There is increasing evidence that addressing sustainability can be good for business as well as the planet. We look at how the shifting emphasis towards values-based consumption is placing the onus on companies to take the lead – and ask what businesses are doing to recognise this.
Today’s consumers are looking to companies to show them how to make sustainable buying decisions. It is not just the younger consumers as generational-stereotyping might have us believe – for individuals of all age groups, our inability to make a neutral (even positive) impact through day-to-day consumption is becoming increasingly frustrating.
The recent uproar against plastics–while playing only a bit part in the wider question of sustainability–is a tangible issue that has projected the topic onto the agenda of many consumers. It is undoubtedly the precursor to what has become a shift in how we are making purchasing decisions, and what our perception of value is. Technology firms are waxing lyrical about how they can help companies increase efficiencies and lead sustainability efforts. And we are now seeing the innovations originating from nimble tech start-ups being replicated (to varying
consumers are wise to ‘greenwashing’–the increasingly transparent practice of making unsubstantiated claims about a company’s environmental conscience
degrees of quality) by incumbent industry players, as they try to keep pace.
Lead, don’t follow
In the financial services sector, where regulation has historically driven much of the change on the consumer side, those firms that take the initiative and lead the way stand to win over customers. But it means making genuine investment in sustainability. The word genuine is key here because consumers are wise to ‘greenwashing’–the increasingly transparent practice of making unsubstantiated claims about a company’s environmental conscience–which has the potential to damage a firm’s reputation more than a one-off regulatory breach, for example.
It is often said that significant change forces innovation. Certainly, the issue of the environment is forcing positive action. Today, many organisations are moving towards incorporating science-based targets that resonate with wider global goals such as the global Sustainable Development Goals (SDGs). This is not just talk and a real example might be Colgate Palmolive, which has introduced a Global Energy Reduction Team to look at reducing water consumption across its business.
The question is, what is your business doing to make it easier for consumers to do the right thing? If sustainability is not a core component of new product design, or if your business is not questioning the carbon footprint of its supply chain, it might be time for a rethink. Those firms that wait for regulation to catch up and dictate their rules of conduct, will likely be caught off guard.
Let us not forget that consumption is still democratic
It is well reported that younger consumers are intent on putting their money where their values lie. And sustainability is just one part of this jigsaw. A firm’s ethical reputation will hang on much more than just the environment and now requires companies to have a wider culture of doing the right thing.
In the financial sector in particular, it is easy to focus on the bank-bashing and negative sentiment towards the behaviours of certain financial institutions which have tarred the industry. Rightly or wrongly, this is what many consumers perceive. Yet external developments such as concerns about the condensed power of FAANGs, privacy laws and irresponsible tax behaviours, are causing consumers to be more open to competition if they believe it has their interests at heart. It is time for financial services to move on, but we can only do this if commerce takes the initiative instead of wagging a finger at the regulator.
In recent years, consumers have become more accustomed to a fluid, innovative environment. We are no longer afraid of using firms that don’t have the backing of big brands and most of us are willing to forego the perceived security of established firms for innovative start-ups that we feel are fighting our corner. Those firms unwilling to adapt to these changing trends are likely to have their reputation eroded, and it is a little inward looking to be caught up solely in the regulatory change that has followed the Financial Crisis. Conversely, sustainable and ethical considerations pose a great opportunity for financial services companies, and the industry as a whole, to win back trust.
Companies that make it easier for people to do business–with non-exclusive and accessible services–are becoming increasingly attractive to consumers. Since the Financial Crisis, the regulators have been working to make it easier to new entrants in order to increase competition. Accessibility is starting to replace exclusivity and we only need to look at new entrants in the wealth management sector as an example, as they offer lower fees and low investment minimums (and many of whom have made sustainable investing a key premise of their offering – not coincidentally).
Elsewhere, challenger banks continue to take an increasing share in the banking sector. According to the FT Adviser, the biggest mortgage lending growth in 2017 came from specialist and challenger banks while main stream lenders saw a decline in lending growth. When it comes to day-to-day banking services their processes feel smooth, providing a reassuring sense that the bank is on the consumer’s side. (It takes just minutes to open an account and your bank card will come the next day rather than the tedious 3-5 day window quoted by traditional banks).
Technology means that large companies can no longer afford to hide behind legislation and sluggish services will be punished. Firms have a real opportunity to re-evaluate, streamline and focus on what they are good at. This might result in losing some of the legacy business that is costing money to maintain, and which might be low hanging fruit for more nimble market entrants, for example.
In conclusion, the challenges posed by conducting sustainable business offers a big opportunity for the industry to regain trust by taking the lead. As changes are not legally obligatory however, it puts the emphasise squarely on individual firms to act. Furthermore, once the fog of Brexit has lifted, the environment and ethics look set to play a significantly bigger role in the theatre of politics. Companies that acknowledge this will do well, while businesses that continue to brush aside sustainable and ethical matters do so at a very high risk to reputation.