determining consumers’ willingness to pay for eco friendly

JOURNAL OF SOCIAL AND ORGANIZATIONAL RESEARCH Vol.1, Issue 2

105

Determining consumers’ willingness to pay for eco-

friendly products: A study of recyclable shopping

bags and packaging

Malka Liaquat1, Saadia Irshad1, Syed Azhar Hussain

1. Institute of Management Science, The Women University, Multan

2. KIPS College Multan. [email protected]

Abstract UN Millennium Development Goals (MDGs) and Sustainable Development Goals

(SDGs) have identified environmental sustainability and sustainable consumption &

production as a key challenge to be dealt with in order to ensure development of

future generations. This trend demands awareness and shift in value system at

individual level for advocating environmentally safe, biodegradable and recyclable

products. This study is undertaken to determine the relationship of environment

locus of control, environment awareness, environmental values with individuals’

willingness to pay for green products. Survey is undertaken from a sample of 300

grocery shoppers at prominent stores in Multan. Multiple regression technique is

employed by using SPSS to analyze data. Result of the study showed that

independent variables have a significant relationship with dependent variable

(willing to pay more for green products) proving the presence of linear relationship.

Analysis suggested that all variables are significant and there is considerable

evidence that respondents in the sample were conscious regarding environment and

related factors while considering a product purchase. It also indicates that consumers

are conscious of the fact that how their behavior might influence the environment

and take certain actions to make environment better. Using this statistical evidence

on conceptualization, new procedural elements might be identified to expand

literature highlighting willing to purchase green products.

Key words: Environment locus of control, environment values, environment

awareness, willingness to pay, green product

Introduction: In today’s modern world, societies and communities are being more proactive

towards environmental growing problems, thanks to the huge volume of

environmental pollution from industrial manufacturing (Wanekaya, Chen, &

Mulchandani, 2008). In addition to this, UN Millennium Development Goals

(MDGs) and Sustainable Development Goals (SDGs) have also endorsed the

environmental sustainability and sustainable consumption & production as a key

goal to be achieved in this millennium. Thus, the shift towards to sustainable

environment demand major change and shift not only in global perspective but also

in belief and value system of an individual.

mailto:[email protected]

Malka Liaquat, Saadia Irshad and Syed Azhar Hussain

106

This shift requires the need of making awareness and analyzing behavior patterns of

individuals towards environmentally safe, biodegradable and recyclable products

and enlightening how its usage can make him/her an active member and contributor

of eco-system.

Efforts are undertaken in developing countries like Pakistan for environmental

sustainability focusing on protecting the environment and adopting go green

campaigns. Environment Protection Department (EPD) of Government of Punjab,

states that Pakistan produces waste between 0.283 to 0.612 kg/capita/day and is

increasing by 2.4% per year (EDP Report). Rendering to Pakistan Commercial

Guide produced by Export.gov, country like Pakistan lack an appropriate

infrastructure and setup for waste management resulting in production 48.5million

tons of solid waste. Further, it outlines the waste generation on per day basis in which

cities of southern Punjab such as Multan and Gujranwala generate about 3600 and

3400 solid waste per day.

Waste collection percentage has identified that plastic and paper garbage is higher

than other metals and solids as per data of 1995-2005(EPD report). According to

study by Batool, Chaudhry and Majeed (2008), an increase in income level of

middle-income group has led to enhanced usage of plastic which has evolved its

recyclability as important concern. Since, plastic bags take hundreds of years to

degrade, their ecological impact is not only threatening for marine life (Müller,

Townsend, & Matschullat, 2012), but also for public health (Clapp & Swanston,

2009). It is also worth mentioning here that slow degradability of plastic brings its

toxic components to negatively affect the food chain. So, there is no doubt left in

destructive nature of plastic bags. Many countries have devised and enforced laws

to limit the use of these bags to combat pollution. Around the globe, recycling has

emerged as preferable strategy to deal plastic wastage and is being adopted by

developed nations (Cheng et al., 2002; Qureshi, 2000; Ludwig et al., 2005).

Awareness session, campaigns and promotions about recyclability are being

endorsed in western world.

In recent decade, consumers have come to realize how their purchasing habits can

influence and adds to environmental problems(Laroche, Bergeron, & Barbaro-

Forleo, 2001).Consumers during their purchase are becoming more conscious,

whether purchase is not cause of any ecological problem i.e. wrapping material is

recyclable or reusable or buying only biodegrade products like paints, detergents,

CFC hair-sprays or car wash material etc. Studies (Hamzaoui Essoussi & Linton,

2010; Li & Meshkova, 2013; Tsen, Phang, Hasan, & Buncha, 2006)have identified

that eco-friendly behavior of buyers is creating a segment of consumers who are

willing to pay for green on environmental friendly products. For example, 67% of

American population are willing to pay 5-10% more for environmental compatible

stuff in 1989 which by 1999 increased 15%-20% consumers willing to pay more for

green products (Polonsky, Suchard, & Scott, 1999). In UK, (Myburgh-Louw &

O'Shaughnessy, 1993) conducted study among female consumers related to

perception about packaging of clothes detergent to check claims about being eco-

friendly.


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Likewise, in Pakistan organizations such Sapphire, Gul Ahmad and Wiz by Shama

group have taken an initiative to launch recyclable biodegradable products and

shopping bags. However, an important question is whether the consumer is ready to

pay for such eco- friendly products? Since 1990, countries around the world are

making enforcing polices to cut the usage of plastic bag or light weight plastic usage

either by banning it completely or charging fee to customer i.e. in Netherland 0.25

euro is charged to customer for asking plastic bag usage (Xanthos & Walker, 2017).

Whereas, in developing countries like Pakistan there is still needing to make

consumer adapt towards environmentally friendly products and reduce/ban usage of

plastic bags.

Previously conducted research examining consumer behavior covers different

domains and discipline. However, literature state definite evidence regarding the

importance of environmental perspective (Clapp & Swanston, 2009; Ellen, Eroglu,

& Webb, 1997). Previous studies have tried to identify the consumers behavior of

willingness to pay for wildlife(Ojea & Loureiro, 2007), quality of life (Johannesson

& Johansson, 1997). However, the proposed study is intended to address gap of

environmental perspective in Pakistani context especially consumers awareness

level with reference to the usage of daily commodity shopping bag and packaging

to identify the eco-friendly attitude of green product.

In line of recyclable shopping bags, sufficient studies have explored its pros in

developed countries i.e. California USA, where consumers belief that using a

reusable shopping bag is more social and environmental conscious choice

(Karmarkar & Bollinger, 2015). However, in Pakistan the phenomenon is yet to be

explored and highlighted (Mahar et al., 2007; Sadef et al., 2016). The proposed study

is focusing on recyclable shopping bags (made of cloth and paper) and packaging

material of grocery items (made of cardboard, tins or other metals, glass or other

recyclable material). It is pertinent to mention here that this kind of study has not yet

conducted in Pakistan, particularly its analysis on consumers’ willing to pay more

for eco-friendly products. Analogy of ‘Islamic financial products’ can be used for a

clearer interpretation. Markup on Islamic products is always higher because bank

cannot apply market interest rates (KIBOR etc.). However, consumers of these

products are willing to pay more for satisfaction of their religious faith. In the same

fashion, objective of this study is to identify and explore relationship in the determinants of willingness to pay for eco-friendly and recyclable shopping bags

and packaging.

Over the past few years, concerns with pro-environmental behaviors have been

increasing among the environmental conscious market place. In the light of this

increased trend, this study attempts to make it evident that individual’s awareness

and willingness is important to create an eco-friendly balance between society and

nature. The proposed study is centered on the individualistic perspective of pro-

environmental behaviors, which leads towards analyzing a consumer’s willingness

to pay for green products. Thus, environmental awareness, locus of control and

values contribute towards shaping and mentoring consumer’s attitude towards eco-

friendly products and packaging.


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1. Literature Review and Hypothesis Development:

2.1 Willingness To Pay For Green Product: From ecological perspective, ‘willing to pay’ refers to maximum amount of money

a consumer is ready to pay for buying an environmental friendly product.(Laroche

et al., 2001)notes that eco-friendly behaviors stands out as an important factor which

influence consumer’s decision for purchase of green product. According

toKahneman & Knetsch (1992), estimate of WTP is not about the economic value

of goods, rather it is an expression of a “willingness to acquire a sense of moral

satisfaction”.

Quantum of WTP is quite multifacted ranging in general from for eco-friendly

products (Laroche et al., 2001), environmental protection(Cason & Gangadharan,

2002) and narrowing down to organic food (Didier & Lucie, 2008), renewable

energy (Bang, Ellinger, Hadjimarcou, & Traichal, 2000), and recycled products

(Hamzaoui Essoussi & Linton, 2010). Studies have several factors which

contributed towards willingness of consumer in purchase of green products i.e. in

case of purchase of recycled product, environemnetal issues and behaviors played

as vital role in increasing consumer’s willingness to pay(Tsen et al., 2006) and in

another study value and price associated with green product acts as antecdents for

willingess to pay(Biswas, 2016).

2.2 Environmental Locus of Control: Individuals have been categorized as perceiving things with external and internal

perspective (Rotter, 1966). External oriented perceives events happening are beyond

their control whereas internal oriented state events happen as result of their actions.

This aspect of LOC has been used in environmental perspective (Aguilar, Waliczek,

& Zajicek, 2008; Huebner & Lipsey, 1981; Riechard & Peterson, 1998).

Environmental locus of control (ELOC) can be defined as, “the extent to which

people believe that they have the ability to affect [pro-environmental] outcomes through their own actions”(McCarty & Shrum, 2001), they further state that higher

ELOC consumers are accessible targets for marketers for offering eco-friendly

products.

According to (Cleveland, Kalamas, & Laroche, 2005)ELOC plays a dynamic role in

capturing consumer’s perception about control and influence over environment. Just

like LOC, the construct of ELOC also divides into external and internal, where

former environmental issues are beyond their control and latter holds that view their

behavior has an influence on the environment. Studies have identified that individual

with internal ELOC exhibits more positive attitude towards ecological awareness

and high profits are associated with purchasing of eco-friendly packaged products

(Trivedi, Patel, & Savalia, 2015). Therefore, it indicates that individual ELOC do

influence their willingness for buying green products.

2.3 Environmental Awareness: Environemnetal awareness(EA) can be defined as, “‘knowing of the impact of

human behavior on the environment”(Kollmuss & Agyeman, 2002) thus, it can be


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said as an ability to identify, analyze, recall and associate a product or service’s

environemt related issue. According to study (Moon, Florkowski, Brückner, &

Schonhof, 2002) conducted in Germany, when consumers turn conscious and

mindful of the benefits associated with the product, even if the premium is high they

intend to buy it.

In the same line, (Chitra, 2007) noted that higher the level of environmental

awareness, higher would be the number of shoppers who are willing to pay for pricey

eco-friendly products. Wheeler, Sharp and Theil (2013) stated that an important

reason for rejection faced by green brands is due to lack of awareness. They further

specified that if green message is not able to transfer its meaning or influence its

consumers it lacks acceptance. Thus, it clearly indicates that awareness does

influence the willingness of consumer to purchase eco-friendly and recyclable

product.

2.4 Environmental Values: Values plays vital role in action performed by an individual, in Environmental

perspective it is defined as “Values that suggest or advocate action oriented toward the environment” (Gheith, 2013). According to (Stern & Dietz, 1994)EV can be

divided into three types: egoistic values, which influences individuals for protecting

environmental aspects that personally affects oneself, altruistic values takes into

account environmental hazards which can harms others and biospheric concerns cost

and benefits of environmental hazards in relation to large context such as ecosystem.

Studies have been conducted to identify how value mechanism governs

environmental behaviors among individuals, for example,(Steel, 1996) noted that

when individual perceives natural environment possess importance for human

survival its show high environmental activism, thus strong association between

values and environmental activism.(Sony & Ferguson, 2017) identifies that a strong

relationship of environmental values and individuals lifestyle behaviors i.e. buying

and using recyclable products. Thus, inference can be made that consumers with

strong environmental value would be ready to spend for recyclable and eco-friendly

products.

On basis of above stated literature, following relationships are hypothesized:

H1: There is a significant relationship between consumers’ Environment locus of

control and their willingness to pay for eco-friendly/green products

H2:There is a significant relationship between consumers’ Environment awareness

and their willingness to pay for eco-friendly/green product

H3:There is a significant relationship between consumers’ Environment values and

their willingness to pay for eco-friendly/green products


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Based on above stated hypothesis, following conceptual framework is

derived:

Figure 1: Conceptual Framework presenting relationship between

Independent and dependent variables.

3 Research Design and Methodology:

3.1 Target Population and Measures Target population for the study is Grocery shoppers at big shopping malls e.g. Metro,

Hyper Star, CSD, Chase up and other prominent superstores in Lahore and Multan.

Mix of Multi-staged Sampling and Convenient Sampling were conducted for data

collection. In order to collect data from 300 sample consumers, self-administered

questionnaires were employed. Questionnaire items are adapted from various other

studies. Responses are taken on a 5-point Likert Scale that is ranged from Strongly

Disagree to Strongly Agree. Environmental Awareness is measured through 5-item

scale developed by (Ermolaeva, 2010). For Environmental Value 11-item scale

devised by (Alibeli & White, 2011) is employed and for ELOC and WTP a 13-item

scale devised by (Cleveland et al., 2005) and 4 item scale by (Laroche et al., 2001)are

used.

3.2 Screening of Data: Table 3.1 portrays demographics including gender, age, educational qualification

and salary which are examined in this study. This table exhibits that greater part of

respondents in the study have mean of postgraduate qualification and mean of 31-

35 years of age. Moreover, this table shows marital status and compensation of the

respondents showing most astounding degree of married male respondents with men

income of PKR.31000 - PKR.40000.

3.2.1 Normality Testing: An outlier is an observation that lies outside the overall pattern of a distribution

(Moore and McCabe, 1999). Usually, the presence of an outlier indicates some sort

of problem. This can be a case which does not fit the model under study or an error

in measurement. The value is high or less than range it is outlier. Scatter plots is another way to find the outliers (Hall &Wang, 2005). In this study, there were a few

observations, which could be regarded as outliers, but these observations had

Environmental locus

of Control

Environmental

Awareness

Environmental

Values

Willingness to pay

for green product

H

1

H2

H3


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unnoticeable effect on the results. Therefore, these observations have been included

in the analysis without having any consequences on the outcomes.

The graph of histogram shows the normal distribution. A "normal" distribution of

variation results in a specific bell-shaped curve, with the highest point in the middle

and smoothly curving symmetrical slopes on both sides of center

Table 3.1 : Descriptive Statistics

N Minimu

m

Maximu

m

Mean Std.

Deviation

Gen 263 1 2 1.24 .425

M.S 263 1 3 1.54 .584

Age 263 1 4 1.70 .894

ED 263 1 4 1.94 .560

Salary 263 1 6 2.72 1.468

Valid N

(listwise) 263

3.3 Testing Assumption of Regression Analysis

Table 3.2: Normality Results

N Skewness Kurtosis

Statistic Std. Error Statistic Std. Error

WTP_COP 263 .587 .150 -.107 .299

EV_COP 263 .059 .150 -.439 .299

ELOC_COP 263 -.268 .150 -1.026 .299

EA_comp 263 .077 .150 -.712 .299

Valid N

(list wise) 263

Table 3.2 lists the Skewness and Kurtosis values. The basic element of statistical

analysis is to know the location and variability in the data. This can be explained by

skewness and kurtosis. Skewness helps define the symmetry or lack of symmetry

more precisely. The dataset or distribution is symmetrical then the curve is spread

evenly not concentrated on one side. Kurtosis helps define whether the data is heavy

or light tailed. Dataset having high kurtosis would have heavy tails while the data

having low kurtosis would be having low tails.


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Figure 2: Histogram

3.3.1 Multi-collinearity: Correlation value higher than 0.70, is an indication of multicollinearity. Stine

(1985), states that the VIF is used to check whether there is multicollinearity in data

or not. It is easier to calculate collinearity through the VIF or tolerance. Therefore

(Kaline, 1995) points out that VIF value is above 10 or tolerance is lower than 0.10it

refers that data is suffering from issue of multi-collinearity.

Table 3.3

Coefficientsa

Model Collinearity Statistics

Tolerance VIF

1 EV_COP .988 1.013

ELOC_COP .988 1.013

a. Dependent Variable: EA_comp

Table 3.4

Coefficientsa


Tolerance VIF

1 ELOC_COP .975 1.025

EA_comp .975 1.025

a. Dependent Variable: EV_COP

Table 3.5

Coefficientsa


Tolerance VIF

1 EV_COP .457 2,127

EA_comp .457 2.127

a. Dependent Variable: ELOC_COP


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Table 3.6

Correlations

WTP_COP ELOC_COP EA_comp EV

WTP_COP

Pearson Correlation 1 -.172** .139* .124*

Sig. (2-tailed) .005 .024 .044

N 263 263 263 263

ELOC_COP

Pearson Correlation -.172** 1 -.157* -.111

Sig. (2-tailed) .005 .011 .072

N 263 263 263 263

EA_comp

Pearson Correlation .139* -.157* 1 .737**

Sig. (2-tailed) .024 .011 .000

N 263 263 263 263

EV

Pearson Correlation .124* -.111 .737** 1

Sig. (2-tailed) .044 .072 .000

N 263 263 263 263

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).

4 Results and Discussion: Regression analysis reveals that all the hypotheses are significant and independent

variables have a significant relationship with dependent variable proving a linear

relationship exists.

Locus of control (LOC) is an important construct which helps to interpret differences

among individuals. Based on Rotter’s social learning theory (Rotter, 1954), exclaims

that a dispersion patterns is displayed by individuals on basis on external and internal

locus of control based on perception with reference to their performance and

responsibilities (Granding et al., 1978). The results proved the assumption that

individuals if made realize that individual casts effects on environment can make

them change their behavior, support for which comes from study of (Phares, 1976)

stating that personal efforts of an individual and responsibility if taken by themselves

can help to promote green behavior.

Awareness of environmental issues can be deemed as a prime determinant of this

behavioral change, a better public understanding of willingness to pay should increase encouragement to use green product. A linear and strong relationship exists

between Environmental Awareness (EA) and Willingness to pay for green (WTP)

since p-value is 0.024 of relationship.(García Gallego & Georgantzís, 2011) also

makes it evident that if consumers are made aware of influence green products it

would help them to prone more towards green products.

Hypothesis 3 of the study is also acceptable with a p value of 0.04 indicating linear

relationship between EV and WTP for green products. A strong sense can be built

in consumers through EV, as it provides a direction and help to change their attitudes

and beliefs towards green products and influence their purchase behavior. This lies

in accordance with study of (Erdem et al, 2004), which state individual change their


114

behavior. Thus when individual are made aware about the importance of disposable

bags it would influence their behavior towards purchase.

5 Conclusion: The current research aimed to explore the relationship of environmental locus of

control, values, and awareness with willingness to pay for green product among

consumers living in Lahore and Multan. The Regression analysis with other

statistical tools was applied to the data collected. Following are the observations

from the data analysis it is analyzed that a linear relationship exists between

independent and dependent variables. Environment locus of control has a significant

relationship with willingness to pay for green product. Thus, there is linear

relationship between Environmental Locus of Control and Willingness to Pay for

Green Product as in verified in various studies (Mittal and Walfried, 1998 and

Eskildsen et al., 2004). Furthermore, the environmental awareness has a significant

relationship and positive relationship with willingness to pay for green product with

p-values 0.024. It can be concluded from these results that there is linear relationship

between Environmental Awareness and Willingness to Pay for green product. For

successful awareness, marketer should do some work in this regard. Green product

image is not a small issue. Organization should promote message among consumers

tactfully to make them aware of how their purchase can influence the environment

they live in.

These buyers would be ready to spend on green product. Companies should make

appropriate strategies and marketing plans to enhance the green product.

Environmental values have significant relationship with willingness to pay for green

product. The research has suggested that the variables are all significant and there is

considerable evidence that respondents in the sample were conscious regarding

environment and related factors while considering a product purchase. It also

indicates that consumers are conscious of fact that how their behavior might

influence the environment and take certain actions to make environmental better.

The result is aligned with the Cleveland et al, (2012), Boztepe, A., (2012), and

Biswas, A., & Roy, M., (2015), who also reported the same significance.

Environmental values construct was significant and would be able to predict WTP;

this is also the case with the earlier studies. It indicates that the environmental values

are important for the purchase decision. This also implies that the marketers should also consider emphasizing these extra features in their marketing programs.

Similarly, environmental awareness has a significant and positive effect on WTP.

This factor highlights the importance of the marketers’ activities and their

subsequent effects. EA would play a critical role in the purchase decision of the

green products and hence apply the cognitive abilities to the buying habits. ELOC

has a negative but significant relationship with WTP. This is a little unexpected or

confounded result that how can locus of control would affect the purchase decision.

One probable rationale can be that people would try to control all the factors

regarding the green product and may not trust the established brand. They might be

following the green product issues or guidelines regarding environment.


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Academically, this study signifies ELOC, EV, and EA as WTP green product

antecedents. Advisably, search for other predictors and new moderators and

mediators of process are much likely to exist. Using this statistical evidence on this

conceptualization, new procedural elements should be identified to expand literature

highlighting willing to purchase green products.

6 Limitations and Delimitations Even though this study has acknowledged the discipline of marketing, however in

larger context many other variables can be observed has well. So limitations of this

study are that

1- As the data collected through convenient sampling, thus generalization

can be an issue.

2- The study focuses on products like shopping bags for which the

purchase process is not simple as compare to durable goods such as cars

and electronics in which the decision making more intricate and

purchase is not frequent either.

3- Due to lack of resources this study is limited to explore the links among

ELOC, EA, EV and Willingness to pay for green product, whereas other

variables such as attitude can be taken into consideration to understand

the underlying phenomenon.

7 Managerial Implications In terms of managerial implication, the study encompasses various perspectives.

This study can be beneficial for marketers in order to incorporate green phenomena

among the consumers by promoting awareness and value system for “Green

products and packaging”. Interest groups and policy makers would be advised by

this study to channel all of their resources, time and energy towards creating

environment awareness, making it part of their culture and value system and making

consumers conscious of their environment locus of control. If a movement is geared

to make people realize the consequence of their actions (i.e. use of plastic bags and

packaging) at individual and collective level, the behavior to pay more for eco-

friendly/green shopping bags and packaging will increase. The marketers should

also adopt idea about green product to make consumer environmentally conscious

to encourage actions for green behavior. The organization should go green not only

to gain the competitive edge over their non-green rivals but also to contribute to the

well-being of the environment as a whole. Mangers can use this study as a

motivation guide for consumers which helps to promote their stores and CSR

perspective as well through means of pamphlets, in-store displays etc.

8 Recommendations for Future Research This study also provides some suggestions for future research which are as follows:

8.1.1 Generalization issue can be addressed by employing other sampling

techniques for future study.

8.1.2 The current research can provide base to extend the topic by including new variables in the analysis.


116

8.1.3 More cities can be selected other than Lahore and Multan for

including supermarkets to see how consumers act towards green products

could managers to improve their strategies

8.1.4 Variables such as loyalty personality or value can be used as

intervening variable in study to see how purchase behavior can be guided.

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