In today's market, sustainability has emerged as a key concern for consumers, shaping their purchasing decisions and driving market growth. A joint study conducted by McKinsey and NielsenIQ McKinsey and examined 90+ different ESG-related claims on consumer goods’ labels, ranging from “ethical” and “eco-friendly” to “biodegradable.” This study sheds light on the relationship between sustainability, consumer behaviour, and business performance in the consumer packaged goods (CPG) sector. This article explores the findings of the study and highlights the significance of incorporating sustainable practices and environmental, social, and governance (ESG) claims in business and marketing strategies.
Link to study: McKinsey-NielsenIQ Joint Study
Consumer Demand for Sustainable Products:
Consumers have demonstrated a strong inclination towards purchasing environmentally and socially responsible products. In a 2020 McKinsey survey on US consumer sentiment, over 60 % of respondents expressed their willingness to pay more for products with sustainable packaging. Additionally, a recent NielsenIQ study revealed that 78 % of US consumers consider a sustainable lifestyle important. Despite this demand, many CPG companies have faced challenges in generating sufficient consumer interest and demand for their ESG-focused products. Numerous instances exist where companies have launched products with ESG-related claims but fell short of sales expectations.
The Business Case for Sustainability:
To understand the impact of ESG-related claims on consumer behaviour, McKinsey and NielsenIQ conducted an extensive study that analysed actual consumer spending patterns rather than relying solely on self-reported intentions. The study tracked the sales growth of products with ESG-related claims and compared them to products without such claims over a five-year period.
ESG-Related Claims Drive Growth: Products featuring ESG-related claims experienced an average cumulative growth of 28 % over the five-year period, compared to 20 % for products without such claims. This demonstrates a clear and positive correlation between ESG-related claims and sales performance.
Shifting Consumer Spending: Over the five-year period analyzed, products with ESG-related claims accounted for 56 % of all growth, surpassing initial market expectations. Consumers are actively supporting their stated ESG preferences by choosing products that align with their values.
Implications for Businesses:
The study emphasises the importance of integrating sustainability and ESG-related claims into business practices and marketing strategies. Companies should recognise that sustainability is not only a moral imperative but also a solid business decision. The following insights from the study can guide businesses in developing effective sustainability strategies:
Consumers Prioritize ESG-Related Claims: Consumers are gravitating towards products with ESG-related claims, indicating a demand for sustainable and socially responsible options. By aligning with consumer values, businesses can tap into this growing market segment.
Types of ESG Claims Matter: The study identified six classifications of ESG-related claims, such as environmental sustainability, social responsibility, and sustainable packaging. Businesses should assess which claims resonate most with their target audience and tailor their messaging accordingly.
The McKinsey and NielsenIQ study provides valuable insights into the consumer behaviour dynamics surrounding sustainability and ESG-related claims. It establishes a compelling case for businesses to prioritise sustainability and integrate ESG considerations into their operations and product offerings. By meeting consumer demand for sustainable products, companies can drive growth, enhance their reputation, and contribute to building a more sustainable and inclusive economy.
We are keen to speak with businesses who are looking into a more sustainable approach to coms and marketing.