Raise in the popularity of ESG
Environmental, Social, and Governance (ESG) has rapidly gained popularity over the last few years. According to a survey conducted by BlackRock in 2020, 88% of institutional investors and 72% of retail investors globally have taken sustainable investing into account in their investment process. However, the surge in ESG investing is not just driven by investors. The power of the people – consumers – is playing a crucial role in driving companies towards ESG initiatives.
Consumers today are more aware and concerned about the environmental and social impacts of the products they use and the companies they buy from. They are increasingly demanding that companies be transparent and accountable for their actions and actively work towards sustainability and social responsibility. A survey by Accenture found that 60% of consumers globally are willing to pay more for sustainable and eco-friendly products. Additionally, research conducted by PwC says that 76% of consumers surveyed will stop buying from companies that treat the environment, employees, or the community in which they operate poorly. So, how is consumer behavior driving ESG? We’ve decided to provide you with a few examples of this phenomenon!
How are consumers driving the change?
Companies have responded to this shift in consumer behavior by integrating ESG considerations into their operations. Many companies have made commitments to reduce their carbon footprint, increase diversity and inclusion, and improve their corporate governance practices. These commitments are often driven by consumer demand, as companies realize that meeting ESG expectations is not only the right thing to do but also a competitive advantage. Companies that fail to adapt to these changing consumer preferences risk losing market share, as consumers are increasingly voting with their wallets.
As said by Cristianne Close, the Global Markets Practice Leader for WWF International in an article with World Economic Forum: “Brands that deliver on the pursuit of purpose, that drive a culture of sustainable innovation, are the front runners in consumers’ eyes – and they are watching.”
The food industry is a prime example of this trend. With consumers becoming more health-conscious and environmentally aware, food companies have been forced to change their practices to meet these new demands. Many companies are now using sustainable sourcing practices, reducing packaging waste, and investing in plant-based alternatives to meat and dairy products. This shift towards more sustainable practices is driven by consumer demand and is also seen as a necessary step to ensure long-term business success.
Another example is the fashion industry, which has traditionally been criticized for its negative environmental and social impact. However, with consumers becoming more aware of the industry’s impact on the environment and labor practices, many fashion companies are now taking steps towards more sustainable and ethical practices. These include using recycled materials, reducing water usage, and improving working conditions in factories.
Another way that consumers are driving ESG is through the power of social media. Social media has given consumers a platform to share their opinions and hold companies accountable for their actions. When a company engages in behavior that is perceived as unethical or harmful to the environment, consumers can quickly mobilize and use social media to voice their concerns. This can lead to negative publicity, boycotts, and other forms of consumer activism that can have a significant impact on a company’s reputation and bottom line.
Companies are taking note of these consumer demands and are increasingly integrating ESG initiatives into their business strategies. For example, Coca-Cola has pledged to make its packaging 100% recyclable by 2025, and Unilever has set a target of achieving net-zero emissions from all its products by 2039. These companies recognize that the shift towards sustainability and social responsibility is not just good for the planet but is also necessary for their long-term business success.
Additionally, it’s important to note that consumers are not only more prone to choose companies that score higher than others in ESG, but they’re much more susceptible to noticing companies that greenwash or greenhush, driving the importance of transparency on sustainability even more.
In conclusion, the power of the people – consumers – is driving ESG initiatives as they demand that companies become more transparent and accountable for their actions. Companies that fail to adapt to these changing consumer preferences risk losing market share, and therefore, many companies are now taking steps towards more sustainable and ethical practices. With consumers using their voices and actions to hold companies accountable, ESG initiatives are becoming increasingly important for companies’ long-term success.
At Storm4, we strive to partner with startups paving the way for ESG. We support scaling their teams to meet their mission of a decarbonized future. If you are experiencing growing pains, get in touch. Our ESG recruiters connect leaders with professionals across Engineering, Data, Product as well as Sales and Marketing.