This year, we saw companies double-down on purpose amidst a rise in consumer skepticism and politically motivated attacks on ESG. Below are six notable trends and what they might mean for 2023.
Purpose-driven marketing and stakeholder relationships to ESG have seen escalating evolution through the pandemic — with increased challenges and opportunities this year. In 2022, we saw brands double-down on purpose-driven initiatives as they worked to drive consumer loyalty, retain top talent and create exponential impact — all amidst a rise in consumer skepticism and politically motivated attacks on ESG.
Below are a few of the notable trends from 2022 that the Allison+Partners and Headstand Purpose Center of Excellence is tracking, and what they might mean for 2023:
Anti-woke ESG backlash — Jamie Berman, VP, Boston
Politically motivated backlash against climate-smart investing and corporate climate action reached new levels in 2022, with at least 17 states adopting anti-ESG regulation. Legislative blockades, state-driven boycotts (such as those against BlackRock and others) and other political targeting of net-zero and related climate initiatives have set up a potential blockbuster year in 2023.
The new year will certainly be a reckoning of sorts for ESG, as a GOP-led US House of Representatives comes into power and begins probing investors’ and companies’ ESG commitments. We’ll see more conversation around the role of ESG within investors’ portfolios and its effects on the bottom line as ESG-minded organizations push back on conservative criticism, and the US Securities and Exchange Commission’s pending mandatory climate disclosure rule will also bolster this narrative, especially where allegations of greenwashing are concerned. Even with political headwinds, hope remains strong that ESG investments trends will continue their upward trajectory: In 2021, 49 percent of institutional investors reported incorporating environmental and governance factors into their investment decision-making processes, up 7 percent from the previous year, and ESG investments are predicted to more than double over the next three years, showing a continued momentum for ESG causes moving forward.
New chapter in capitalism — Katy Mendes, VP, San Francisco
2022 was the year that Yvon Chouinard donated 98 percent of his $3 billion company, Patagonia to a new organization, Holdfast Collective — which he said will be “dedicated to fighting the environmental crisis and defending nature” — with no tax deduction, because Holdfast isn’t a normal nonprofit. The entirety of the company’s voting stock, equivalent to the rest of the shares, went into a newly established entity known as the Patagonia Purpose Trust. A statement from the new company shared, “Every dollar that is not reinvested back into Patagonia will be distributed as dividends to protect the planet.”
This incredible move, where Patagonia became a 100 percent-for-the-planet business, signals that a profit-for-purpose business model is entirely possible. While not every executive is positioned to be as transformative as Chouinard, this reimagining of capitalism can hopefully inspire more purpose-driven companies and business leaders to redefine their profit models to more directly and aggressively address urgent social needs in the face of an accelerating climate crisis.
Climate impacts to frontline communities — Megan Rufty, VP, Washington, DC
This past year, we saw the very visible impacts of the climate crisis — from floods to drought — to record-breaking temps and every natural disaster in between. With clear signs pointing to the impacts of climate change, 2022 also saw a growing understanding from activists, government and corporations alike of the frontline communities of the environmental crisis — those that experience the “first and worst” impacts of our rapidly changing climate. Frontline communities are disproportionately carrying the burden of climate change, are more exposed to the physical impacts from natural disasters and pollution, and are often underserved communities of color, without access to protection.
While the direct impacts of the climate disaster were harsher than ever, we saw this year more concerted efforts to protect these at-risk communities. The US passed the Inflation Reduction Act, which will make much-needed funds available to in part serve frontline communities. For example, the Act will invest directly in programs to reduce pollution in these areas. This includes the creation of climate and environmental justice block grants to support community-led projects; and funding for fence-line monitoring near industrial facilities, air-quality sensors, new and upgraded multi-pollutant monitoring sites, and monitoring and mitigation of methane and wood-heater emissions in disadvantaged and disproportionately impacted communities.
In addition, at COP27, negotiators established a loss and damage fund to support the developing world as those communities face and try to rebuild from the effects of climate change. In 2023, the urgency to protect frontline communities will only increase. While 2022 saw government action, this coming year companies have a major responsibility to use their power and platform to advocate for and directly benefit the communities who need it most.
Caution: Greenwashing ahead — Norah Silverstone, Senior Account Executive, Boston
To capitalize on the growing consumer demand for environmentally and ethically sound products, several brands have engaged in greenwashing through false or overstated claims on the ‘green’ credentials of a product or service, in hopes to distract from the brand’s contribution to climate change.
While brand greenwashing may have flown under the radar in the past, consumers and activists are increasingly skeptical and proud internet sleuths who can no longer be easily swayed by misleading green claims. Due to increased skepticism, we saw an uptick in criticism — and in many cases, lawsuits — in 2022 against brands accused of false claims to wash themselves of pressure from third parties to be more sustainable in their operations and products and use their scale to lead the way for other brands. From pulling “sustainable” products to avoiding sustainability marketing altogether, brands are becoming more aware of the risk of engaging in greenwashing and the impact it has on their reputation and success. And as more brands are called out for greenwashing, we expect to see an increase in lawsuits against the companies that don’t act quickly enough to absolve themselves of any and all false green marketing in 2023. To avoid being under fire for greenwashing and earn the trust of consumers, brands need to communicate transparently, authentically and regularly about progress against science-based targets and sustainability initiatives — rather than overstate progress in this area.
Blurred line between politics and corporate action — Katy Mendes, VP, San Francisco
The decision to overturn Roe v Wade earlier this year uncovered an uncomfortable truth — there are some issues that brands may feel are just too political to weigh in on. When the SCOTUS draft decision was leaked, many brands kept quiet; and less than 10 percent of companies commented on the development.
Yet, the lines between politics and corporate action are increasingly becoming blurred — with many consumers looking to business leaders to speak out and use their platforms to advocate for them when their basic human rights are in danger. A new poll from Axios and Harris Poll suggests that companies that are slow to respond to political crises, or do it inconsistently, suffer the most in terms of consumer reception and trust. In today’s world, “silence is complicity” is a phrase we’re hearing more and more that underlines this new pressure on brands to understand what they stand for, how issues intersect with their business values, and to take action and communicate accordingly.
Employees as critical stakeholders — Cassie Downey, Account Manager, San Francisco
Building upon the point above, research shows that employees who saw their employer’s values in alignment with their own were more likely to recommend their employer as a great place to work (70 percent vs 25 percent); and a majority (84 percent) of employees surveyed said they would only work with purpose-driven companies and brands moving forward. Throughout 2022, we saw numerous examples of employees being treated as critical stakeholders as it related to impact and purpose commitments from corporations — most memorable, perhaps, being the call from employees for statements regarding the Dobbs v Jackson Women’s Health Organization ruling in June.
In order to ensure they are recruiting and retaining top talent, brands should confirm there is alignment between external communications and internal actions, taking into account employee feedback and co-creating solutions and commitments throughout the process. By demonstrating a commitment to the workforce, brands can rally employees around the company’s purpose and ESG efforts to create a more unified workforce that creates a sense of purpose and belonging. As we enter 2023 with signs of economic headwinds ahead, it remains to be seen if employees will retain the same sense of vocal advocacy for issues at work; but many companies have learned the importance of the employee stakeholder, and that is likely here to stay.