For Retailers

ESG: Why CSR Matters to Businesses

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As the eCommerce industry grows, so does the buzz around ESG. Socially conscious consumers aren’t the only stakeholders who care about a company’s ESG and CSR initiatives. Consumers, employees, and investors consider a company’s impact on society and the environment when making decisions regarding that company.

So why does ESG matter for your eCommerce brand, and where did it come from? The concept of ESG (environmental, social, and governance) began when socially responsible investing was first introduced. You can think of ESG as the measurable outcome of a company’s overall sustainability and social impact performance.

As we move further into the era of purpose-driven commerce, eCommerce, direct-to-consumer, and legacy brands alike are going to have to adjust their business model and marketing strategies to keep up with consumer demand for social impact.

 

What is the Difference Between ESG and CSR?
ESG vs CSR

While ESG and CSR are related, knowing their differences are important. Corporate social responsibility, or CSR, is a strategy that reflects a company’s commitment to positively impacting society and the environment.

You can learn more about corporate social responsibility from the pyramid of CSR. The CSR pyramid outlines the economic, legal, ethical, and philanthropic responsibility that businesses should have. You can also think of it as a framework that explains society’s expectations for brands to get involved in social responsibility.

ESG, on the other hand, are factors that investors and stakeholders use to evaluate a company’s impact. Essentially, CSR is the approach and ESG is the result.

As an example, a company may implement a corporate social responsibility strategy to become more environmentally responsible. To become more environmentally friendly, they may be focused on reducing carbon emissions from their shipping and delivery. They can then use ESG to set measurable goals and outcomes. An example of this would be committing to reducing their carbon footprint by 45% by the year 2030.

You should also know that ESG ratings are important for investment opportunities. ESG reporting helps investors make more informed decisions. It also helps consumers and employees better understand which companies are purpose-driven. In the era of conscious commerce, consumers are valuing purpose alongside price and product when making purchase decisions.

This means that CSR, ESG, and social impact, are more than just buzzwords. A company’s ESG impact is increasingly becoming more crucial to its brand reputation and financial performance.

 

What are the Benefits of Corporate Social Responsibility?

 

 

More and more direct-to-consumer and eCommerce brands are building corporate social responsibility into their brand DNA. This puts them at a competitive advantage over legacy companies. To compete and thrive in today’s marketplace, brands need to create more meaningful connections with their customers and communities. They can do this by affecting broader social change.

Here are a few benefits for your eCommerce business when leveraging ESG and CSR programs, including benefits to your bottom line.

Positive Brand Reputation

Cultural events like the global pandemic and the social justice movement have made it clear that the younger generation of consumers are more likely to favor brands that advocate for positive social change.

83% of Millennials say it’s important for the companies they buy from to align with their beliefs and values. Furthermore, 78% of consumers are more likely to remember a company with a strong purpose over the competition. When a company leads with purpose, they are better able to connect with consumers on an emotional level. This can then create more meaningful and memorable customer experiences.

Increased Customer Loyalty and Retention

It’s no surprise that consumers are increasingly becoming more loyal to brands who engage in CSR. When a company leads with purpose, consumers are 72% more likely to be loyal to that company. Consumers are even switching brands to support one associated with a cause— despite previous loyalty to another brand.

Enabling a CSR strategy for your business can help you build stronger customer loyalty and increase the likelihood for repeat purchases. Today, more consumers are making purchase decisions based on their values. This means that brands who are committed to making a positive impact are at a competitive advantage.

 

Enabling a CSR strategy for your business can help you build stronger customer loyalty and increase the likelihood for repeat purchases. Today, more consumers are making purchase decisions based on their values. This means that brands who are committed to making a positive impact are at a competitive advantage.

Increased Sales and Revenue

With increased customer loyalty comes increased sales and revenue. On average, loyal customers are likely to spend 31% more than new customers do. Your loyal customers are also more likely to advocate for your brand.

In recent years when economic concern was present, consumers didn’t spend less— they began to spend more mindfully. In fact, 71% of Millennials would pay more for something if they knew it benefitted charity. Additionally in 2021, the average order value for brands who gave back grew by 22%.

Aligning your brand with corporate social responsibility initiatives is a great way to drive business and revenue growth. It's also a great tactic for creating stronger customer relationships.

Better Ability to Attract and Retain Employees

Similar to consumers, employees value company purpose too. Now more than ever, employees are more driven to work for purpose-led brands whose values align with their own. 91% of employees say their company’s purpose makes them feel like they are in the right place during ongoing challenges. Examples of this are the global pandemic and ongoing economic risk.

Furthermore, employers with high ESG scores perform 14% higher in employee satisfaction. They are also 25% more attractive to prospective talent than other employers. As we navigate through The Great Resignation, companies with ESG and corporate social responsibility strategies can better appeal to employees. They are also more likely to retain their existing employees.

ESG and CSR Best Practices

 

Similar to CSR, ESG was once a nice to have for businesses, but is quickly becoming a need to have. Why? An ESG strategy doesn’t only add value to a company, it also provides a competitive advantage over others. It also helps brands create more purposeful and valuable relationships with stakeholders.

An ESG strategy is a great way to get started with identifying the social and environmental impact that your brand has. You can then discover opportunities for areas for improvement and integrate these opportunities into your corporate social responsibility strategy.

Here are a few ways that you can integrate ESG and CSR into your business in the long term.

Company Culture

Employee engagement is an integral part of your company culture. Employees are increasingly valuing purpose alongside salary and benefits when considering new job opportunities. This means that an ESG strategy can be a great business practice for engaging your employees.

Whether you have existing CSR initiatives or are starting from the ground up, look for opportunities to involve your employees. You can provide employees with information on why these corporate social responsibility initiatives are important to your company. Through informative training, you can better build corporate social responsibility into your company culture.

Actionable tactic: Host a quick internal training session on how your company is going to become more sustainable. You can then send out quarterly updates to share your progress.

Education and Advocacy

Now more than ever, consumers are expecting their favorite brands to engage in social impact. They are choosing to align themselves with brands that stand up for social issues and serve as advocates against injustice.

53% of consumers believe brands can do more to solve social problems than governments can. You can use your platform to provide education on current events that are impacting society in real time. Highlighting the ways that your brand is taking action to make a positive change will positively resonate with consumers.

 


Actionable tactic:
Use your voice on social media to highlight a prevalent cause, like reproductive rights. You can then share resources on ways that your company is getting involved and how others can too.

Brand Values

One of the best ways to create an authentic CSR strategy is to leverage your brand values. Your best stakeholders are going to be those who share similar values and beliefs as you. This means that leading with what is important to your brand will help stakeholders with similar values find your brand.

Actionable tactic: Look at your brand values and identify opportunities to partner with a nonprofit organization. You can then create an evergreen campaign together, like providing meals to children living in food insecure homes.

Giving Back

Driving charitable donations from your brand is a great way to show your commitment to ESG and CSR initiatives. Giving back to causes that you and your stakeholders care about can help drive loyalty and increased revenue for your brand.

This tactic is most effective when you involve your customers so they can see the impact that your brand is making. Giving back is also beneficial as investors explore your ESG strategy.

Actionable tactic: Use your online store to drive donations. As an example, you can donate 1% on every purchase. This can help you create more memorable and meaningful purchase experiences for your customers.

Get Started with a CSR Strategy

Purpose-driven commerce isn’t a trend, and it’s here to stay. Each day, more brands with CSR built into their business strategy are entering the market. This means that legacy and expanding enterprises need to get involved with corporate social responsibility and ESG initiatives.