For many Product Leaders and their teams, incorporating Environmental, Social and Governance (ESG) factors into their decision-making is still a not well understood task and a grey area.
In this blog I explore the top ESG trends that you need to be aware of as Product Leader. From shifts in consumers preference that open new market opportunities to anti-greenwashing regulations that set higher expectations on how green claims about products are backed up by data. From increased need to embed ESG considerations throughout the product lifecycle to the use of digital tools to enable the transition to more sustainable products.
This is a good timing to equip yourself with the right tools and think about the long-term success of your products and services.
1. Consumers have increasing interest in buying sustainable products and willingness to pay a premium price.
In recent years, consumers are increasingly shifting their spending toward products with ESG-related claims. This trend reflects a growing awareness of the environmental and social impact of consumerism. As concerns about climate change, resource depletion, and social justice escalate, consumers are seeking out products and investments that align with more sustainable values.
Find below some stats that give you a sense of how the market is changing.
This year, McKinsey and NielsenIQ have undertaken an extensive study to explore whether consumers really care about sustainability and ESG claims. The study examined the actual spending behavior of the consumers, and it was conducted on everyday consumer packaged goods, ranging from foods and beverages to cosmetics and cleaning products, offered in supermarkets in the US.
One of the findings was that products making ESG-related claims averaged 28 percent cumulative growth over the past five-year period, versus 20 percent for products that made no such claims.
Although this study has limitations and does not establish a definitive causal link between consumer choices and ESG-related claims, the shift in consumers’ preferences is evidenced by various consumer sentiment surveys.
Here some examples from consumers globally.
In 2023, Bain surveyed more than 23,000 consumers globally about a broad set of sustainability issues. Among other findings, it emerged that consumers are interested in purchasing sustainable products, with 50% reporting that sustainability was one of their top 4 purchase criteria. Moreover, respondents are globally reporting that they would pay a 12% premium on average for minimized environmental impact. Similarly, in 2022, the IBM Institute for Business Value (IBV) survey of 16,000 global consumers found 49% of consumers say they have paid a premium—an average of 59% more—for products branded as sustainable or socially responsible in the previous 12 months.
Tip for Product Leaders: There is an opportunity to generate demand for sustainable products. Start researching new target markets that value sustainability and analyze the potential financial benefits of the new market opportunities!
2. Regulators across the globe are taking a stronger stand against deceptive environmental claims; Product Leaders have a role to play in counteracting greenwashing.
With the rise of sustainable labels, there has also been an increase in deceptive or misleading environmental and sustainability claims in advertising and marketing; therefore, regulators are strengthening their stance on greenwashing and setting the measures to examine firms’ practices and protect consumer.
Whether intentional or not, greenwashing occurs when assertions lack evidence, leading to implications for organizations. The stakes are high, with reputational risks and diminishing consumer and investor confidence in genuinely green and sustainable products. To address this issue, consumer protection laws include green claims codes and guides, offering businesses a framework to avoid falling into the greenwashing trap. In addition, financial regulators are taking decisive action by establishing mandatory ESG disclosures and standards for corporate reporting. These measures underscore a collective effort to foster transparency, accountability, and authenticity in the pursuit of sustainable business practices.
Tip for Product Leaders: By building evidence and incorporating ESG considerations across product and service lifecycles, you can create the foundation to confidently support product environmental and sustainability claims with reasonable grounds that can be verified.
Download the Skyjed STOP Greenwashing Playbook and:
- Discover how to navigate the evolving anti-greenwashing regulatory landscape;
- Be equipped for the increasing scrutiny and mandatory ESG disclosures;
- Confidently back up green and sustainability claims.
ESG considerations are no longer an afterthought but a crucial element throughout the product lifecycle, necessitating an immediate consideration in product design, production, and distribution strategies to meet evolving consumer demands and regulatory requirements.
Organizations are increasingly being held accountable for the impact of their products and activities on the environment and society. In fact, the way we produce and consume has some negative impacts on society and environment (e.g., emission of greenhouse gases, waste, social inequalities, and others). Environmental and societal issues, such as climate change, biodiversity loss, modern slavery, inequalities, food security and others are interconnected and lead to risks and opportunities for both, businesses, and society.
If we aim at achieving sustainability and remain competitive ESG risks, opportunities and impacts should inform how products are designed, engineered, and used.
A more sustainable product/service is economically viable and:
- Produced/provided, distributed, consumed and disposed of in a socially responsible way (e.g., using clean energy sources and saying no to modern slavery practices in the supply chain)
- Developed with ESG risks and opportunities in mind
- Not causing health or safety concerns during the production, supply chain and for consumers
- Compliant with sustainability requirements and ESG reporting
- Free from greenwashing.
Tip for Product Leaders: embrace Lifecycle Governance and Management and take a comprehensive approach to managing products and services throughout the entire lifecycle and embed sustainability considerations that align with the broad organizational strategy. Such an approach encompasses strategic planning, risk assessment, continuous monitoring, and adaptive decision-making.
Skyjed’s founder, Leica Ison, discusses how to enhance the overall product/service ESG performance in her recent blog: Beyond Carbon Credits: Embracing Lifecycle Governance for Sustainable Product Transitions.
How the Skyjed platform helps Product Leaders to make ESG data part of their decision-making process
Digital transformation and ESG data go hand in hand. The Skyjed platform enables Product Leaders, Managers and CEOs to capture and use financial and non-financial data as a strategic resource to make informed decisions and drive growth across 6 domains of product health:
Once the data is captured, the Skyjed platform facilitates the continuous monitoring and improvement of the product/service throughout its lifecycle.
The Skyjed’s platform offers a simple framework to enhance the overall product/service ESG performance:
♦ Set up a new product or service
♦ Create a team with an ESG focus and start collaborating
♦ Design sustainable products and lifecycles
♦ Connect with distributors, suppliers and relevant stakeholders to exchange ESG data
♦ Monitor ESG goals and manage ESG risks
♦ Make continuous improvement of ESG performance of products and services.
Contact us today so we can assist you in setting up the ESG templates! We also get you started with the wider range of Skyjed’s platform features that support you to implement the sustainability strategy as well as achieve your product ESG goals and prevent the risk of greenwashing.
About Skyjed
Skyjed’s AI-powered end-to-end lifecycle and governance platform is mission control for product management. Bringing together every data point across your entire product portfolio and lifecycle into a single source of product truth, it gives our clients a new perspective to make more strategic lifecycle decisions to launch, monitor, optimize, and win with brilliant products.
Our industry-leading platform has received numerous awards and recognition from clients and industry bodies, demonstrating our commitment to innovation and excellence.
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If you want more information, Contact the Skyjed team.