Consumers walking the talk, spending based on ESG

Studies have found that consumers are more likely to buy from purpose-driven companies and are considering sustainability in their decisions.

Julia Wilson

Julia Wilson

Principal, Advisory Strategy and ESG, KPMG US

+1 404-222-3511

Consumers are increasingly deciding where they shop and what they buy based on how sustainable they think the brands are: whether that is because goods are ethically sourced, manufactured, or produced with sustainability in mind. Studies have found that consumers are more likely to buy from purpose-driven companies and are considering sustainability in their decisions.

Retailers take the call to action

Retailers and CPG companies are responding to this increased awareness by consumers. But it is not just the consumer driving action. Retailers and manufacturers alike cite increased pressure across a variety of stakeholders. According to the 2022 KPMG CEO Outlook survey of 165 global and U.S. consumer and retail (C&R) CEOs, seventy-two percent of C&R leaders reported seeing demand from stakeholders, such as investors, regulators, and customers – for increased reporting and transparency on ESG issues.

Beyond reporting, thirty percent of consumer and retail CEOs believe that taking a more proactive approach to societal issues will be the key driver to accelerating their company's social component of the ESG strategy in the next three years.

A separate KPMG 2022 survey of 100 US retail executives found that most of them recognize the importance of ESG and will maintain or expand ESG budgets in 2023. They also are more inclined to invest in established processes, and mechanism for oversight of ESG topics as key to addressing ESG challenges.

Keys to a successful ESG journey

Retailers have made great strides at incorporating ESG goals in their business. Companies have no small challenge in the years ahead as they execute on their commitments and especially net zero carbon emissions targets.

The increasing body of evidence that indicates that companies can both do good and do well financially is contributing to a record number of retailers setting out on their own “ESG journeys.”

A successful ESG journey typically involves four distinct phases:

  • Assess current state: Take a 360 view of ESG internally and externally.
  • Build strategy: Determine where you want to go with ESG, and your overall objective compared to your peers.
  • Operationalize: Put the programs in place to reach targets and commitments.
  • Report and monitor: More than compliance, it is about measuring the pace and success of the organization’s ESG strategy.

A caution is that companies may try to take on too much at the beginning and are challenged with trying to make progress on all topics.

Embarking on the ESG journey regulatory requirements ahead

The U.S. regulatory wheels of the SEC are now in motion with proposed Climate Disclosure Rules anticipated to be finalized in April, 2023, yet companies understand the importance of moving forward with the programs and processes to be able to timely report on climate disclosures once they take effect. Many of the largest retailers and CPG companies are taking a proactive approach to anticipated requirements, citing that they simply do not have time for a wait and see approach.