Why a Robust ESG Profile is Essential for Food & Beverage CPG Marketing

CPG marketing that leverages positive ESG performance will attract younger generations whose buying power will only increase with time.

Younger generations, particularly Gen Z, are more and more aware of the impact their shopping habits have on the world around them. As a result of that, brands with robust ESG (environmental, social, and governing) programs are more appealing to them. Considering the buying power of both Millenials and Gen Z, these consumer preferences can’t be ignored. 

According to NASDAQ, these groups account for 43% of the US population and 49% of the global population, “…together with Gen Z, [millennials] are poised to be on the receiving end of a wealth transfer as big as tens of trillions of dollars.”

Combine that with their preference for products that are environmentally friendly, socially conscious, and originating from companies with ethical company policies, and brands simply can’t afford to ignore these issues. Additionally, the benefits of ESG initiatives extend far beyond consumer appeal including employment decisions.

Considering the momentum of these concerns among consumers, shareholders, and various governing bodies, deciding whether or not to pursue ESG initiatives isn’t a yes or no question. It’s a matter of deciding which direction is right for your brand and how best to convey your ESG performance to consumers.

How Do Food and Beverage Brands Select An ESG Lane

Deciding which aspects of ESG to implement, track, and advertise can seem like a big undertaking. However, while implementing these kinds of changes can take time and money, the appropriate ESG avenue a brand should pursue often comes down to a mix of practicalities, your inherent values, and willingness to commit. 

The simplest way to get started is to identify an ESG position where your brand is already performing well or above average. Does your brand already promote an inclusive workplace, have competitive wages, or have some form of anti-corruption policy for management? Then your Governance performance is off to a great start. From there it’s a matter of optimizing and tracking that data before advertising it to consumers.

Brands can also go the opposite route and identify areas where they’re performing very poorly. For example, identifying and correcting a sustainability issue may attract consumers who appreciate transparency and prefer more environmentally friendly products. This can greatly improve brand affinity which may lead to higher sales volumes and higher lifetime customer value.

There’s also something to be said for pursuing a direction that the food & beverage industry finds particularly challenging. In a report from DLA Piper, in partnership with Fitch Solutions, they examined the performance of food and beverage companies in regard to ESG issues. While brand reputation was one of the top concerns, “…about 4 in 5 respondents also cite responsible sourcing of products, the use of plastics in packaging and carbon emissions as either their largest or second largest ESG challenge.”

ESG Pitfalls and Opportunities

All claims of ESG performance must be accurate and verifiable. While attracting consumers is obviously the end goal, using ESG ad claims that can’t be verified will have the opposite effect and can be detrimental to brand reputation. Greenwashing, false or exaggerated claims in regard to environmental friendliness, is particularly problematic.

For example, an article by Bloomberg Law detailed what happened when a consumer sued Nestle over certain ESG ad claims. “The judge sided with a plaintiff that said she bought Nestle’s products, including its hot cocoa, because of social and environmental benefits that were featured on the packaging. She said she later found out that the Swiss company’s practices are harmful to the environment, and that its cocoa comes from plantations that rely on child and slave labor.”

Additionally, forward-thinking in regard to ESG issues can keep companies out of hot water as governing bodies update various regulations. Brands that already have ESG programs will have an advantage and can possibly avoid non-compliance risks (fines, lawsuits, shutdowns, etc.).

Kirsty Simpson, director of the Litigation and Regulatory team at DLA Piper South Africa, adds “A focus on ESG not only makes business sense but also legal sense. If appropriate ESG policies are not adopted and implemented, licenses and permits may be refused, suspended, or withdrawn as a result of the failure to comply with regulatory requirements. Legal liability may also flow against corporate entities or their directors who breach duties in relation to ESG obligations.”

Bottom line? Food and beverage brands with ESG ad claims that are substantiated are more likely to attract consumers and avoid legal pitfalls.

Advertise ESG Performance Via an Omni-Channel Approach

Once a food and beverage brand has implemented an ESG program, its performance must be tracked in order to leverage it for CPG marketing purposes. While having this data is useful for internal purposes, strategically advertising it across multiple channels allows you to effectively share these programs with consumers.

High-quality marketing assets that inform consumers about these programs are particularly effective. These can be shared across social media, on the brand’s website, through Amazon descriptions, etc. It’s also worthwhile to consider whether this information should be included on the label. If an ESG conscious shopper is debating between several similar products on the shelf, that information could be what lands the sale.

Want insight from an expert in the industry? Tune in to Building a Socially Conscious Brand. In this episode of our podcast, Beyond the Shelf, Rod Johnson of BLK & Bold Specialty Beverages shares how he and his friend/business partner, Pernell Cezar, created a line of specialty beverages that gives back to communities across the globe as well as why he believes there should be more socially conscious brands.

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