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Consumers Hold The Power: How ESG Issues Impact Corporate Decisions

October 24, 2022

Reference article: 2021 ESG Consumer Intelligence Series: PwC

With the click of a button, we hold the ability to use the digital space as a soundboard for what concerns us most, give praise to those that we admire and even discredit the actions of individuals or organizations that do not align with our own values. 

Corporations do not operate in a vacuum, and their business decisions hold the ability to reshape our social climate and build better habits. 

Today, companies face the unrelenting velocity and impulsive spirit of these digital channels, and must consider how the narratives created by customers are a crucial part of their brand story. Without a strategic approach towards ESG (Environmental, Social and Governance) efforts, companies could find it difficult to maintain brand awareness and meet consumer expectations. 

According to NerdWallet, ESG consists of “non-financial factors investors use to measure an investment or company’s sustainability. Environmental factors look at the conversation of the natural world, social factors examine how a company treats people both inside and outside the company, and governance factors consider how a company is run.”

These factors are significant markers for consumers to determine whether a company aligns with their personal ideals. 92 percent of business respondents, based on a survey from PwC, agreed that “companies with commitments to ESG policies will outlast competitors without.”

In addition, “83 percent of consumers think companies should be actively shaping ESG best practices.” Whether it is a shift to sustainably packaged goods or a pledge to implement diversity and inclusion initiatives, companies must be able to commit a genuine interest in ESG that is more than just a blanket statement and is authentically aligned with brand values.

What are ESG issues? 

ESG standards can be derived from a number of socio-political factors. The concept includes topics such as carbon emission reduction, climate change, data privacy, diversity and inclusion, political contributions and updated hiring practices. 

At its core, ESG establishes a nuanced list of areas that companies can begin to target. In relation to an organization’s mission, ESG solutions can build value alignment with their target groups and form ethical commitments that better the world. 

As COVID-19 promptly shifted user habits and recent social movements directed our attention to systematic inequalities, a rise in the “conscientious consumer” came about. This consumer is “willing to pay more for healthier, safer, and more environmentally and socially conscious products and brands.” 

In addition, such products and services should not come at the expense of consumers. Accessibility to quality items can not remain a luxury, but must become undisputed right for all. 

Now, high-level executives have begun to spotlight ESG, in hopes of appealing to consumers. 

What’s most important to consumers? 

As mentioned in the survey, “76 percent of consumers told us they will discontinue relations with companies that treat employees, communities and the environment poorly.” 

Overall, consumers believe that companies are not doing enough. Despite high investments in data security and climate change, consumers are not as likely to suggest that businesses are invested in ESG. It is clear that consumers (74%) find companies to be more conscious of environmental concerns, but even a similar number (73%) found them stagnant on diversity and inclusion.  There is a clear gap between the investments that companies make in ESG initiatives, and how their customers perceive progress towards those initiatives.

Across several major issues, company executives overcompensate their businesses’ approach to ESG. From healthcare to compliance with regulatory law, consumers hold that “corporate actions matter more to them than words.” 

What can companies do? 

There are varied ways that a company could integrate ESG into its corporate strategy. The survey states, “Consumers believe it’s financial incentives tied to social good – more than anything else.” 

PwC’s survey data suggest that certain barriers interact with a company’s progress of ESG actions. 40 percent of executives claim that it can be complicated to balance ESG and growth targets, while 37 percent cite that “a lack of reporting standards and regulatory complexity as a bigger obstacle to advancing ESG issues than a lack of attention by senior management, time or resources.” 

Here, at Carimus, we have developed a set of recommendations that companies can deploy to productively enact ESG solutions: 

To actionize sustainable values, you can: 

  • Build programs around your brand values: ESG efforts should directly align with brand values, and be an authentic investment that consumers can resonate with. 
  • Activate your employers, partners and stakeholders: There is a gap between company actions in regards to ESG and how consumers perceive their efforts. Corporations should implement a comprehensive communications strategy — which includes an ESG report and promotional campaign — to bring consumer perceptions in alignment with investments. 
  • Build compelling, authentic narratives to share your mission: Effective programs and messaging around your ESG initiatives allows you to manage the narrative about ESG solutions at your company vs. relying on metrics that are subject to scrutiny and misinterpretation. 

For more on how companies can build proactive ESG solutions, and reshape the future, go to https://carimus.com/esg

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