Why Businesses Should Care What Consumers Think About Their ESG Efforts

At the front door of global business, governments and news headlines are demanding companies step up as part of the solution to environmental, social and governance (ESG) challenges. At the back door stands the consumer — a stakeholder ready to vote for “doing the right thing” by use of the wallet in hand.

Research technology company Glow found that 88 percent of Australian consumers say it is important for companies to be environmentally and socially responsible. Nearly two-thirds (64 percent) also said a company’s performance on those issues is a factor in their purchase decisions.

Glow’s results were similar for the United States and United Kingdom, and NielsenIQ’s 2021 report for Canada showed 82 percent of households deem sustainability an important issue. The value of ESG-positive company behaviors to consumers is global, per PwC’s June 2022 Global Insights Pulse Survey.

Statistics will shift from study to study, depending on what attributes, industries and population segments are measured with differing questions, but the trend is clear.

“It’s a rising tide,” said Tim Clover, founder and CEO of Glow, who has spent nine years digging into the “why” behind consumer behavior with a particular focus on ESG over the last two years, culminating in Glow now tracking and benchmarking consumer perception of the ESG efforts of over 500 brands globally.

Consumer action on ESG concerns is growing

Consumers not only want businesses to be good corporate world citizens. In greater numbers, they now also demonstrate a measured effort to live more sustainably themselves, even despite — or perhaps because of — crises such as recessions and the global pandemic.

They need brands to supply the choices that support these changes in lifestyle — and the percentage of U.S. retail consumers willing to spend more on products from socially and environmentally responsible brands increased across all generations over the last two years, according to a 2022 report from the Wharton School of the University of Pennsylvania. Over the same time period, the premium they are willing to pay too has risen, particularly among Generation Z consumers, who also tend to influence their older family members.

Brand switching is another way that consumers cast ESG votes with their purchases. In May 2022, Glow found that 1 in 4 consumers in the U.S., Australia and the U.K. started, switched or stopped use of a brand with sustainability and social responsibility concerns as a factor.

All of this is not to say that opinions about a company’s performance on sustainability, diversity or fair trade is the sole reason for switching brands. However, data shows these perceptions can be a significant decision point — and in a competitive marketplace among brands, they can tip the scales.

How technology aligns ESG efforts with consumer perceptions

Most studies provide a balcony view of trends and differ based on variables, so corporations must drill down to the data most relevant to their brands. That provides not only insight on how their customers feel about their specific ESG programs, but it also identifies “white space,” or new opportunities where few or no others are making an impact.

Technological advances make this process faster and easier. For example, shortly before the pandemic Glow launched Catalyst, an open-source research program to deepen the understanding about consumers’ priority issues. What started with climate change expanded with client and partner input to measure what are now 22 key issues most people expect businesses to address.

“The research process that gathers this type of consumer opinion used to take 12 to 14 weeks, cost a huge amount of money, and require lots of specializations from people,” said Clover, who added that with Glow’s technology this type of assessment can be completed in one to a few days. “Now, you can jump on our platform and say, ‘I’m looking for 1,000 people in the States that represent the population from an age, gender and location perspective.’”

To further assist brands to respond to their audiences' ESG preferences, Glow then created a metric called the Social Responsibility Score (SRS), which measures a brand’s consumer perception on issues against its industry or a specific competitor. In a single metric, SRS gives a brand a snapshot in time of how it fares with consumers. Underpinning this is a diagnostic framework of 13 different drivers of concern, such as plastics, supplier welfare, and education and employment, that can be used to guide investment and communications.

Greenwashing vs. greenwhispering

Consumers, as well as investors, are getting better at recognizing corporate “greenwashing” — or overstating ESG efforts, including being a hero in one arena but a villain in another. Consumers aren’t the only ones with anxiety about ESG and corporate social responsibility (CSR) performance. As a study from Google Cloud found, even corporate executives and managers worry about their organizations being guilty of greenwashing, which damages brand reputation.

Clover, however, points out a business danger at the opposite end of the spectrum: “greenwhispering.” Out of fear of having ESG messages perceived as inauthentic, companies will often be too quiet or modest to share their successes with ESG programs. But he feels that reaching consumers with an education process, measuring how the program and the messaging are received, can counter that.

“There’s a role of education here that’s critical for businesses. Consumers really want to understand the issues in more detail, to understand some of the science and the lengths to which companies are going to solve these problems,” Clover told us.

“Companies that are brave enough to go and take the time to explain the depth of these issues and educate the market, they’re leading. They’re winning,” he added.

To avoid the greenwashing accusation, Clover recommends businesses talk about what’s been achieved rather than making vague planning statements, such as “we plan to be emissions-free by 2025.” Pledges carry less weight with wary consumers and are not as powerful as milestone accomplishments, he advised.

Using technology to build trust

Using the education process Clover recommends can accomplish two critical goals: sharing successes that build reputation and helping consumers to live a more sustainable lifestyle. A company thus increases brand loyalty, product value and customer retention — all good for better returns on ESG efforts, market messaging and revenue growth.

In short: Earn the consumer’s trust. “[The SRS] metric is highly correlated with trust,” Clover noted. While trust seems like a quaint concept, it’s fundamental to a company’s bottom line. Intuitively, satisfying complaining customers is cost-effective and profitable, but it took the 1979 White House and 1981 Coca-Cola studies, respectively, by Technical Assistance Research Programs (TARP) to prove it with the numbers.

Today’s consumers still want useful, quality, taste-pleasing products at a fair price, and they want to feel their patronage is valued. They also want these things without companies harming the planet, human beings, animals or the trust they place in these brands.

Some will pay more to help make that happen. Many will switch brands if those needs aren’t met. Companies really do have to “do the right thing” and make sure consumers know that they are doing it.

Clover offered an important reassurance to business: “With the advances that have been made with research technologies, guessing your way through these ESG processes is no longer required. There’s no need to put a finger in the air anymore.”

As for those consumers at the back door, business leaders can do themselves and all of us a favor— to borrow from Paul McCartney — open the door and let them in.

This article series is sponsored by Glow and produced by the TriplePundit editorial team.

Image credit: standret/Adobe Stock