ESG and Marketing Procurement
With the effects of man-made climate change now being felt increasingly keenly around the world, intense pressure is being exerted on global businesses to clean up their act and prioritize green initiatives across their operations.
This pressure doesn’t just come from the need to meet regulatory obligations either. Customers are increasingly seeking to spend their money with brands which hold values aligned with their own. This places the ball firmly in the court of marketing and procurement and their role in purchasing and creating advertising which effectively communicates the values and ethos of the brand.
"Companies have many reasons to focus on environmental, social, and governance (ESG) issues," writes McKinsey. "They may want to satisfy their consumers, who are increasingly choosing brands with strong ESG credentials, even if the prices are higher. Or they may be seeking to stay ahead of ever more stringent regulations. Others react to pressure from banks and investors, want to improve employee engagement, or feel a need to better attract and retain talent."
Transparency
One of the most effective ways brands can increase their ESG credentials in the eyes of customers is by increasing transparency through intelligent use of data and marketing.
Customers are being increasingly impacted by environmental decline and brands need to reassure them they are on their side. According to one report, 58% of people have been personally affected by environmental problems, with 53% having stopped buying from brands that negatively impact the environment and society. 63% believe sustainability is the responsibility of the brand, rather than external forces.
Brands need to use marketing and procurement to communicate with customers what they are doing to create a more sustainable world. Whether this is a switch to more easily recycled materials in product or packaging, reducing our carbon footprint by reducing reliance on Asian manufacturing and the long-distance supply chains which go hand in hand with it, or anyone of dozens of other initiatives, brands need to make sure the public is aware of them and can easily access more information which supports the claims.
"Leading players are already capturing real benefits from their efforts," continues McKinsey. "Our colleagues’ analysis shows that top ESG performers enjoy faster growth and higher valuations than other players in their sectors, by a margin of ten to 20 percent in each case. Strong ESG credentials drive down costs by five to ten percent, as these companies focus on operational efficiency and waste reduction."
Agency Choice
Because effective ESG credential communications are going to be so important in the future, it is becoming increasingly critical that marketing procurement teams partner with creative and advertising agencies which share their vision.
When everyone involved in the marketing process – both internal and external – are working from the same page, it results in marketing efforts which are more authentic and better at communicating crucial ESG information.
Greenwashing – the act of brands being insincere regarding their green credentials or covering up harmful activity with superficial sustainability activities – is something customers are becoming increasingly savvy to and will not hesitate to call out businesses which engage in the practice and cease spending money with them. Therefore, ensuring that marketing, procurement, and external agencies are all aligned is of the utmost importance.
"For PR and communications, this is a real moment of reckoning," writes Forbes. "On the one hand, audiences and customers are waking up to the impact and dangers of greenwashing, with PR agencies accused of facilitating or even producing greenwashing, particularly on behalf of fossil fuel clients. On the other hand, professional communicators have exactly the skills needed to support positive corporate change, communicate progressive governance, foster conversations, and ignite action."
In our previous article, we made the case for why procurement and marketing need to be more deeply ingrained with one another and nowhere is this truer than when communicating ESG credentials and working with similarly inclined outside agencies.
Businesses welcome the outside perspective an agency can provide on ESG issues, particularly when it comes to avoiding groupthink and identifying the "golden nugget" for communications within the myriad issues that ESG covers," continues Forbes. "We help clients by developing strong sector-specific knowledge but also keep a wider perspective of where we can identify opportunities to advance sustainable practices where there is also a communications win."
Marketing, procurement, communications, PR, and upper management need to make sure that, not only is the brand behaving in a responsible manner from an ESG perspective, but those efforts are being effectively communicated through marketing channels.
Final Thoughts
ESG concerns are going to become increasingly important as climate change – which many experts now say is inevitable – continues to impact the lives of customers. Brands need to work both internally and externally to ensure ESG related messages are having the necessary impact.
ESG and marketing is sure to be a hot topic at ProcureCon Marketing 2022, taking place in November at The Westin Rancho Mirage Golf Resort & Spa, Palm Springs, CA.
Download the agenda today for more information and insights.