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Sustainable transformation practice

The ECCT’s Marketing Club, in conjunction with AmCham, hosted a lunch on the topic: “Sustainability: What matters to consumers and why it matters to brands” featuring guest speaker Jonathan Hall, Managing Partner of Kantar’s Sustainable Transformation Practice.

The speaker began by noting that sustainability is defined by most corporations in much the same way as listed in the United Nations Sustainable Development Goals, which covers much more than the environment, including society and the economy. The environment is only mentioned in four of the goals.

Up until the early 21st Century we were living in a period economists call the great moderation. However, since the 2008 global financial crisis, disruption has become the new normal, which corporations will need to adapt to. Many of the ways we did things before will therefore need to change. Examples of disruption include the rise of e-commerce, AI, the blockchain and hybrid working habits. There are also more systemic shocks that need to be dealt with brought about by geopolitical risks, cybersecurity, climate change and extreme weather events. Sustainability is the biggest disruptor now. Many different stakeholder groups are starting to put pressure on corporations. As a result of the social environmental factors that are driving its disruption and that disruption will become ever greater. In this ever-changing environment, businesses are facing existential risks if they fail to adapt.

Based on data collected by Kantar, the highest portion of consumers believe that large corporations have had the most negative impact on environmental problems in the world, followed by national governments. This perception is even stronger among the younger generation. According to Kantar’s data, 75% of Millennials look at a company's sustainability strategy when considering where to work and 77% of GenZers want to work for organisations whose values align with their own.

But it is not just consumers that are paying more attention to sustainability issues. Key players in the financial industry believe that ESG has a material impact on how businesses are perceived in the marketplace and their ability to access capital and that the relevance of ESG factors is increasing. There is also a recognition that governments have regulatory levers that they will need to pull if they are going to achieve net zero by 2050 (which most governments have committed to).

Among the world’s largest corporations, nearly 100% of CEOs believe that sustainability is critical to their companies' future success. The economy changed dramatically during the global coronavirus pandemic and there is little prospect of things going back to the way they were before.

The speaker cited work done with the World Federation of Advertisers in 2023, where they interviewed executives from 30 global corporations and around 1,000 marketers globally, as well as representatives from academia and NGOs. The results revealed that some progress has been made. In terms of executive involvement, 87% of respondents said the Chief Sustainability Officer reports to CEO and board members (compared to 80% in 2021). In terms of visibility of KPIs, sustainability as a KPI in marketing dashboards increased to 42% in 2023, versus 26% in 2021. In terms of sustainability communications, 40% said they have a sustainability story and are proud to communicate it versus 25% in 2021.

At the same time, progress is deemed as not going fast enough. Back in 2021, over 20% of respondents said that their sustainability efforts are well advanced but this figure fell to 15% in 2023, indicating a realisation that things are not so advanced as previously perceived. In fact, 90% of marketers agreed that sustainability agendas must be more ambitious and 94% said that marketers need to act more bravely and experiment to drive transformative change.

It appears that most people care about sustainability but only a minority of them are taking the necessary action. According to Kantar’s data, 84% of people want to live a sustainable lifestyle but only 27% of people are actively changing their behaviour. This value action gap should be seen as a valuable opportunity for brands. Businesses have an opportunity to take advantage of consumers’ aspirations and close this gap by offering goods and services that align with consumers’ values and aspirations. It is estimated that the economic opportunity that this gap represents is worth US$12 trillion.

Sustainability value contribution to brands is growing significantly. According to Kantar’s Global BrandZ Top 100 data, sustainability contributes US$193 billion to the value of the top 100 brands. Of these, only 2% of brands are over-performing which means there is enormous opportunity on the table. Moreover, sustainability remains the most important driver of corporate reputation. 93% of marketers believe they have the right skills and data to unlock the economic opportunities.

The top challenges to realising the potential are redefining success, having dedicated resources, closing the (knowledge) gap and changing internal mindsets, According to the speaker, in the Asia Pacific region, organisational silos are inhibiting progress while there are also problems with measuring sustainability efforts, among others.

The speaker went on to cite some examples of best practices, including offering incentives to executives to achieve sustainability goals, integrating people and planet into P&L reporting and creating a refillable container system to reduce waste and prices for consumers.

Kantar’s Sustainability Sector Index, an annual Kantar study, provides an eco-system of global knowledge to support global and local sustainability strategies. It covers 42 sectors in 33 markets across the world. Results show that consumers are actively engaging with sustainability. Based on the most recent survey, 54% of consumers pay a lot of attention to environmental and societal issues in the news, 47% are prepared to invest time and money in companies that try to do good and 51% believe that buying sustainable products is a demonstration of who they are.

Another Kantar survey reveals that 74% of people believe businesses have a responsibility to make society fairer and 64% say it is businesses’ responsibility to solve climate and environmental issues​. This is especially true for young people. For many GenZers and Millennials, sustainability is a core part of who they are. Enthusiastic Millennials helped shape a cultural context in which today’s young see the connection between sustainability and their identities and futures. Therefore, to understand younger consumers today, you must understand sustainability. 64% of Millennials and 57% of GenZers consider themselves to be environmentalists while 58% of Millennials and 51% of GenZers believe that buying sustainable products or choosing environmental and socially conscious services shows others who they are what they believe in.

This shift in generational attitudes is significant and has not happened since the second world war and will act as a market disruptor for many years to come. From the early mid-20th century until the end of WWII was the period that can be described as one of “institutionalism”. In this period, people’s values were defined by respect for institutions. From WWII until the beginning of the 21st Century was the period of individualism, which marked a shift in focus from institutionalism to individualism, led by the baby boomer generation. Now, we are seeing a new shift from individualism to mutualism, led by Millennials. This does not mean that the values of previous generations will disappear but rather that society will increasingly be defined by mutual values. Businesses and brands that align themselves with those values will benefit.

In Taiwan, of the 17 SDGs, people are most concerned about climate action and responsible consumption and production, highlighting the significant awareness of environmental sustainability. In addition, reduced inequalities and the promotion of good health and well-being are prominent social concerns in Taiwan. Taiwan’s figures are quite consistent with global surveys. Of the top issues concerned with sustainability, the most prominent are climate change, air pollution, extreme weather events and over-exploitation of natural resources. While climate action-related issues are the most important to address in Taiwan, increasing economic inequality has emerged as a critical social issue demanding attention. Physical & mental health challenges, as well as lacking jobs offering living wage, are also among top concerns in Taiwan. This is also rising in importance in other countries.

People realise that they are not meeting their sustainability aspirations and want brands to help them to be more sustainable. However, they are also wary of corporations and sceptical of claims if it appears that they are being made just for commercial reasons. For this reason, in the post truth hyper-cynical world, brands need to be extremely careful about how they broadcast their sustainability credentials. Their approach should vary depending on which sector they operate in. Kantar has mapped sustainability issues by their stated importance and sector relevance, to help brands focus on offensive and defensive plays or develop a “swords and shields” strategy (shields for defensive strategies that need to be taken care of just to maintain customers and swords for offensive strategies that, if employed, could actually help the company to improve their competitiveness and increase market share).

Consumers are becoming more aware of greenwashing, which is why corporations have to guard against it. Based on Kantar data, 52% of people across the world say they have seen, or heard, false or misleading information about sustainable actions taken by brands. This illustrates how trust has been severely undermined. How can people change their purchase decisions if they feel they can’t trust the claims? Moreover, it has been found that the more people look for solutions, the more they feel brands greenwash/social wash and the more they stop purchasing their goods and services. This should ring alarm bells for all corporations and lead to extreme caution in how they advertise their green credentials.

But the rewards for getting it right are potentially enormous. 63% of people say they have tried brands or use brands that have a more positive environmental or social impact or are open to it. On the other hand, 50% of people say they have either bought less of or stopped buying certain products/services because of their negative environmental or social impact. This illustrates the need for brands to take action to clean up their acts but also the enormous potential gains if they do.