Weekend Readings | How important are ESG statements to consumers? | South Seattle Emerald

by Kevin Schofield

A report from consultancy McKinsey was read this weekend examining the claims of US companies about their environmental, social and governance (ESG) initiatives and whether consumers care enough to make different purchasing decisions. We know from previous studies that consumers To say they worry about companies’ ESG commitments, but there has been very little data on whether they actually buy different products because of them. In 2020, 60% of consumers said they would pay more for a product with sustainable packaging. Similarly, in a recent study, 78% of consumers said a sustainable lifestyle is important to them. But do they back up their principles with their wallets?

McKinsey looked at five years of product sales data in the United States, from 2017 to 2022, covering 60,000 products and 44,000 brands across 32 product categories spanning food, beverage, personal care and housewares representing a total of 400 million dollars in annual retail sales. Additionally, they identified 93 different ESG claims companies made about their products, into six broad classifications: animal welfare, environmental sustainability, organic farming, plant-based ingredients, social responsibility, and sustainable packaging. They then compared sales growth for products with ESG claims to growth for products that did not make those claims. They checked for other factors, such as different price levels, new versus. established products and brand size.

They found that ESG was good for business: Products with ESG claims cumulatively grew 28% over the five years, compared with 20% growth for products without ESG claims. Over the period studied, 56% of all growth was for products with ESG claims.

However, the growth was not even extended to all product categories: 11 out of 15 food categories saw more growth for ESG products, as did 3 out of 4 personal care categories, but only 2 out of 4 beverage categories 9 recorded the highest growth for ESG Products. The category with the most benefit for ESG products has been paper and plastics; the categories with the lowest growth were infant formula and pet food, suggesting that for some purchases, consumers have priority priorities (such as recommendations from doctors and veterinarians).

Also, not all consumer demographics have behaved equally. The greatest growth in ESG products has been driven by higher income households, urban and suburban residents, and families with children.

Interestingly, companies that made less common ESG claims, such as vegan or zero carbon, experienced higher growth than companies that made more common claims, such as sustainable packaging. Furthermore, products that made multiple ESG claims experienced greater growth than products that made only one of these claims.

The McKinsey study rightly points out that all of this is based on affirmations of ESG-related commitments, without concrete evidence that the companies have actually complied with these claims in their products. There have been a lot of reports in the news lately (and some lawsuits) about greenwashing by companies where they make claims about their ESG efforts without actually delivering meaningful results. It seems, however, that, at least for the moment, consumers are taking their word for it: the verbal ESG commitments companies are making are having an effect on the success of their products in the marketplace. That said, there is certainly an opportunity for consumer advocates to do more to hold companies accountable for delivering on their promises and verify the ESG-related claims they are attaching to their products.

Consumers care about sustainability and back it up with their wallets

Kevin Schofield is a freelance writer and publishes Seattle paper trail. Previously worked for Microsoft, published Seattle City Council informationco-hosted the Seattle News, Views and Brews podcasts, and raised two daughters as a single dad. He serves on the board of directors of the Woodland Park Zoo, where he also volunteers.

Featured image by petrmalinak/Shutterstock.com.

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