Why the S in ESG is Increasingly Driving Consumer Demand

By Srikanth Iyengar, Director Assurance, CLA

Sustainability is often viewed through the lens of carbon emission reporting.  But carbon is only part of the equation. More broadly considered, can the resources within and available to a business withstand the test of time?  

There are a multitude of factors to consider in a sustainability framework, such as:

• Managing disruptive technologies
• Addressing changes in consumer preferences
• Adapting to human capital expectations
• Evaluating critical resource needs for sustained operations

The current SEC proposal and some state regulations (California and New York) are focused on carbon emission reporting.  Europe’s reporting requirements, however, go beyond emissions and are based on an overall sustainability framework.

Consumers are Paying Attention

In an article Top 10 Sustainable Consumer Research Findings, The National Retail Federation summarized several studies that show sustainability is a differentiator and is increasingly driving purchasing decisions. One such study by the Shelton Group found that 87% of Americans feel green certifications have importance during a purchase decision.

Also, younger buyers think about sustainability differently compared to older generations. Young consumers consider the sustainability of a manufacturing process, while 56% of older generations prioritize recyclability, as researched by the National Retail Federation.

A Framework for Sustainability

In the consumer goods manufacturing industry, a sustainability framework looks at the current state with the future state in mind.  

Present Critical Factors: 

• Product quality and safety 
• Product design and lifecycle management 
• Data security
• Customer privacy

Future Critical Factors: 

• Increased employee engagement and diversity 
• De-risking supply chains

In the consumer goods industry, customer privacy and data security are also crucial due to reliance on technology and constant innovation. Employee engagement, diversity, and inclusion are gaining prominence across industries.  All are essential for establishing a credible brand and attracting top talent. 

Other factors to consider include energy management, water and waste management, labor practices, and material sourcing and efficiency based on applicability to each organization. 

Critical to consider are risk mitigation strategies, processes, and controls to prepare an organization for the future.   

Need help identifying mapping out a sustainable ESG framework for your company?  Contact us.