What’s the recipe for a successful business and brand? Of course, you need great products that solve customers’ problems, make their lives easier, and deliver great value. You need generous helpings of fantastic services that help create memorable customer experiences and grow brand loyalty. You may also need to add well-oiled operations and processes powered by great technology in the mix. A talented workforce is a must to make all of the magic come alive, and visionary leadership at the helm to steer the ship (or the pot). But, is that it? Not quite.
Incorporating environmental, social, and governance (ESG) goals into a business strategy is a must for companies looking to gain market share and stay ahead of the competition. Consumers are increasingly taking notice of how the brands they engage with approach ESG, what they say, and most importantly how they put their words into meaningful actions. According to PwC, more than three-quarters (76 per cent) of consumers would “discontinue relations with companies that treat employees, communities, and the environment poorly.”
According to PwC, more than three-quarters (76 per cent) of consumers would “discontinue relations with companies that treat employees, communities, and the environment poorly.”
Consumers are calling for responsible, sustainable governance, so it’s no surprise that forward-looking companies are starting to take note. Boards are under pressure to develop clear ESG criteria and to have an ESG business strategy in place to support decision-making, planning, and reporting.
Why ESG is good for business
Not many companies, consumers, or investors were thinking about ESG issues a few years ago, but today the situation has significantly changed. Sound ESG business strategy is fast becoming an essential factor by which brands can distinguish themselves from their competitors and make a more positive impact on the world.
Numerous studies in recent years, for example, have found that sustainability—one pillar of ESG work—is a significant concern for both consumers and investors. And investors are forecasting that ESG criteria will become even more of a priority. When Morgan Stanley asked investors what the biggest driver of share price performance would be over the coming 12 months, two-thirds (67 per cent) of respondents said climate change, while 15 per cent said sustainable consumption.
We only need to look at some of the early adopters of ESG practices to see how well consumers respond, with many happy to pay higher prices for sustainable products.
Sound ESG business strategy is fast becoming an essential factor by which brands can distinguish themselves from their competitors and make a more positive impact on the world.
The clothing brand Patagonia, for example, stands out from its competitors due to the company’s dedication to ESG. We’ve also seen larger companies in Europe, such as British multinational fast moving consumer goods (FMCG) brand Unilever, publicly setting out their ESG practices. Unilever’s Sustainable Living Plan, launched in 2010, is an interesting and complex example of long-term corporate sustainability planning. And over in the financial sector, there have been huge changes in the way that organisations and individuals view their investments and pensions.
In 2022, ESG-focused investment funds and pensions are well positioned to match—or outpace—the long-term performance of funds that invest in industries that are widely viewed as damaging or unsustainable, such as fossil fuels and tobacco.
Brands can stay future-proofed with ESG
As wealth and spending power move into the hands of the next generation, the business case for ESG becomes even more apparent. By 2030, Millennials (born 1981–1996) and Generation Z (1997–2012) will be the largest consumer group. And these generations grew up with far more awareness of environmental and social issues than Generation X (1965–1980), Baby Boomers (1946–1964), and the Silent Generation (born in and before 1945).
We’ll also see huge demographic shifts within the workforce as the younger generations forge ahead in their careers. According to Mercer, Millennials and Gen Z will make up 72 percent of the workforce by 2029 compared to 52 per cent in 2019.
By listening to the values and expectations of the youngest generations, we can future-proof our businesses and use ESG practices to guide our day-to-day operations and planning.
ESG can help companies to attract and retain talent
As businesses, we know that employee experience is critical to attracting, retaining, and motivating our workforces. The Great Resignation, which began in 2021, shows us that ESG practices have already become an important push and pull factor for employees.
People want to work for companies that reflect their personal values, where they feel safe, respected, rewarded, and are able to learn and grow. PwC finds that the vast majority (86 per cent) of employees “prefer to support or work for companies that care about the same issues that they do.”
Employees gain a sense of purpose and enjoy a greater sense of fulfilment when they work for a company with credible ESG practices. Companies that have a diverse workforce benefit from the varying backgrounds and perspectives of employees. Research from IDC in 2020 found a clear correlation between greater D&I and organisational resilience.
ESG: Driving change together
At Zendesk, we strive to actively embed ESG into our strategy to support our communities and protect our environment. In 2021, we powered Zendesk offices with hundred per cent renewable energy for the second year in a row. Our sponsored product programme, Tech for Good, donated over $3M in software to nonprofits. We recently announced our Zendesk Foundation Tech for Good Impact Awards and committed $500K in grants and free software to nonprofit organisations who can use Zendesk’s technology to magnify their impact. We also increased our investment in diversity, equity, and inclusion (DEI) initiatives, established a diversity council, made improvements across the board on diverse representation in our workforce and reimagined how we are bringing our “Inclusion” value to life through our employee communities and inclusive benefits.
Commitment to ESG practices must be an authentic resolve and more than just perfunctory. Most businesses are now cognisant of the importance of incorporating ESG into their business strategy and are hoping to strike the right note with consumers, investors, and employees with their stance on these vital issues.