WHY THE ESG TREE SHOULD INCLUDE EVERYONE AT YOUR BRAND
Before the term ESG came to prominence, this was often known as corporate social responsibility (CSR) – and planning, reporting and executing was often siloed within corporate affairs departments at companies, with a focus on “giving back.”
These corporate-level considerations are still crucial – the SEC adopted a new rule this year that will enhance and standardize climate-related disclosures by public companies, and companies that operate internationally are already subject to carbon-reporting rules in the European Union. So you’re likely to already be doing it, and have been for years.
But with the rise of ESG, the focus and responsibility for these items has been reengineered and broadened to include the entire business. This is crucial because it recognizes that the benefits of ESG go beyond optics – they have deep business benefits.
The key in getting it right, however, is unlocking what ESG means to the stakeholders that matter most – from consumers, to regulators, employees, and even movers and shakers makers like media and industry influencers.
One of the biggest reasons ESG investments create risk for a business or simply fall flat is because they aren’t rooted in what stakeholders really want to see the business do – and those expectations vary significantly sector to sector.
In oil and gas, for example, only 11% of people say investments in DEI are important (a social issue); meanwhile, 45% of people say investing in renewable energy alternatives is important (an environmental issue), according to the Ipsos Global Reputation Monitor survey, fielded in 27 countries in April 2023.
But looking at tech, the public says the most important ESG issue is increasing cybersecurity (41%, a governance issue), while only 21% say reducing carbon emissions are important (an environmental issue).
While some businesses have been accused over the years of “greenwashing” – taking minimal steps that appear to be more sustainable in an effort to gain marketing benefits – today, another phenomenon is taking hold amid the culture wars: Greenhushing.
Some businesses are downplaying their ESG practices to avoid becoming fodder in the culture wars, but still continuing on the same path by recruiting diverse employees, developing more environmentally sustainable products
or continuing to update their business practices to be more transparent – but simply not promoting it or running ad campaigns around it, to avoid courting unwanted controversy.
How ESG leads to growth
Despite controversies around ESG practices, one third of all growth in the consumer packaged goods industry came in products marketed as sustainable in the last 10 years, according to a recent report from the NYU Stern Center for Sustainable Business, despite the fact that sustainable products are less than one fifth of market share.
But brands can’t count on sustainable practices alone to sell their product: While consumers generally recognize that products that are sustainably made tend to cost more, the products still need to match or beat competitors on quality.
The share of CPG market growth that’s come from sustainable products in the last 10 years, despite representing less than one-fifth of the market
Source: NYU Stern Center for Sustainable Business 2023 Sustainable Market Share Index
In fact, it’s not close: 88% of Americans said that, if they were forced to choose, they would prioritize the quality of a product over the brand’s values, according to an Ipsos Consumer Tracker poll fielded in spring 2024. So sustainability needs to be a co-benefit – not the only selling point. Insights professionals must get involved – considering ESG principles in new and existing products and services to ensure you’re meeting demand
in the space for environmentally friendly products, giving consumers an option to recycle products/product waste and packaging more efficiently, and building diversity and accessibility considerations into your design pipeline so that you have better sustainable products that can serve more customers.
