So said McKinsey when they released the learnings from a joint study undertaken with Nielsen IQ that examined the explosion of interest from consumers in environmentally and socially responsible brands and products.
McKinsey and NielsenIQ analysed 5 years of sales data covering 44,000 brands and identified 93 different ESG-related claims. The analysis revealed a clear link between ESG-related claims (e.g. animal welfare, environmental sustainability, organic-farming methods, planet-based, social responsibility and sustainable packaging) and consumer spending.
This news was music to our ears here at The GoodNet, and we’ve had a good look at the report.
Here are six things we learned..
1. Consumers are increasingly prioritizing sustainability: The report found that nearly 60% of consumers globally are willing to change their shopping habits to reduce their environmental impact. This means that companies who prioritise sustainable practices are likely to attract and retain more customers in the long run.
2. Consumers are willing to pay more for sustainable products: According to the report, around 45% of consumers are willing to pay more for eco-friendly products. This suggests that companies that invest in sustainable production methods and materials may be able to command a price premium for their products.
3. This applies to brands of all sizes. Smaller brands achieved disproportionate growth in 59% of categories, while larger brands did so in 50%. Established products making ESG-related claims outperformed established products without them in 68% of categories. Private-label products that made ESG-related claims seized more than their expected share of growth in 88% of categories, suggesting consumers may be eager to support affordable ESG-friendly products.
4. Less-common ESG-related claims are associated with higher growth rates than more common claims. This suggests brands can successfully use their sustainability initiatives and positioning as a means of differentiation. Products that highlighted the least common ESG-related features (such as “vegan”) grew 8.5% more than peers that didn’t make such claims.
5. Combining multiple ESG-related claims is associated with higher growth rates. Products with multiple types of claims grew twice as fast as those with only one. However, companies must back these claims with genuine actions that have a meaningful ESG impact to avoid greenwashing. The study suggests that a multiplicity of claims made by a product may correlate with authentic ESG-related behaviour on the part of the brand, and brands should reflect on their commitment to ESG practices holistically.
6. Sustainable practices can boost customer loyalty: Consumers are increasingly loyal to companies that prioritize sustainability. In fact, nearly 70% of consumers said they are more likely to recommend a brand if they believe it is making a positive impact on society and the environment.
Overall, the McKinsey report highlights the growing importance of sustainability for consumers and the potential benefits for companies that prioritise sustainable practices. By taking meaningful action on sustainability and effectively communicating their efforts (while complying with appropriate legislation such the ASA’s Green Claims Code), companies can differentiate themselves from competitors and build lasting customer loyalty.
Read the full report here.
