December 8, 2020 — Published, Strategy
Under mounting pressure to be socially accountable, retailers are behaving like good corporate citizens, but if their efforts go unnoticed by customers and stakeholders, they may be adding little or no value to the bottom line.
The value of environmental, social, and governance initiatives is now broadly acknowledged. A majority of business leaders and investment professionals surveyed by McKinsey said that ESG programs create both short and long-term value. When customers notice these programs, it affects their buying behaviour. 60 percent of people are willing to buy from a company with a high ESG perception score, whereas only 20 percent are willing to buy from a company with a low score, RepTrack research indicates.
However, there may be a perception gap between what companies do in this space and what people think they do, according to recent analysis by RepTrak. The McKinsey survey also noted an increase in leaders who say ESG programs have no effect on shareholder value, which now stands at 25 percent, up from 14 percent in 2009.
Could it be that their programs lack profile and aren’t getting noticed? There may be a number of underlying issues.
ESG initiatives may not be linked effectively to the business and brand strategy. Programs are often separate investments in siloed departments, which tick the box of corporate citizenship, while failing to build reputation or contribute to business growth. Unless the same rigour is applied to ESG as it is to core business priorities, these investments may have little to show for themselves.
Longstanding retailers embedded in communities often have a large number of local partners, added piecemeal over the years, with no clear strategy or measurement. They take it as read that this creates goodwill, but they might achieve the same recognition with half the partnerships. By linking their efforts to their brand strategy, they can focus, evaluate, strip out underperforming partnerships and sponsorships and realign to those that build their brand and get noticed.
The execution of programs may lack ownership. Recycling stations in retail stores are usually marked with a recycling logo, or the identity of a charity partner, but lack prominent branding, or a meaningful story of how deeply the retailer is involved in the initiative. This is a wasted touchpoint. Instead of co-branding with the program delivery partner being an afterthought, brands should make the effort to apply their design system to all their collateral and use it as a conversation starter.
IKEA is often cited as a good example, but the brand just keeps delivering on its social ethos and seldom misses an opportunity to keep ‘talking’ to its customers. Its in-store recycle centres aren’t just green boxes with a recycle logo. They’re part of the brand’s ongoing conversation about the many continuous improvements IKEA makes to people and the environment and a call to action to get involved. For example, the copy might read: “Improvement #10: Make your recycling a part of your everyday life. See the whole Never Ending List at Ikea.com.”
Retailers that are serious about sustainability are equally serious about sustainability reporting. What are the social and environmental benefits of initiatives and how do they stack up against the desired impact? Are programs expected to reduce costs, or deliver to the bottom line in the short-term, or are they a longer-term investment?
Sustainability reports provide a platform for communications about businesses’ impact on societal wellbeing, ensuring investors and communities hear about the good work they’re doing. The Woolworths Group’s Sustainability Report ‘Committed to a better tomorrow’ reinforces how intrinsic sustainability is to the business, its people, customers and communities. It scores progress against commitments in the context of their three pillars of People, Planet and Prosperity. The H&M Group Sustainability Report reinforces its brand vision ‘to lead the change towards a circular and climate positive fashion industry, while being a fair and equal company across our entire value chain.’
Social responsibility is valued, but unfortunately, it doesn’t speak for itself. Linked to your unique brand, through purpose, narrative, reporting and distinctive branding devices, it can be a differentiator and a business driver.
This article was first published on Inside Retail.