The ESG Advocate 019 - It's not easy claiming green
ESG represents risks and opportunities, and one of those opportunities is differentiation through marketing. This concept is challenging as sustainability and ESG are pretty nascent, but the drive to make a sustainability claim is very high.
As a result, brands are all over the place with marketing and storytelling, mainly because their efforts to address the issue are also all over the place. Still, is it all greenwashing, are we too early to capitalize on the actions, or should we just be focused on saving the planet, regardless?
Last week, Dominic O'Connell, a business presenter for Times Radio, wrote this:
If everyone claims to be sustainable, the term means nothing.
Let's get to it!
SIDE NOTE: With Twitter under new management and my newsletter hosted on Revue (owned by Twitter), I'm waiting to see what happens.
Just in case, don't forget to follow me on LinkedIn or Twitter (ironic)!
Consumers want a sustainable lifestyle
Yale's latest Climate Opinion study shows that 72% of Americans believe global warming is real. It's probably because when Americans step outside, they either see floods, droughts, wildfires, or smoke from across the country from a wildfire.
When it comes to consumers and sustainability, there is a lot of confusion. I often write about the confusion and conflation between sustainability and ESG, but that's not what I'm writing about today. Consumers are at different levels of sustainability maturity and are also confused about how to have an impact with the brands they interact with.
For example, something as seemingly simple as curbside recycling is very complex and not consistently effective. Consumers intersect with brands at the disposition of the product here. Greenpeace blasted the circular economy and plastic recycling as 'fiction,' and they aren't wrong. I witnessed this myself while replacing doorknobs in our house last week. The packaging plastic, which stacked nicely, could not be recycled.
Most plastic packaging has RIC codes to let consumers know what materials make up the plastic and, therefore, where it should be routed for recycling (if it can be). However, that doesn't mean your provider takes it. For example, mine wouldn't take the doorknob packaging because some plastic requires unique recycling processes. And don't even get me started on recycling pizza boxes! Also, please don't search for that; it is a rabbit hole.
Regardless of this complexity, consumers want to get sustainability right and find that they can align their personal goals through their behaviors, especially in an inflationary environment. Deloitte looked at this in the UK and opened their consumer sustainability report with these numbers:
There is a sharp increase in the number of people who have adopted a more sustainable lifestyle in the last 12 months. Compared with 2021, consumers have significantly increased their focus on buying just what they need (+20 points), on reducing their meat consumption (+9 points) and on opting for low carbon emission modes of transport (+11 points).
Notice how people have adopted a sustainable lifestyle through sustainable behavior. So, where do brands fit in? The report goes on to say that consumers are:
choosing brands that have ethical or environmentally sustainable practices and values, or by no longer purchasing certain products because they have concerns around the brand's ethical or sustainability practices or values.
...and this is where things are falling over.
Enable consumers, tell your story, and get verified
Companies are under pressure from many stakeholders, including consumers, and making progress at different rates, even within the company. With the movement towards a sustainable lifestyle, company claims as they transition are complicated to back up and often come across as greenwashing.
Rebecca Stewart, AdWeek's Europe brand editor, looked at a qualitative study of 75 people by the Advertising Standards Authority (ASA) in her article on Your Brand's 'Net Zero' Claims Are Nothing but Hot Air to Consumers.
The ASA reported that green claims didn’t have too much direct influence over purchasing behavior. However, most participants said such language would likely boost their perception of a brand, which of course could have a longer-term impact on buying decisions.
This is similar to Deloitte's findings above but a little different. Still, both studies point to a singular truth - sustainability impacts the brand. And so, we have the ESG differentiation creeping in with an opportunity to capture the consumers' imagination.
With a good sustainability tagline, a company could capitalize on its efforts through marketing. This can be a powerful and very irresistible force for marketers. Is marketing a robust enough vehicle to communicate complex sustainability ideas? At least two examples from the past week represent different ways companies are missing the mark.
From marketing to enabling action
First, look at an example of a simple claim that apparently forgot the follow-through. Last week, an Illinois court case (Curtis v. 7-Eleven) revealed a pretty straightforward sustainability marketing claim on party plates, cups, and freezer bags:
products were labeled “recyclable”
I mean, I debated on even whether to blockquote that out for you. Yet, when examining the product for the RIC code (remember my doorknob situation above?), Devon Curtis, the plaintiff, couldn't find any. Like with any court case, it's a little complex, but:
Judge Seeger found that Curtis’ (second) theory of liability stated a claim, because a lack of RIC numbers is intrinsic to the product itself, and it prevents the product from being recycled at any facility.
In other words, you can't claim a product is recyclable without giving consumers the tools to complete the act of recycling, in this case, the RIC code. Per my earlier note, the availability of recycling facilities came up but is mainly outside the defendant's control.
To me, the fix couldn't be more straightforward. Either put the RIC code on the product or don't make a claim. When making sustainability claims, ensure you understand the regulations and rules around the ecosystem so consumers can follow through. This is where sustainability and marketing meet ESG (E and G), as it has manifested as a risk in the form of litigation for the company.
Having a tagline vs. telling the story
The more interesting example this week involved HSBC. Overall, banking and capital markets have a complex role in sustainability. Finance plays an active role in the transition, but we can't stop funding or shut off fossil fuels tomorrow. We need financial services to support a just transition.
So when a bank makes a sustainability claim around a single project or effort, the complexity is lost and comes across as an omittance, which puts it on a regulator's radar. At least, that is what the ASA found (per the Financial Times).
The Advertising Standards Authority deemed that HSBC misled customers in two adverts by selectively promoting its green initiatives, while omitting information about its continued financing of companies with substantial greenhouse gas emissions.
In its "Climate change doesn't do borders" campaign, HSBC touted project claims like planting trees and funding client transitions to net-zero (something many companies can't agree on the definition for but put that aside for now). HSBC is still subsidizing fossil fuels but has announced a phase-down. This is the 'omit' part of the complaint.
Celine Herweijer, Group Chief Sustainability Officer, HSBC, writes about this complexity as she lays out How we’re enabling the transition from coal to clean. She doesn't omit the complexity and explains the challenge here:
Although renewable alternatives are becoming ever cheaper and more efficient, shutting down coal power plants overnight isn’t an option. Over 3 billion people live in countries that still depend on coal for over two-thirds of their power consumption. This reliance is particularly acute in many Asian and developing economies.
And then plots the course here:
We need to chart a course that supports the efficient functioning of these markets and allows them to continue to develop and invest in the energy infrastructure required for electrification, renewables and low emissions fuels, while also phasing out thermal coal on a timeline that does not jeopardise net zero.
This article builds a complete story from challenge to approach. Now, it's still early days here, but I like the way she lays it out with clarity. Nuance is a word that surrounds ESG and sustainability issues, and she covers the nuance of this issue well.
Trust is often at the core of the brand-consumer relationship. So my advice is this. When making sustainability claims, be truthful about your progress with a complete story, even if it includes the challenges. Climate change is a big, scary issue and people need to understand this isn't as easy as turning off the proverbial light switch.
Sustainability claims in marketing should not be focused on one-off philanthropic projects (still great to do!) and need to focus on your plan, progress, and issues. That means you need to do the work to make a claim.
Lastly, companies can find another way to build trust in this article on sustainability claims in the beauty industry. Forbes retail contributor Jessi Baker writes:
Sharing proof of independent verification is the most effective way to assure shoppers that claims are fact, not fiction. 41% of the shoppers we surveyed considered independent verification as very trustworthy, making it far and away the most highly trusted source of sustainability information when consumers are in purchasing mode.
Before jumping into sustainability claims and marketing, have someone else take a look and validate. This last point will likely be the default as it appears to be the path of least resistance, but it can also become a trap of inaction if the focus is the marketing and not the impact. Don't fall into this trap and drive impact! If you don't, you will certainly be accused of greenwashing, but with third-party verification.
Can a focus on ESG help?
Since ESG represents the impact of the world on a company and that company's resulting risks and opportunities, might it be a good place to start with reaching consumers? Absolutely.
For example, Unilever is considered a global leader in sustainability but has also been accused of greenwashing. On the other hand, one major investor saw the effort as a complete distraction.
Terry Smith, chief executive of Fundsmith, one of Unilever’s largest shareholders, said this:
A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot. (Unilever) is obsessed with publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business.
On the surface, this sounds crazy. Why would mayonnaise need a purpose? When you go to Hellman's sustainability website, the consumer messaging around sustainability is quite clear. They tackle sustainability through material ESG issues. For example:
We are on our way to sourcing 100% of our oils responsibly across our tasty line of mayos, dressings and sandwich spreads.
Alright, responsible sourcing is material, for sure. They expand the story by explaining their partnership with Field to Market: The Alliance for Sustainable Agriculture. Hellman's also makes other claims about plastics and helping consumers reduce food waste by helping with leftover tips via Fridge Night.
None of these claims are philanthropic or one-off projects but are instead material issues. Helping reduce food waste harkens back to the finding in Deloitte's study above and could capture a consumer's shift to a sustainable lifecycle. As I checked their website, it reminded me that even I re-heated some barbeque chicken this past week to make a sandwich with some mayonnaise. I could've just as easily discarded it!
Frankly, I didn't find these claims as vague as what you might find in a splashy marketing message or tagline. It's what Hellman's has identified as material while giving some relevant consumer advice.
So, here is another option for marketing. Rather than communicating with consumers on saving the world, understand your stakeholders better and focus on your ESG corner of impact.
This is a little more storytelling and a little less marketing. It's also a big reason I am obsessed with ESG. By thinking about your stakeholders and ESG risks, you can pivot towards opportunities and help consumers in a way only you can.
I don't need Hellman's to have a purpose, but I appreciate the reminder that they can take a meal from a few days ago and spice it up, so I don't discard it.
LinkedIn Post of the Week (from 3 weeks ago)
For my English-only friends, use the translator feature of your browser and read Dr. Dorothea Baur's thoughts on this topic.
Initially, I missed her post, but it is a good one on greenwashing! We should always have a healthy skepticism, but not everything should be discounted as greenwashing. If we do that, we will throw out the good efforts out with the greenwashing.
Dr. Dorothea Baur on LinkedIn: Greenwashing Truther — www.linkedin.com
#Greenwashing is hype, in two respects: some do; the others basically smell it everywhere where sustainability is mentioned. I am annoyed about the latter in my new column.