In recent years, the growing imperative to make claims around ESG (environmental, social, governance) and sustainability has caused companies who never thought they needed to worry about managing advertising claims to stand up and take notice.
These companies face a dilemma. They must make sustainability claims or risk falling behind competition and potentially going out of business. However any misstep around sustainability claims can have disastrous consequences in today’s highly charged socio political environment.
So why is this the case, and what can companies do to set themselves up for success?
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The Pressure to Make Sustainability Claims
The tremendous pressure placed on companies to make claims around how their products and organizations are addressing sustainability concerns is coming from all fronts, and it’s only getting more intense.
- Consumers are increasingly making purchase decisions based on which products and companies meet their expectations around sustainability - A recent Capgemini study study revealed that almost 80% of consumers have or are likely to change purchase behaviors to favor environmentally and socially responsible products.
- Investors are integrating ESG considerations into their investment decisions. By 2024, Deloitte expects ESG mandated assets to represent half of all professionally managed assets globally. Similarly, stock exchanges globally are requiring ESG reporting. Currently 55% of global exchanges tracked by the UN Sustainable Stock Exchange Initiative have published ESG reporting guidance.
- Regulators are becoming more and more active. The European Commission, the International Consumer Protection Enforcement Network (ICPEN), and the UK Competition and Markets Authority came to similar conclusions that over 40% of sustainability related claims made on web sites are exaggerated, false, or deceptive. This and other findings are leading to more regulation such as the Green Claims Code in the UK, and a much anticipated revision of the FTC’s Green Guides in the USA.
This pressure is forcing change. Deloitte’s most recent Consumer Products Industry Outlook surveyed 100 senior executives at global CPG companies. Sustainability was the overwhelming top priority for innovation with over 5x the responses than the next highest priority. Closely related to this, six in ten companies are making moderate to significant investment in increasing transparency in 2022.
Greenwashing vs. Greenhushing
To complicate matters, the downside of errors, omissions, or outright false and misleading statements with respect to ESG and sustainability can be enormous. We’ve all seen news recently about companies accused of greenwashing or causewashing. With a topic as emotionally and politically charged as sustainability, condemnation around false claims is often swift and brutal with little regard for intent.
Recently, Coca-Cola, IKEA, Unilever, Procter & Gamble and TESCO were among companies called out for “misleading and mendacious packaging claims” by the Changing Markets Foundation, mostly related to plastic sourcing and recycling claims.
Unfortunately, fear of being accused of greenwashing has led to “greenhushing” - the deliberate under-reporting of sustainability-related data, activities and accomplishments specifically to reduce greenwashing risk. Of course this is not a good outcome either. Greenhushing leaves significant value on the table, reduces the number of companies that can serve as positive examples for others, and generally reduces the dialogue around the very important topic of sustainability.
4 Principles to Successfully Navigate Sustainability Claims
Ok, so companies across industries are in the difficult position of having to make claims related to ESG and sustainability in order to satisfy demand coming from multiple fronts. However the risks related to any misstep are potentially enormous and may very materially impact the business as well as corporate reputation.
Below are four principles companies can follow to make sustainability claims more confidently.
- Consistency - It’s critically important to put rules in place around how specific types of sustainability related claims must be substantiated. Very often large global companies may have a decentralized approach to claim substantiation. Different R&D departments or legal counsels may have their own substantiation requirements. With a clear, documented global approach in place, there is never a question around how a specific sustainability claim was substantiated. Because of this, as guidelines or regulations change, you’ll know exactly what the implications are for the substantiation methods you’re using and the claims you’re making.
At the 2022 ACI Food Law Conference in Chicago, an Assistant General Counsel at MARS, Inc. laid out just such an approach when she described the MARS Global Protocol for Sustainability Claims, which is being used to lay out clear criteria for dozens of types of sustainability claims across channels in the absence of clear government regulation. - Transparency - It’s important to be very clear within your organization about how and where sustainability claims are permitted to be used. Corporate level aspirational claims around future targets may not be appropriate for a specific brand to use. It’s important to have a transparent, global solution that lays out very clearly which sustainability claims can be used at which level of the product hierarchy, and how this may differ by geography and marketing channel. In this way, marketers can be confident in the claims they are using and those reviewing usage should have far fewer cases of sustainability claims used inappropriately
- Traceability - Be sure there is a single source of truth for all sustainability claims, and that there are direct links upstream to the substantiation that supports each claim and downstream to the usage of that claim in-market. This traceability will dramatically accelerate responses to questions about claims as they arise, and will enable rapid action if a claim needs to be changed or removed from market based on regulatory changes or competitive dynamics.
- Agility - Finally, given the dynamic nature of the ESG/Sustainability environment, agility in all things is essential. This is true whether you’re looking to accelerate new product development and associated sustainability claims, respond in social media with timely and relevant sustainability messaging, or avoid risk and accusations of greenwashing. Working with solutions that help unite related data and documentation, and bring workflows together for rapid approval will make a real difference.
Sustainability claims are a critical business imperative for all companies across industries. These claims help define brands and products in a way that resonates with consumers, and help define corporate objectives in a way that positions companies favorably to consumers, regulators, and investors alike.
Not much is certain around ESG and sustainability claims. However, companies who take the time to invest in systems and processes that deliver consistency, transparency, traceability and agility just might be able to rest a little easier while driving better business outcomes.
Reach out to have a conversation about how solutions from Veeva can help manage sustainability claims.
