidt’s Deodorant Company, a small Portland-based company known for using natural ingredients and its cruelty-free promise. Likewise, Colgate-Palmolive owns Tom’s of Maine and Clorox owns Burt’s Bees.
Based on consumer purchases alone, large brands with high brand equity have little incentive to widely incorporate these sustainability features.”Yewon KimAssistant Professor of Marketing
Still, there are signs that sustainable brands – including the eco-friendly spinoffs owned by large companies – are going toe-to-toe with large manufacturers. In 2012, sustainable products sold by small brands captured less than 5% of market share in the personal care industry. But by 2019, this number had shot up to 20%.
“There’s a higher preference for those brands that have fully sustainable product lines, and fringe brands offer these at a higher rate, which suggests that it’s easier for them to do so because they have short product lines,” Brecko says. She and Kim found that consumers preferred buying sustainable products from fringe brands over established brands – and were even willing to pay more for the same item if it came from a mission-driven company.
Law and labeling
The study suggests that consumer demand alone is not enough to motivate large brands to invest in sustainable practices. “Based on consumer purchases alone, large brands with high brand equity have little incentive to widely incorporate these sustainability features,” Kim says.
However, increased oversight could change this. Brecko points out that the European Union has more rigid rules governing personal care products than the United States. Companies making sustainability claims in the EU must provide proof of reduced environmental impact. “A recent regulation makes it such that companies cannot use words that sound ‘green’ on their product packaging without providing evidence that the product indeed meets sustainability standards,” Brecko says.
In the U.S., there have been increasing calls for stronger regulation of the personal care product sector after toxic chemicals were found in items ranging from nail polish to lotion to soap. It wasn’t until 2022 that Congress gave the Food and Drug Administration increased oversight authority by passing the Modernization of Cosmetics Regulation Act, the most significant expansion of the agency’s power to regulate personal care products since 1938. At the same time, the Federal Trade Commission has stepped up prosecution of companies making deceptive environmental claims.
States have enacted their own sustainability mandates. In 2020, California became the first state to ban the sales of cosmetics tested on animals. By March 2024, 11 other states had passed similar bans.
Kim and Brecko are working on a follow-up study that tracks these recent laws’ impact on the personal care industry. “Although a mandate is local, national brands may have to adjust their entire product lines to comply, especially when the regulation originates in a large state like California,” Kim says.
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This story was originally published by Stanford Graduate School of Business.