Consumer sovereignty and market realities

Minimally regulated free market capitalism has long been claimed to be both central to one's personal freedom and a necessary catalyst to organic innovation. Largely devoid of government intervention, the dynamics of this economic system are believed to rest on the unseen forces of self-interest within society, famously described by Adam Smith as the 'invisible hand' that symbiotically balances supply and demand.

With purchasing agencies playing a pivotal role in steering this entire mechanism, it seems logical that considerable emphasis is placed on the principle of so-called "consumer sovereignty". As one of the foundational concepts in liberal market economies, consumer sovereignty assumes that individuals are adequately informed about products or services, and therefore bear ultimate responsibility for making sound choices that meet their preferences and needs.

But how realistic is this? Humans inevitably take shortcuts in their thinking and, in combination with information asymmetry and the marketing power of companies, the degree to which consumers truly possess sufficient knowledge is rightfully debated. 

The issue, however, spills far beyond the personal, and plays a significant role in aligning individuals' buying behaviours with broader societal objectives, such as the Climate Transition Act. While an overwhelming majority of Europeans are concerned about the magnitude of environmental issues and express a desire to contribute to the circular economy by purchasing more responsible products, unfair commercial practices systematically challenge their sovereignty, thereby hindering the feasibility of these aims.

Consider, as an example, greenwashing, an infamous promotion of deceptive information regarding a company's products and practices as more "eco-friendly," "ethical", or "sustainable" than they really are. In 2020, 53% of green claims on products and services were deemed to be blatantly unfounded, while 40% were unsubstantiated, according to a study by the European Commission. At the same time, nearly half of European respondents said they prefer to buy products with an environmental label.

In response to these challenges, the European Parliament acknowledged the need to empower consumers for the green transition as a crucial component of the Green Deal in the autumn of 2023. The Internal Market and Consumer Protection (IMCO) subsequently adopted a provisional agreement aimed at enhancing the visibility of product guarantee information, as well as banning generic environmental claims. Yet, however promising, the initiatives may fall short of addressing the magnitude of the problem. More drastic changes to the reporting of climate-relevant product externalities are needed to catalyse informed decision-making, an area where Volt offers its own vision.

Volt's Proposals

First and foremost, Volt Europe advocates for an expansion of the Corporate Sustainability Reporting Directive to include a comprehensive end-customer component. Specifically, it calls for businesses to foster transparency by providing complete information regarding individual products and services at the point of sale. The disclosures should include critical metrics such as greenhouse gas (GHG) footprint, recyclability, environmental impact, and other relevant factors serving as the benchmarks for more sustainable consumption practices.

Additionally, while the Parliament has rightly moved to explicitly prohibit sustainability labels that lack approval from certified schemes or public authorities, the absence of an alternative framework for establishing the credibility and value of such labels remains a glaring oversight. Recognising this gap, Volt proposes the establishment of a unified EU-wide sustainability index, similar to existing ones, to assess the efficiency of domestic appliances and houses. This index would evaluate the environmental footprint of products, assigning them a rating on a user-friendly scale that effectively communicates their sustainability impact. This initiative would streamline citizens' decision-making processes by providing precise and accessible information regarding the ecological implications of their purchases.

Furthermore, Volt advocates for the enforcement of this objective sustainability index as a mandatory criterion in all public procurement processes across Member States. By integrating sustainability considerations into public procurement practices, governments can advance their purchasing power to drive demand for environmentally responsible products and services. Not only will this foster market incentives for businesses to prioritise sustainability, it will also align public expenditure with broader environmental objectives.

Climate agenda in action

In the landscape of modern consumerism, where the choices of individuals reverberate globally, it has become imperative that these decisions are rooted in well-informed understanding. By advocating for transparency in product information, the establishment of a unified sustainability index, and the integration of sustainability criteria in public procurement processes, Volt aims to fundamentally empower consumers and thus reshape market dynamics from the outset. Nonetheless, the path ahead demands collective effort, continuous innovation, and unwavering commitment from policymakers, businesses, and citizens alike. It is only through concerted action that we can truly unlock the transformative potential of consumer empowerment and pave the way towards a greener and fairer Europe.

Article by Polina Sushylova