APAC can do better on ESG

In the latest R3 and Campaign CMO Outlook study (exclusive to participants and Campaign members), 56% of senior marketers in APAC said their companies “could do better” regarding environmental, social and corporate governance (ESG). Only 2% of APAC marketers surveyed said issues related to ESG were not important. The survey results suggest ESG needs more attention from corporate leadership, and opinion still exists within some companies that ESG is a distraction from 'real' performance drivers.

C-suite priorities vs consumer interest

Regardless of C-suite priorities, issues of sustainability and diversity are of concern to Asian consumers. A study released by Hakuhodo last year highlighted that 74% of Indonesians prefer socially conscious brands and will pay more for socially conscious products. Indonesian consumers place a high emphasis on positive community impact. They want to see initiatives where results can be experienced at a hyper-local level. In India, the pandemic has increased consumer awareness around the scarcity of resources. In response, 65% of consumers said they will continue their adapted buying behavior in the “new normal.”

Some brands have made significant commitment to align their interest with changing consumer needs and values, seeing this as a step toward building a more sustainable business—an imperative in a post-pandemic environment.

Gojek has pledged to meet its goal of zero emissions, zero waste, and zero barriers by 2030, working toward not only blue skies but economic security for its drivers. Indian CPG company Godrej Consumer Products looks internally and has initiated policies that address gender parity, LGBTQ+ inclusion, and the work-life balance of its employees.

ESG drives, rather than distracting from, performance

Regardless of North Star brands leading by example, 8% of marketers surveyed in APAC have not seen any financial investment in ESG in the last year. 54% saw little or no increase in ESG expenditure. Slashed budgets as a result of COVID might be an explanation, but if brands are serious about performance, they must acknowledge the ROI of greater sustainability, diversity and inclusion, as well as good governance.

Good governance has been proven to correlate with commercial performance. Just this year, Tesla, Walt Disney, and Walmart were three companies added to the S&P 500 ESG Index, which measures the performance of securities that meet sustainability criteria. They join long-standing members of the Index, like Apple, because of improvements in areas like Environmental Responsibility and Occupational Health & Safety. The financial investment company MSCI has its own ESG Leaders Index for Asia, and companies like Tencent, Alibaba, and Sony rank high on the list.

Having diverse representation on boards also clearly improves performance, yet there is still hesitancy to include women in governance roles, as shown by Singapore’s struggle to meet the Institute of Public Charter’s goal of 30% female representation.

ESG as a marketing mandate

How we are to change reluctant attitudes and biases to ESG will depend on pressure from competitors and the power of the consumer.

Encouragement can be found in knowing that half of senior marketers in APAC have ESG under their marketing remit. Sceptics might argue this opens doors for greenwashing and more meaningless PR campaigns, but if marketers are set on transforming their companies into data-driven organizations, the results will serve as additional proof points to elevate the importance of ESG among stakeholders.

Three ways to improve on ESG, wherever you are on the journey

1. The most important thing is to build awareness. Awareness is a great motivator for change. Collecting diversity data from your agency partners and gaining a greater understanding of production and digital processes through a sustainability lens are easy steps to begin with. With this information, marketers can benchmark their performance and identify areas where they are doing well, where they can easily improve, and what needs urgent attention.
    
2. Companies that have ESG data should use that knowledge to activate compliance. Releasing sustainability and diversity reports is a nice way to keep stakeholders and consumers informed, but what really matters is how the information is applied to improve current performance. Compliance is not just a result of auditing but one of systems (including technology) and process.
    
3. Companies that do not integrate ESG principles into everyday business will find the journey laborious. Much like building muscle, developing a culture of sustainability and accountability takes time and effort. A few campaigns and a one-year commitment won’t cut it. To achieve transformation of this scale and significance requires vision, expertise, patience, and a clear roadmap championed by company leadership. It must become part of the way a brand does business

Shufen Goh is co-founder & principal at R3.