In the Green: Evaluating the Impact of your ESG Initiatives
By Ted Pardee, Chief Revenue Officer, Premise Data
ESGs provide companies with the knowledge and tools to become purpose-driven business leaders in their discipline.
We explore how companies can use crowd empowerment to drive change and examine why purpose-driven businesses are particularly well-positioned to tackle the world’s biggest problems. Taking advantage of the opportunities created by the need to tackle social and environmental issues is likely to be “disruptive” in many industries.
ESG metrics were used mostly by “impact investors” — investors who are themselves purpose driven and who are attempting to use their investments to drive positive change in the world until around 2013. That has changed as businesses and organizations become more conscious of their overall impact.
To many investors, caring about ESG metrics is a matter of preservation. The goal of cost reduction and securing an energy source are at the core of this environment. Meaning, if investors want to continue to be profitable, they need to secure the resources that make them profitable still exist in the future. In simple terms, don’t dry out the well of your resources.
Let’s take a look at European consumer goods giant and ESG initiative pioneer Unilever. Unilever sells more tea than anyone else, controlling nearly 30% of the branded tea business. Unilever also purchases roughly 12% of the world’s tea overall. Its Lipton brand alone sells roughly $3.5 billion worth of tea every year and has a global market share of nearly 3x that of its nearest rival, Tata Beverages, the owners of Tetley Tea.
Lipton’s success did not come without human and societal costs. Tea workers often lack access to education, health benefits, protection for illness or pregnancy and are rarely given housing. Tea harvesting also carries an environmental cost, driving deforestation and soil degradation.
Unilever is acutely aware of this. That’s why in 2010, Lipton committed to only using sustainably sourced tea by 2015.
Unilever originally took this on because they wanted to do the right thing, and immediately realized they needed to drive revenue while affecting positive environmental and social change. Once they made the switch, they had to figure out how to make money on their investment.
It started with marketing. Unilever capitalized on the fact that consumers truly care about whether or not what they consume is socially and environmentally productive, which is what led them to build brand buzz around that.
This ultimately translated “Brand Love” to Profits. Since Lipton had a product that was different while still being high quality, it could consider charging a higher price to capture consumers who were willing to pay more for a higher-quality tea, thus increasing profits.
There have been hundreds of academic studies exploring the link between ESG and corporate financial performance. In January 2018, Larry Fink, the CEO of Blackrock sent out a letter to the CEOs of the companies in which Blackrock is invested.
He said, in part: “Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate. Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth. It will remain exposed to activist campaigns that articulate a clearer goal, even if that goal serves only the shortest and narrowest of objectives. And ultimately, that company will provide subpar returns to the investors who depend on it to finance their retirement, home purchases, or higher education.”
Understanding how your business’s ESG initiatives are perceived in real time while auditing what you’re currently doing at a hyperlocal level are key first steps towards making the necessary changes that drive increases in sales and profits.
That’s where global crowdsourced data insights platforms like Premise come in. Premise operates a global crowdsourced data collection network that empowers organizations to get a comprehensive assessment of current initiatives at a macro and micro level. By creating tasks and surveys and putting them out into our marketplace, we have the ability to open a dialogue that helps organizations mitigate their impact on the environment and while better investing in their human capital.
Premise can create tasks that engage and inform the consumers about brands that have “sustainable initiatives” to ensure a safer environment. Each task can be designed to help Contributors not only actively seek out sustainable products but also capture if there is a shift in consumer behavior when consumers look to the other side of playing a passive role in saving the environment even if they have an additional cost to pay at the time of purchase.
Crowdsourcing can capture shifting consumer behaviors and changes in attitudes towards companies, and large chain stores specifically. While traditional brands may have been initially perceived as positive agents of change by bringing low-cost products to communities who historically had not had access to them, Premise can now show that inexpensive labor does so at a large price both environmentally and socially. In order to keep the goodwill necessary to compete, companies make positive changes in this regard and publicize these changes.
In fact, 58% of Premise Contributors have adjusted their routines or behaviors in order to live more sustainably. We can also capture which environmental issues concern our contributors the most, and how those issues evolve and change over time.
By keeping the public on their side, brands can keep their market share and revenues for their shareholder base, while doing better for the environment and their broader communities.
Premise can help you gauge the success of your ESG initiatives and identify areas of opportunity to improve upon them. Contact us today to learn more about how.