The social pressures on businesses to act ethically or responsibly are growing. These pressures are stemming from a variety of stakeholders exerting their influence on businesses either directly or indirectly. Stakeholders include Consumers, Employees, Government and Investors all of whom are closely scrutinising the behaviour of businesses. These stakeholders care about how businesses conduct themselves in carrying out their day-to-day operations and how they generate their profits.
These influences are being demonstrated by:
Consumers Demanding Sustainable Goods and Services
A recent YouGov market research poll indicated that over 70% of UK consumers have the aspiration to live sustainable lives. The market for ethical products is now worth £ 50bn and has been growing at a healthy compound growth rate of 14% in the last decade. Early leadership shown by retailers Marks and Spencer’s has resulted in annual net benefits of £ 135m from it “Plan A” programme. Most other retailers are rising to this challenge motivated by the power of the green consumer. More and more consumers now expect their retailers and product providers to provide sustainable products for them to buy.
Sustainable Supply Chain Pressures
Retailers are now expecting leading consumer packaged goods (CPG) suppliers to create and provide them with products that are sustainable. As a result the design, development and marketing of sustainable products are a key business driver in CPG businesses. This pressure is not limited to the businesses to consumer (B2C) supply chain. B2C companies wishing to be authentically sustainable are now passing this aspiration on to their suppliers. As a result business to business (B2B) companies supplying to CPG businesses are now feeling the same pressures to become more sustainable.
Major groups of corporate investors such as the Carbon Disclosure Project (CDP) comprising 655 institutional investors holding US$78 trillion in assets require transparency into the Environmental, Social and Governance (ESG) policies of the companies that they invest in. This interest stems from a growing belief that sustainable businesses generate more sustainable shareholder value as evidenced by recent research from the Harvard Business School. As a result the market for ethical and sustainable investments is growing and is worth £ 20bn annually in the UK alone.
Political Pressures for Sustainable Business
Governments are taking action to incentivise / force companies to adopt more sustainable business models and social responsibility. This is resulting in the growth of regulatory regimes
that require more transparent and public reporting of the Environmental and Social impacts of a business. This trend is particularly evident in the UK, where for examples all businesses listed on the main market of the London Stock Exchange must report on the gender diversity, ethical opportunities policies and global GHG emissions as part of their annual report (download free Cambium report).
The Rising Power of Social Networks
Rapidly growing social networks offer easy access to directly communicate with massive populations worldwide. Consequently these networks now provide Stakeholder groups with the power to hold businesses to account and to force them to act responsibly and sustainably.
The use of social networks to impact business are visible on a regular basis. Recent examples have included CEOs (RBS) refusing incentive bonuses or being pressured to resign (Barclays), supply chain failures e.g. Tesco – “Burger gate”, Primark – Bangladesh disaster, Starbucks and Google – tax avoidance are now regular occurrences.
Due to these stakeholder groups and their increased ability to exert significant influence via social media, annual general meetings, new legislation and most tangibly at the till in their local supermarket, business has to ‘walk the walk’ and not just ‘talk the talk’ in terms of their commitments to be more Sustainable. Failure to meet these commitments risks significant damage to corporate reputation, brand and ultimately shareholder value.
As a result of these pressures businesses are seeking to invest in Sustainability solution to these challenges. This is creating massive new long term growth opportunities as these businesses seek become more sustainable and responsible.