Heterogeneous demand for ecologically sustainable products on ensuring environmental sustainability in South Africa

Abstract

There is an urgent need for the development of environmentally sustainable products market in developing economies, particularly in South Africa due to increasing ecological externalities and risk. We use a stated preference method to examine the heterogeneous demand for ecologically sustainable products. A hybrid latent class model was employed to account for the inclusion of attitudinal information, potential endogeneity and measurement errors. The empirical estimates demonstrate that majority of the respondents attach significant monetary values to meat products with minimal environmental impacts in terms of water and carbon footprint values. We found three heterogeneous consumer segments, with distinct utilities and monetary values attached to water and carbon footprint attributes. Furthermore, the findings show that consumers’ choice and valuation of the sustainability attributes significantly relate to their fundamental attitudes towards the environment and sustainable practices, as well as their knowledge towards environmental sustainability. The use of economic incentives as a mechanism to ensure environmental sustainability is feasible in South Africa. The empirical framework used offered a theoretical advantage in terms of endogeneity bias and measurement error, relative to the traditional latent class model.