ESG Under Pressure
I do believe that we, as leaders across all organizations, really need to start to embrace it as fundamental. … the issues that we’re trying to solve through ESG initiatives, they’re not going away.
In the years following the murder of George Floyd, nearly every business took a hard look at the diversity in its ranks and took some action to address the disparities. That led to many businesses finding themselves caught between political decisions that affected their customers, feeling compelled to speak out even when it risked impacting sales. It was a new—and uncomfortable—position for many business leaders, who were used to staying above the political fray. At the same time, the growing emphasis on the employee gave the corporate social responsibility movement a boost, making the themes of purpose, sustainability, and diversity board-level topics for most large companies.
Now, though, as the economy slows and a political backlash against many of the cultural and social changes of the past decade grows, some businesses are reporting fatigue in the ESG space and noting that customers seem less enthusiastic about the concept of doing well by doing good than they did even a year ago. Is this about burnout, a decision to put their wallets over their hearts, or something else entirely?
“For younger consumers … purpose isn’t a buzzword,” said a C-suite executive at a wellness and personal care company. “They want it and expect it, but what is interesting is they don’t necessarily want to pay for it. They still want efficacy; they still want value, and then they want purpose—in that order.” That puts businesses in a difficult spot, the C-suite executive said, but cautioned that this doesn’t mean it’s time to abandon ESG. “[Customers] might not have a lot of money, so they expect their brands to do some of this work for them by giving back to communities or doing more sustainable packaging.” It may cost more to do that, but the downside of not doing it may be higher, the executive said.
Kang, CMO of eos, a beauty and skin care company, agreed that this is not the time to give up, despite the financial pressures. “The possibility that ESG and corporate social responsibility goes lower in the priority list as a result of dealing with things that feel more existential to leaders—that’s … a real risk.” She said, “I do believe that we, as leaders across all organizations, really need to start to embrace it as fundamental. … The issues that we’re trying to solve through ESG initiatives, they’re not going away.” Kang said eos is maintaining its investments in its social responsibility programs. “Those programs are really fundamental to how we build a long-term brand. You make these investments for the long haul.”
Some companies have leaned in heavily to ESG and achieved good results. At Levi Strauss & Co., the “Buy Better, Wear Longer” campaign—which encourages consumers to “waste less” by spending more on Levi’s—has been a huge hit. “It’s been the most effective campaign in the recent history of Levi’s,” said Eckert. “[That] campaign has driven market share gains.”
And at CBS, ensuring that programs reflect the diversity of society has become an expectation rather than a nice-to-have. “There has been … no backlash from the perspective of seeing diversity on screen. We’ve only seen success,” said Subramanyam. “If you ever inadvertently end up with a show or an idea that isn’t naturally diverse, the consumer is pushing back. I get called up by middle America all the time, ‘Hey, that’s not what a friend group looks like anymore.”
Why do people lease cars, but own all their other household technology? It’s an area that’s ripe for innovation, when you think about it. To appeal to younger consumers’ desire to have the latest and greatest technology but also support sustainable practices, Best Buy Canada launched a subscription model experiment for laptops earlier this year. Said Polly Tracey, chief communications and public affairs officer, “This is about building a relationship with the customer. If technology is such a big part of your life, Best Buy becomes your tech partner.”
The marketing emphasizes saying “goodbye to FOMO forever” and offers a cost below that of owning the laptop, the ability to trade in at the end of the term, and a promise to refurbish or recycle the old device. For now, customers must do their trade-ins in a store because it’s an easier way to gather information. “Our advisors in stores are a massive part of the process; they tell us what customers want and what they want to sell,” Tracey said. The company is also experimenting with online marketing, pushing information about the subscription to customers browsing for laptops. “We’re very encouraged by the response—and uptake—by our customers and we’re expanding the program even faster than our original plans.”
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