Sustainability is high on the agenda with world leaders, activists, lobbyists and CEOs gathering in Egypt for COP27 this month. Rishi Sunak initially said he wouldn’t attend, so that he could focus on the UK’s autumn budget, before reversing this decision. This tension between immediate, local economic problems and a long-term, global view on sustainability is one that’s being felt by many.
Rising inflation, supply chain issues and soaring energy costs are bearing down on businesses and taking focus away from sustainability issues. A recent survey of chief executives by KPMG found that half of CEOs are reconsidering or thinking of pausing their ESG (environmental, social and governance) efforts due to economic pressures, and 34% have already done so. Another study by Proxima found that rising inflation had let to a quarter of businesses delaying their plans to decarbonize their supply chain.
It's not that businesses don’t have the will to take action on ESG issues. In a recent global research study from Oracle business leaders agreed that more progress needs to be made on sustainability and social factors, but 91% of them said they face major challenges. These include finding the right data to track progress, and time-consuming manual processes to report on ESG metrics.
ESG has become a global movement, and the backlash against it is underway. Back in May Tesla CEO Elon Musk furiously tweeted that “ESG is a scam” after the electric car manufacturer got removed from a major ESG index for a lack of disclosure around environmental and social issues. Republican politicians in the US have made ESG enemy number one, drawing it into the ‘woke’ culture wars.
Former Vice President Mike Pence wrote in The Wall Street Journal, “The woke left is poised to conquer corporate America and has set in motion a strategy to enforce their radical environmental and social agenda on publicly traded corporations.” In August Florida governor Ron DeSantis went so far as to pass a resolution banning fund managers from applying ESG factors when investing for the state’s pension funds.
Rising gas prices mean it’s becoming easier for populist politicians to blame ESG for the tightening of belts and the issues this causes their constituents. They see an opportunity to aim voters’ fears of inflation at the finance industry’s efforts to combat global warming and other social ills. But while fears rise up and budgets tighten in times of economic stress, the demand from consumers for companies to do the right thing shows no sign of abating. The study by Oracle found more than nine in 10 people believe sustainability and social factors are more important than ever, and a large majority of them (80%) are frustrated with the lack of progress by business on these initiatives. Increasing numbers of consumers want the companies they buy from to show that they care about the environment, their suppliers and their people.
As a financial services marketing agency working in the sustainable investing sphere, and a creative agency working on brand messaging, Embrace is aware of the role marketers have to play in ESG’s evolution. Easy-to-unpack information is crucial to help support nuanced discussions around what investors are trying to achieve.
More transparency and detail can help brands bring people together to take more effective action on ESG. Whereas over-reaching with blanket statements about being on the right side of the sustainability issue can backfire, as many firms have discovered. In 2019, fashion brand H&M fell foul of Norway’s consumer watchdog over its Conscious Collection of “sustainable’ fashion. The company was found to have provided insufficient information on what percentage of its garments were made from sustainable materials. The collection has since been rebranded as Conscious Choice, with more useful information for shoppers on what their clothes are made of.
Consumers are ready for more evolved messaging on ESG. We need to move beyond blunt “good guys / bad guys” narratives in order to empower people to make informed choices with their spending power. Rather than presenting as perfect, it’s better to show a more real picture, and share a relatable story of a company’s journey towards net zero.
If you’d like to talk to us about your ESG messaging or marketing needs, do get in touch.