Published 1 year ago.
About a 5 minute read.
Rather than undoing years’ worth of progress, brands must double down on ESG strategies that can (and will) continue to bear fruit.
Fears of an impending
have surely made many corporate leaders start to question the value of their
environmental, social, and governance (ESG) initiatives. Obviously, any economic
turmoil tends to breed uncertainty; and, in response, businesses typically
retract into fear-driven mentalities — focusing on the fundamentals and
tightening up spending. Before long, some of the less “business-centric”
activities start to get defunded. But ESG is different and smart executives
shouldn't be so quick to make the cut.
Historically, a comprehensive ESG strategy has always been viewed as a
“nice-to-have” add-on that’s less directly connected to other efforts for
driving business growth. But that outdated perception is simply no longer the
case — a recent Forrester/Dun & Bradstreet
found that not only does improved ESG performance drive profit, but failing to
meet ESG goals leads to an increase in operational and financial risk.
Even news that ESG stocks are getting battered is tempered by the
that ESG equity funds have done better this year, on average, than their non-ESG
counterparts. Also, while the tech sector has been hit
by the recession due to investor demands from pre-revenue companies, large
multinational industries have
to focus on sustainability and other areas of ESG where they know they are weak.
Regardless of the recession, they know they have to do something, as the risk
of doing nothing is too great. This momentum means that holistically and
effectively integrated ESG strategy and deployment inside organizations may very
well be recession-proof.
The truth is, ESG strategy is a welcome evolution from bolt-on, Corporate Social
Responsibility (CSR) thinking that prevailed in the previous decades. Developing
a clear ESG strategy and a holistic plan to execute this over time becomes a
powerful tool for innovation and business transformation — so long as
organizations realize that it’s about how closely ESG is tied to the entire
not just to the marketing or communications department.
Every successful organization knows the importance of balancing near-term and
long-term needs. But under the pressure of a recession, the right mix might not
be clear. ESG investment and focus are often judged by their perceived
short-term costliness — despite the fact that, in the long run, it tends to pay
off as technological scale increases.
For example, when UPS made the
to electric delivery vehicles, it was because its electric delivery vehicles
finally had the same up-front cost as its gas models. Yet, with some long-term
thinking, UPS could have earned even greater savings and lower emissions sooner,
as years earlier EVs were a better deal over the lifetime of the vehicle, with
much lower operating costs and higher uptime.
It’s important to remember that a solid ESG strategy is a long-term play. ESG is
not a quick fix or seasonal. It should be strategic, always lean towards
business innovation and rely on broad buy-in from all stakeholders throughout
the journey. This is why ESG messaging must be constant, authentic and
consistent — as well as unique and accessible — in order to rise above the noise
and potential criticism. Hitting all of these right notes takes a significant
investment of time and resources that might have historically deterred attention
from leaders; but the focus and pressure from all stakeholders on positive ESG
performance continues to increase — so, those that stay the course stand to gain
a big advantage as we emerge from the other side of this downturn in the market.
When a rock-solid ESG strategy is aligned with the business, then brand and
innovation opportunities pop
up — from collaborations
with partners that lead to new products and services, to market expansions, to
future-proofing existing efforts as policies and priorities shift towards ESG.
In some cases, economic uncertainty makes a focus on ESG even more urgent. For
example, when it comes to their employee base, organizations need to attract and
retain talent through both bullish and recessionary environments. How they are
walking the talk and fulfilling their purpose becomes more important. ESG
strategies that don't ignore the “S,” such as Gildan’s Made with Respect
put people first across a supply chain and allow companies to retain and attract
A recessionary commitment to ESG can also spur innovation that has a lasting
positive impact. Nike was able to bring real innovation into how its design
teams build out products through the lens of sustainability with the launch of
“Move to Zero” — its ambitious effort to
move towards zero carbon and zero waste to help protect the future of sport. To
date, it has already
resulted in lines
of products made from recycled materials and (as importantly) more sustainable
that have lowered both shipping costs and supply chain emissions.
ESG focus can be a long-term value creator, as long as a brand has an ESG
strategy that is closely aligned with its business goals as much as with the
stakeholders it serves. With this kind of strategy, making real progress on ESG
becomes easier, more streamlined and more cost-effective in the long run. As the
recession threatens to put some ESG plans on hold, the risk is not only to the
planet, but to businesses who will only end up spending more time and money when
they eventually pick up where they left off. The race to a more sustainable
future won’t stop in the face of recessionary fears, so company leadership must
commit to an “always-on” mindset on ESG or risk falling behind.
Published Oct 14, 2022 8am EDT / 5am PDT / 1pm BST / 2pm CEST
Rob serves as an industry expert for the United Nations Media & Social Impact Summit, Sustainable Brands Conference, the Interactive Advertising Bureau (IAB), AIGA, The Art Director’s Club, The One Club, Hyper Island, NYU and the League of Advertisers.