As the first half of the year nearly draws to a close, our intern Stella takes a closer look at 3 sustainability trends that are shaping 2023.
1. ESG Standards & Regulation
In recent years, environmental, social and governance (ESG) factors have gained recognition as drivers of long-term growth and shareholder value. While ESG-focused investment is anticipated to continue rising throughout 2023 and beyond, investors and market participants have been pushing for increased regulation to combat greenwashing and misleading claims. In the absence of a definitive taxonomy of ESG factors, the methodologies used by ratings agencies are highly inconsistent, undermining their utility as a benchmarking and decision-making tool. Compounding this issue is the fact that ratings tend to focus on the risk of ESG factors to the rated company, as opposed to the impact that company has on the environment and society.
Last month, the UK government published a consultation on the future regulation of ESG ratings providers as part of its wider Green Finance Strategy. A key proposal laid out in this consultation is that ESG ratings providers are brought under the regulatory perimeter of the Treasury, to tackle concerns around the quality and reliability of ESG disclosures. The proposed reforms are designed to ensure ratings providers meet certain standards, by streamlining ESG frameworks and disclosure regulations. While the UK has a long way to go until we reach Net Zero, the strategy acknowledges that systemic changes are needed to support firms through the transition to a net-zero economy. ESG standards and regulation are anticipated to evolve throughout 2023, as stakeholders demand greater accuracy and transparency from ratings providers.
2. Sustainable Supply Chains
According to a recent survey from Ernst & Young, focusing on supply chain sustainability is key to ESG efforts, as global supply chains account for an estimated 50-70% of operating costs and 90% of greenhouse gas emissions. In today’s globalised economy, supply chains can also play a significant role in targeting human rights issues, unethical labour practices and corruption. Undoubtedly, establishing an ethical and transparent supply chain can deliver enduring organisational resilience, unlocking new opportunities for innovation and collaboration. But this is easier said than done, due to the scale and complexity of many supply chains, spanning multiple continents and involving many suppliers and subcontractors.
A recent documentary entitled Fashion Reimagined highlights this issue, by following British designer Amy Powney on a quest to create a collection that is entirely sustainable from “field to finished garment”. This would ultimately take her the best part of 3 years to achieve, travelling throughout Europe and South America to source materials and meet the people who produce them, considering the production footprint at every stage. The film emphasises the importance of transparency in building sustainable supply chains, as well as continuous improvements in processes, policies, and materials. While we are far from the end goal of a net-zero supply chain, consumer preference for sustainable brands is compelling businesses to rethink their supply chains and take accountability for the actions of their partners and suppliers.
3. Purpose-Driven Marketing
Purpose-driven marketing is a means of connecting with customers on a deeper emotional level, emphasising a company’s commitment to a higher purpose beyond simply making a profit. One example of this is Lush, a natural cosmetics retailer which has built a strong reputation by developing purpose-driven campaigns such as Have a Heart, which called on the UK Government to pass legislation banning LGBT conversion therapy. Stores across the UK invited customers to scan a QR code and send an e-card to their local MP, asking them to “have a heart” and bring an end to this abusive practice. By leveraging brand values to drive engagement, this approach fosters trust and loyalty as consumers increasingly seek out brands which align with their values.
As consumers become more socially and environmentally aware, companies are facing increasing pressure to address these issues. But authenticity is a critical component of purpose-driven marketing, and this means that certain principles must be applied throughout the company. As part of its Have a Heart campaign, Lush reviewed its own diversity and inclusion policies, to ensure the values behind the campaign were being reflected inside the company. While having a brand purpose is paramount, authenticity, transparency, and consistency in communicating these values is what makes a genuine connection in the minds of consumers.
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