Can businesses close the loop to respond to the cost of living crisis?
The energy price cap is expected to reach £2,800 this year, the number of people struggling to afford food has gone up by 57% from January to April, all while certain brands have “more money than they know what to do with”. There is an imbalance in economy, and making it circular may help solve the cost of living crisis.
2022 was meant to mark the next normal, and in its own twisted way, it has. In the UK, lockdowns are over for the majority of society and COP26 concluded with a brand new shiny agreement for nations to adhere to. It was hoped that this year would mark the next evolution of a just transition to a low-carbon economy, one that protects both planet and people.
Instead, our politicians are under police investigations, energy costs are plunging many households into fuel poverty and the costs of other essentials, like food, clothes and electronics, continue to rise, lining the pockets of brands at the expense of consumers.
In the current cost of living crisis, businesses need to do more to promote long-lasting products and services that alleviate the economic situation for consumers.
MarketWatch reports that “corporate profit is at a level well beyond what we have ever seen, and it’s expected to keep growing”. This is a direct juxtaposition to headlines that have dominated the year so far.
Ofgem has this week warned that the energy price cap is expected to rise to £2,800 in October, meaning that the number of people in fuel poverty in the UK could potentially double.
Additionally, the Joseph Rowntree Foundation warns that rising energy bills ‘have the potential to devastate the budgets of families on the lowest incomes, while the Resolution Foundation has warned that the number of families experiencing “fuel stress” could treble to six million.
Energy isn’t the only spiralling cost. The number of people that are struggling to afford food is up by more than 50% since the start of the year, now affecting 7.3 million adults. Indeed, food prices are, on average, up by 5.9% in the past year and could reach 10%, according to the Food Foundation.
Then there is the Trussell Trust, one of the UK’s largest food banks. The Trust handed out more than 2.5 million food parcels last year, a figure that will likely be eclipsed again this year.
It is broken, so fix it
In Terry Pratchett’s 1993 book Men At Arms, he wrote: “A man who could afford $50 had a pair of boots that’d still be keeping his feet dry in 10 years’ time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet”.
This fiction has long since become fact, with many brands pumping out cheap products that wear down easily, from electronics to fashion. In the current climate, we’re also relying on finite, volatile gas imports that no longer serve society. “Good boots lasted for years and years,” Pratchett wrote. Products today need to do the same.
The linear economy we find ourselves in is one of ‘take-make-dispose’, yet in the pursuit of profits, some businesses have been placing more emphasis on the take and make, which in turn leads to cheaper goods and a higher rate of disposal. This vicious circle can trap consumers in a constant state of needing to replace what they’ve just purchased.
Some MPs and brands are offering “advice” on how households can cut back on cuts by using more with less. But households on the poverty line don’t need advice, they need support mechanisms, and access to products and services that are affordable and reduce external pressures.
Take food, for example. A picture is quite rightly painted that UK households create around 4.5 million tonnes of avoidable food waste annually, equitable to around £14bn. But retail and manufacturing are huge contributors to the UK’s food waste mountain. In 2020 alone, more than 90,000 tonnes of surplus food from businesses had to be redistributed – equivalent to 220 million meals to help those in need.
This is an example of businesses playing their role in society. They are supporting communities in need. But they are treating the symptoms, not the cause. There are a number of factors as to why these meals had to be saved from becoming waste – namely cost and quality.
As the cost of living continues to squeeze household purse strings, the relationship between brand and society must evolve, otherwise expect your brand to suffer. Brands need to demonstrate that they not only understand the struggles facing consumers, but are helping to alleviate that.
The circular economy is an ideal way to strengthen the relationship with consumers while responding to their needs. If more money needs to be spent on food and energy, help make those costs cheaper. Retailers can and should promote energy-efficient technologies that last longer and can be repaired if damaged.
Numerous retailers have introduced take-back schemes or repair workshops for electronic devices, where users can extend the life of these devices, rather than having to discard them and buy a new one. The same can be said for clothes, with Patagonia being a notable leader in its take-back schemes.
In these times, focusing on the profitability of your products is a short-term gain. But long-term resiliency will be driven by brands that can offer products as services to strengthen ties with consumers. This may be through leasing models that provide cheaper, up-front costs on items or even by offering the brand as a service to local communities, through donations and grassroots initiatives, such as Hubbub’s community fridges.
Connecting with the climate
Even during the cost of living crisis, research suggests that consumers have not forgotten about the climate. A poll of UK citizens at the start of the year found that 54% still want the UK Government to deliver strong policies to combat the climate crisis. In comparison, less than 30% said it was unaffordable to implement such measures.
With this in mind, it is important that brands connect the dots between their purpose, products and services and the response to the climate crisis.
The Green Alliance believes that the action required to meet net-zero will “also help to reduce the cost of living, whether through greater efficiencies, cutting demand for fossil fuels or cheaper energy alternatives”.
One of the main calls to government from the Alliance is that the creation of £400m Circular Economy Innovation Fund would “help businesses develop more products that last and save energy”.
Some brands may wish to explore EcoDesign principles to lower costs and carbon emissions for consumers. This helps keeps smart items and electronics in service longer and makes them cheaper to repair. The Green Alliance states that Ecodesign standards save the average UK household at least £100 on their annual energy bill.
Other brands may also want to look at how selling second-life items can lower costs for consumers while keeping more valuable materials in the loop and lowering emissions. For electric vehicles, which often have a higher upfront cost, research has found that on a total cost of ownership basis, second-hand EVs could save between £700 to £2,300 compared to a diesel or petrol equivalent. This is even higher for third-hand vehicles at around £3,500 to £5,600.
The current linear economy is not only detrimental to the planet, but also to society, where the rich get richer and more are pushed to and beyond the poverty threshold. The rise in costs are interlinked with the collapse of the climate and nature, and failing to respond to one only exacerbates the impacts of the other.
If 2021 was a defining year for the net-zero movement, then 2022 needs to create similar shockwaves and momentum around the just transition, with brands and the circular economy at the heart of it.