The Power of Customer-Driven ESG Standards
How are consumers forcing companies to align with their own ideals?
It’s little surprise that Environmental, Social, and Governance (ESG) has risen to the top of business leaders’ minds for 2022 and beyond. Following nearly two years defined by crises in public health, social inequity, environmental issues, and the global economy, a massive influx of consumers have started aligning themselves with companies whose ESG ideals match their own – consumers who are willing to pay more for healthier, safer, more environmentally and socially conscious products and brands. In fact, a recent PwC report showed that 76% of consumers said they will discontinue relations with companies that treat employees, communities, and the environment poorly. So, how can other businesses alter their ESG standards to better align with ESG-minded consumers and increase revenue?
Why A Companies Environmental Initiatives Matter
While global warming has been a highly debated topic for decades, the recent uptick in natural disasters and weather anomalies have thrust global warming to the forefront of consumers’ minds. Moreover, consumers are paying closer attention to the environmental impacts of the companies they buy from, as backed by a Barron’s report that nearly 70% of consumers in the U.S. and Canada think it is important that a brand is sustainable or eco-friendly.
Companies who accentuate and action their ESG sustainability standards are quickly rising to the top. According to the Forbes list of the most sustainable companies in the world, Denmark-based energy provider Ørsted took the #1 spot thanks to “divesting in fossil fuels and investing in offshore wind power, thus reducing the organization’s carbon emissions by 83%.” Consumers took notice and, as a result, Ørsted expects to bring green power to 50 million people by 2030, nearly 4x the number of customers they served in 2020.
Social- Investing in Your Communities
Of the many top-of-mind global crises effecting consumer behavior, social justice has certainly taken its share of the spotlight. Ranging from Black Lives Matter to economic inequalities, a reported 76% of consumers are looking to brands who stand up for and invest in communities and causes that matter to them (PwC, 2021). A recent Reuters business roundtable revealed that businesses are paying attention, as most CEOs on the panel expressed a shared interest in “investing in their communities because they know it is the only way to be successful over the long term.” In turn, companies are increasingly integrating Corporate Social Responsibility (CSR) programs to align themselves with pressing social movements.
Standing up for Governance
Working hand-in-hand with the social aspect of consumer awareness is corporate governance. As the internal system of practices, controls, and procedures a company adopts in order to govern itself, consumers are paying close attention to Governance inasmuch as how companies treat their employees. Perhaps fueling and fueled by the Great Resignation, PwC reported 80% of consumers and employees are more likely to buy from and work a company that stands up for governance. As a result, a Refinitiv report showed that global corporate governance scores have nearly doubled since 2018, a number that accelerated rapidly since 2020 thanks in large part to CSR programs. Consumers and employees spoke, companies listened.
The Future of Customer-Driven ESG
While CSR programs have certainly helped companies adapt to consumer ideals temporarily, they aren’t sustainable. That’s why, as CEOs and boards of directors face increasing pressure to address ESG issues as a whole, a new title in the C-suite has emerged: Chief ESG Officer. And, according to Harvard Business Review, companies such as Royal Caribbean and Verizon have taken a more holistic approach to ESG by appointing CESGOs. While this hasn’t become commonplace amongst most companies, it certainly points to a future trend – one that has become driven by the most important facet of any company’s success: the customer.
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