The second in a series looking at groups generally thought to benefit from corporate ESG programs, examining which group may be the primary beneficiary of company ESG efforts. The first post on investors is here, with an addendum here.
Customer/Consumer Driven Products
Generally speaking, companies exist to serve their customers because customers are the source of revenue keeping the company in existence. One difficulty in the symbiosis is that customers can be fickle. Their purchasing behaviors change for many (sometimes irrational) reasons and those changes influence product development, mix and availability. The good news is that when customer/consumer buying behaviors reflect their ESG preferences, companies respond by making products customers want.
So customers and consumers are a significant beneficiary of corporate ESG efforts because companies produce things to meet customers’ personal ESG concerns. Examples include:
- plant-based meat and milk substitutes to meet consumer demands for healthier foods
- organic produce to meet consumer demands for healthier foods and reduced chemical usage
- electric vehicles to meet consumer demands for reduced reliance on fossil fuels
- ethically-sourced gold and gemstones to meet customer demands for reduced human rights violations in mining
- LED bulbs to meet consumer demands for reduced energy use
- product designs that are more protective of ocean wildlife (e.g., straws & 6-pack rings)
- cryptocurrencies that use less energy to meet customer demands for lower carbon emissions
It is fundamental human nature to seek connections and a sense of belonging. Companies connecting with customers in this way benefit their customers at an emotional level, sometimes offering comfort and consolation at a time of need in a person’s life. I recently wrote about an example of this. Lego recently launched its Everyone is Awesome set that brings a new perspective to the concept of “connectivity.” A few years ago, many companies redesigned office space so employees could increase social interaction and feel a stronger sense of human inclusion, belonging and connectivity with each other.
Certainly there is a direct link between happy customers and business success, so one could rightly ask if it is the company that really receives the value. I will explore that in a later installment.
In the end, customers/consumer are undoubtedly a major beneficiary of corporate ESG initiatives, but are they the primary beneficiary? The next part of this series will examine ESG value from the perspective of employees.