The moral case for bringing environmentally and socially responsible products to market is clear. But is it possible to achieve profitable growth while also embracing environmental, social, and governance (ESG) priorities?
Recent studies have revealed encouraging trends in consumer behaviour towards products that are marketed as sustainable. The data also shows how businesses that embed sustainability throughout their organisations are gaining concrete financial advantages over their less sustainable competitors.
To put it into numbers, a report by PWC found that “products featuring sustainability attributes can achieve a revenue increase of 6% to 25%+ over products without such emphasis.”
Read on to find out how implementing corporate sustainability initiatives can improve your company’s long-term financial performance, and deliver the holistic trinity of growth, profit, and sustainability.
Faster growth, more market share
The key finding of a study by the NYU Stern Center for Sustainable Business is that products marketed as sustainable are both increasing their market share and also achieving faster growth than their non-sustainable competitors.
The analysis of US purchasing data in 2022 found that products marketed as sustainable held a 17.3% market share and grew approximately twice as fast as non-sustainable products, achieving a five year compound annual growth rate of 9.43% — almost double the 4.98% of non-sustainable competitors.
One explanation for these impressive results can be found in the Better Business, Better World report by the Business and Sustainable Development Commission. This study from 2017 found that when companies integrated ESG considerations at a strategic level, they often improved profitability as a result of operational efficiencies like reducing and eliminating wastage, re-engineering supply chains to reduce environmental impact and cut costs, and promoting internal innovation to improve existing processes.
In other words, embedding sustainability in your business can improve your operational performance. But this alone doesn’t explain the figures above. We also need to consider the behaviour of the people who buy your products.
People care about sustainability
Consumers are showing that they care about sustainability by shifting their spending toward products that are marketed as sustainable. A clear link between consumer purchasing behaviour and ESG claims was established by McKinsey and NielsenIQ, who analysed five years of US sales data for products claiming to be environmentally and socially responsible.
They found that products with labels like “environmentally sustainable,” “eco-friendly,” and “fair trade” showed an average 28% cumulative growth over five years, compared to 20% for products that don’t make ESG-related claims.
In two-thirds of the 32 food, beverage, personal-care, and household categories analysed, products that made ESG-related claims grew faster than those that didn’t. And these “sustainable” products accounted for nearly half of all retail sales in many of the categories.
We should note that the potential for greenwashing is concerning. Although it is a positive sign that people want to buy environmentally friendly products, there is a danger that brands could confuse consumers by making ESG-related claims that they can’t back up.
Meanwhile in the B2B market, another encouraging trend is emerging: not only are ESG products preferred, but customers are willing to pay a premium for them.
Paying a premium for sustainable products
Customers are willing to pay a premium for sustainable goods. That’s the headline finding of a study by Simon Kucher that surveyed over 1400 global industrial professionals on their preparedness and capabilities to pursue sustainability-related opportunities.
The study found a greater willingness to pay in highly technical and innovation-driven industries such as automation technology, semiconductors, aerospace and defence. It also identified a clear opportunity for early adopters of sustainability to gain a competitive advantage.
How much more are they willing to pay? The study by the NYU Stern Center for Sustainable Business found that sustainability-marketed products have a price premium of 27.6% compared to conventionally marketed counterparts.
The opportunity here is huge. The Better Business, Better World report estimates that achieving the seventeen UN Sustainable Development Goals would open up an economic prize of at least US$12 trillion by 2030.
In order to position your company to benefit, you need not only to integrate sustainable practices throughout your business, but also to represent your products as sustainable, setting them apart in a crowded market, and attracting customers who want to support eco-conscious brands.
Sustainability sells products
Representing your product as environmentally and socially responsible has a clear impact on sales. That’s the finding of a study by Elsevier on the influence of Corporate Social Responsibility Appeals (CSRAs) on product sales.
Analysing over 10 million retail transactions, the study determined how effective seven different types of CSRA were on sales. These messages directly convey CSR claims to shoppers on product packages, either as functional messages like “eco material,” “eco packaging,” and “organic,” or as symbolic messages like the “cruelty-free” and “Fair-Trade” labels.
The study discovered that sales revenue for CSRA products was 6.4% higher than for non-CSRA products, with functional messages being more effective at driving sales revenue than symbolic messages. Again, we should note the risk of greenwashing here, if the ESG-related claims brands make are unsubstantiated.
This research makes a strong case that implementing corporate sustainability initiatives and communicating this to your customers leads to improved business and financial performance. So how do you use these insights to unlock sustainable growth for your business?
How Dayrize can help your business seize the opportunity
It’s important not to think of sustainability as a cost, but to look at it as an opportunity to differentiate your company and increase revenue by attracting environmentally-conscious customers.
“In the shift towards sustainable development, embracing ESG principles is both ethical and strategic. Companies integrating sustainability into their core unlock new markets, command premium pricing, and enhance operational efficiency, paving the way for long-term value beyond mere profitability. This approach isn’t just about meeting expectations; it’s about leading with innovation and securing a competitive edge in a forward-thinking global marketplace”
John Kirwan,
VP of Sales
Dayrize
In order to make that shift, you need to be able to make authentic claims about your products’ credentials. Dayrize can help by providing holistic sustainability intelligence and actionable insights that identify your products’ sustainability impacts.
Our Sustainability Intelligence software can also help you pinpoint areas for improvement, and even model product changes to help you forecast the effect of using alternative methods and materials on resource consumption and operational efficiency.
Subscribe to Dayrize updates to learn more from leaders in sustainability for businesses.
