One of the trends of today’s corporate climate is that many businesses are doing whatever they can to signal their values and belief system to potential customers. Be it social responsibility, inclusiveness, diversity, or a number of other issues, this corporate development has become front-and-center.
This isn’t some misguided attempt at altruism either, as consumers are increasingly demanding that companies take sides on certain issues and share their views. While this may have started in more “progressive” industries – or areas that have been known for their avant-garde policies – it has become a widespread phenomenon. Everything from major shoe companies to those selling razors are doing their best to let customers know where they stand on issues.
While we can argue about the merits of some of these strategies, there can be little debate that what companies believe is increasingly important to consumers and thus to investors. That is why it may be so important for companies to embrace sustainability.
Why sustainability?
In an age of disagreement, sustainability is proving to be an issue that many can rally behind. A sustainable policy sees widespread popularity among consumers and many are choosing to do business with companies based, in part, on their promotion and belief in sustainable ideals.1 Younger consumers are especially in tune with sustainability, as close to 66% of consumers under 35 are willing to pay more for brands committed to a positive social and environmental impact.2
Given the increased interest from consumers, it shouldn’t be a surprise that this is already having an impact on the investment world. In a study by MIT and the Boston Consulting Group, a 3,000 person survey across the globe found that nearly half would not invest in a company with a poor sustainability record.3 This trend is spilling over to the institutional side as well, at least according to a recent Ernst & Young survey. In their research, Ernst & Young found that institutional investors believe environmental and social issues should be a top three priority for corporate boards this year, with more than a third focused on climate change—up from just 15% three years ago.4
Consumer activism and its growing impact is slowing beginning to permeate corporate boardrooms, resulting in policy changes for major firms. And as millennials and younger generations—who have shown a greater interest in sustainability—constitute a larger share of the investing pie, it isn’t unreasonable to assume that these issues will increase in both prominence and importance in the years to come.
Bottom line
Social and environmental issues are front-and-center in today’s market, and many now expect corporations to take a stand. One area that allows corporations to do this without wading into as much controversy is the world of sustainability.
This potentially makes sustainability a vital goal for corporations who are seeking to keep both young consumers happy and shareholders in their corner as well. It is also a great example of why knowing and considering sustainability practices may be important, even if it isn’t an investor’s core personal belief.
More than anything, sustainability is what the market is demanding from companies, while various stakeholders—such as employees, customers, and society – are holding firms accountable to sustainability pledges in a meaningful way. To overlook this key aspect of today’s investing climate may be a mistake.
- https://www.nielsen.com/us/en/insights/reports/2018/unpacking-the-sustainability-landscape.html
- https://www.nielsen.com/content/dam/nielsenglobal/dk/docs/global-sustainability-report-oct-2015.pdf
- G. Unruh, D. Kiron, N. Kruschwitz, M. Reeves, H. Rubel, and A.M. zum Felde, “Investing For a Sustainable Future,” MIT Sloan Management Review, May 2016.
- https://www.ey.com/Publication/vwLUAssets/ey-2019-proxy-season-preview/$File/ey-2019-proxy-season-preview.pdf