We’ve Got the Chance to Win Consumers Over on ESG — But We’re Not Communicating It Right

For years, companies have embraced corporate responsibility, then sustainability and now ESG (environmental, social and governance). For the most part, it’s the same bag of goods, only with different packaging. That isn’t necessarily wrong or bad, especially if the outcomes are better for people, profit and the planet.

Today’s challenge, however, is that just when the business community has found a way in which to explain this work, now it's finding that ESG is under attack — and although yesterday's midterm elections, as of press time, hardly amounted to a "red wave," many business leaders will still have their doubts about the ESG movement's viability.

But ESG isn't doomed. If anything, companies have the opportunity to win over consumers, i.e., hearts and minds, with their ESG strategies. Why? Well, to start, a recent Fordham University survey found that about two-thirds of all consumers are still by and large unfamiliar with ESG. But despite that unfamiliarity, they are willing to hear more anecdotal stories about their companies’ ESG efforts and could reward them with more purchases and increased loyalty.

The problem, however, is that many companies are getting the communications part of this all wrong — and they will want to rethink how they talk with key stakeholder groups, starting with consumers.

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“The reality is that sustainability and corporate social responsibility are inherently easier concepts for consumers to understand and embrace than are the environmental, social and governance labels,” said Lerzan Aksoy, Ph.D., Interim Dean and Professor of Marketing at Fordham University’s Gabelli School of Business, which partnered with Rockbridge Associates on this research. “Perhaps most importantly, consumers want stories based on evidence that personally resonates with them.”

While sustainability and ESG professionals understand that governance, social and environmental challenges are all important, for consumers it’s a different ballgame. Consumers are still focused on a company’s environmental performance; as for governance, that’s a subject still very abstract to many consumers — the “G” in ESG may very well be for investors and other stakeholder groups to keep their eagle eyes on.

As for the social, while there’s plenty of evidence suggesting that companies can do just fine while taking a stand, this is where the gaslighting from politicians comes in, as Aksoy suggested. “The term sustainability is easier to understand for consumers so I doubt that the term ‘ESG’ will resonate positively with consumers in the near future, although it is being hammered by the governors of Texas and Florida, Elon Musk, and even the cartoon Dilbert by Scott Adams,” she futher explained to TriplePundit. “The problems result in part from the ability to manipulate components of the social construct to offset environmental issues.”

The Fordham-Rockbridge research also found that the ways in which ESG ratings evaluate companies isn’t resonating with consumers. That’s not to say companies should resort to greenwashing — far from it. If anything, companies should keep communicating their environmental progress, and to a lesser extent, social impact when appropriate. But there’s a difference in what should be communicated to key stakeholder groups such as investors and what is directed toward a company’s customers.

“Currently there is not a statistically meaningful relationship between firms’ social and governance ratings and how customers perceive their social innovativeness,” Aksoy said. “There is a weak but significant relationship between environmental ratings and customer perceived social innovativeness, but these relationships are likely to vary wildly given that there are well over 100 organizations measuring, monitoring, and communicating about firms’ ESG performance. Although the aim is to create meaningful distinctions, they instead create confusion among customers.”

Confusion is also sown when companies communicate too much, and therein lies a barn door that the likes of Elon Musk and the governors of Florida and Texas have opened wide, big time. “Too much ESG information can lead to customer numbness to the issue. Second, research suggests that communicating environmental rather than social issues has a bigger impact on customers,” Aksoy added. “And, there is little to no scientific research on the importance of governance issues relative to environmental and social ones, although our study found it to be significantly lower in importance.”

As for that barn door, there’s still time to slam it shut and allow companies to lead on the ESG narrative and counter any political attacks on this movement. “To increase customers’ ability to process ESG messages, previous research suggests that firms should leverage what is already salient to customers. For example, when a firm engages in a cause that customers perceive to be appropriate for the firm (i.e., high firm-cause fit); this increases the effectiveness of ESG communications,” Aksoy noted. “Similarly, ESG efforts with a clear connection to firm operations lead to positive customer outcomes. An examination of the research to date suggests that communicating ESG efforts in ways that make them appear tangible to customers is key.”

In the end, it’s what we’ve been taught all along: It’s not what you say, but how you say it. To that end, companies and their comms teams need to talk to and with their key stakeholder groups, not at them. “The reality is that sustainability and corporate social responsibility are inherently easier concepts for consumers to understand and embrace than are the environmental, social, and governance labels. Perhaps most importantly, consumers want stories based on evidence that personally resonates with them,” Aksoy told 3p.

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