There is a mountain of surveys out there now that are telling businesses that if they up their game on sustainability, they will get more sales. The million-dollar question is, are the surveys correct? And it really is a million-dollar question. There’s a whole load of money at stake here (not to mention survival on Earth but don’t get me started…).
Because of course when we’re filling out a survey, most of us we will say ‘absolutely, yes, I buy sustainable brands over those that aren’t and yes, I will pay more for sustainability…’ but do we really do that when we’re standing in the supermarket getting our wallet out? [Or tapping our phones on the payment reader, for younger readers]. Equally, do we choose to shun brands that have had negative press on their social and environmental (E&S) performance?
To find out for sure, once and for all, a new and rigorous empirical study has been carried out by proper serious academics in the US. This comprehensive study set out to find out for sure whether, as shoppers, we really do put our money where our mouth is.
I’ll get straight to the point. Turns out we really, actually do. The results are in and sustainability really does drive a significant boost in sales but wait, there’s more…
SUSTAINABILITY BOOSTS SALES
This study, called Do Consumers Care About ESG? Evidence from Barcode-Level Sales Data, took the E&S ratings from third-party agencies of 192 firms with products in 886 product categories, sold in 2,641 US counties. It looked at the relationship between the E&S rating and sales from barcode data.
Now, crucially, the researchers were also able to control for other factors such as advertising and price in order to really hone in on the causal relationship between E&S and sales.
The findings were conclusive. ESG and corporate social responsibility does drive sales. The scientists stated that: “Our study provides direct evidence that E&S activities affect consumer demand–the cash flow channel of ESG.”
“Using granular barcode-level sales data from retail stores, we show that environmental and social ratings are positively related to local sales… The granularity of our data enables us to compare very similar products sold in the same location at the same time by companies with different levels of E&S activities.”
THE DIFFERENCE ESG MAKES
Okay great, but how much difference does it make? How much more sales does a brand drive when it gets serious on sustainability? On average, the study found that E&S drives a nine per cent increase in sales.
“Based on our estimates, a one-standard-deviation increase in the owner’s E&S rating is related to an increase in sales of 9.2% in the subsequent year for the average product sold in the same county,” the scientists stated (they go into a lot more detail in the report that you can download here).
Of course, a word of caution, this is an ‘on average’ figure. It depends on all sorts of variables such as the type of product, socio-economic factors, etc. But still, it’s a guide.
SALES SLUMP AFTER BAD ESG PRESS
The study also found that if your market competitor has a higher E&S rating, it will negatively affect your sales. In other words, your competition will see their sales climb at the expense of your sales dropping.
As well, the study found that sales decline for a firm that receives negative press on E&S issues.
Finally, the study also found that immediately after major natural and environmental disasters, sales in areas located close to the disasters become more sensitive to environmental ratings.
So, let’s sum that up.
- If you get serious on your ESG (you know, like becoming a B Corp), your sales will increase by an average of nine per cent.
- If you don’t do anything about ESG but your market competitors do (you know, like becoming a B Corp), their sales will lift and yours will decline.
- If you get any bad ESG press, your sales will slump.
- If you’re in an area that experiences any extreme weather or natural disaster exacerbated by climate change, and your product doesn’t have good ESG, your sales could slump.
So what do you do? You take action on ESG. We think the best way to do this is by becoming B Corp Certified.
Become a B Corp
Are you more convinced that B Corp is right for you? Would you like to join the B Corp companies using business as a force for good? Here at Grow Good, we exist to coach people through the process of becoming B Corp certified.
The B Corp Impact Assessment framework is free to access and provides dozens of useful insights and opportunities for any business but it can be confusing and overwhelming.
We are consultants who have completed the official training provided by B Lab, the organisation that runs the B Corp certification programme. We live, breathe and sleep B Corp. We are your friendly B Corp buddies. We make it easier. We translate the questions into plain English and give you a host of template policies and example documents so you don’t have to start everything from scratch or reinvent the wheel. We show you how to unlock the big point scoring areas most relevant to your business.
Are you ready to go B Corp? It’s completely your decision but if you are, and if you think it would be helpful to have a guiding hand through the process, we’re here to help. Drop us a line or jump straight in and book a free call here.
Yours in purpose,