How Leveraging Your ESG Strategy Can Drive Retailer Opportunities
How can you become a valuable strategic partner for your key retailer and reap the benefits? One of the best ways in today’s evolving marketplace is to recognize the increasing importance of sustainability as a retail growth driver, and fully leveraging your ESG (Environmental, Social, and Governance) strategy to unlock opportunities that can benefit both you and your retail partner.
As many of our merchant partners will tell you, there is high focus on Environmental, Social, and Governance (ESG) influence on consumer buying decisions - a major consumer behavioral shift that only continues to grow:
87%
of retailers have made ESG a priority
1.7%
sales growth edge over products that don’t make claims
44%
of shoppers believe environmentally-friendly attributes are important
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In food/grocery alone, 87% of retailers have made ESG a priority for their organization.
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Across all categories, sustainability is fast on its way to becoming an important revenue growth driver in the years to come. Already, products that make ESG-related claims currently have a 1.7% sales growth edge over products that don’t, says McKinsey.
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Overall, 44% of shoppers believe environmentally-friendly attributes are important. Millennials and Gen Z consumers, in particular, rank ESG high in their buying criteria and are willing to pay for sustainability, even at lower income levels, says Bain. With Millennials replacing Boomers as the demographic with the highest purchasing power, ESG product innovation, with the new shoppers and revenue streams it can bring, is becoming especially attractive.
Having a strong ESG strategy – encompassing both quick wins and initiatives requiring greater turn-around time -- can give brands a leg up with retailers eager to see leadership from CPG partners.
From on-brand ESG strategy development and effective JBP approaches, to compelling claims communication and high-impact packaging, we’ve helped a number of MPG clients up their ESG game for increased retail opportunities.
Two quick examples:
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A fast-growing Cosmetics company approached MPG to help them develop a competitive ESG strategy.They were concerned that they were at a competitive disadvantage and falling behind when it came to Sustainability as Walmart, Target, Ulta, and many other retailers, which were beginning to require their suppliers to be more "green" in sustainability pillars such as “clean,” “recyclable,” and “cruelty-free” in order to receive strong support. Following careful benchmarking, comprehensive internal assessments, and consumer targeting work, they were surprised to learn that they actually already had a lot of positives to capitalize on – and in fact, much more than some competitors who were actively positioning as ESG leaders with key retailers. Now, with strong storytelling in place for more effective retailer communication, they are well-positioned to take advantage of newly available retail promotions that are opening up. And they are also poised for expanded growth since they are voluntarily pursuing various new certifications over the next year. Longer-term, a multi-year strategic approach is being developed to address longer lead time packaging and formula improvements which will continue to strengthen their new leadership positioning with both retailer partners and consumers.
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Did you know, more US consumers care about plastic waste than about climate change? 84% of American shoppers are concerned about plastics and packaging waste, yet plastic packaging represents nearly half of all plastic waste. For Grove Collaborative, a Certified B. Corp. focused on selling innovative, sustainable consumer products, a plastic neutrality focus is not just good to do, it has become a strong differentiator in the marketplace. Grove has been able to see continued growth thanks to an authentic, unrelenting, enterprise-wide focus on sustainability and what is important to mainstream green consumers. This focus permeates every facet of their business, from R&D investment decisions, to innovation test-and-learn strategies, to consumer-facing claims and communications messaging at critical path-to-purchase touchpoints. Originally a direct-to-consumer, e-commerce business only, Grove believes that meeting its customers wherever they shop is critical to their objective of “making planet-friendly household essentials as accessible as possible.” To win brick-and-mortar distribution, our MPG Target Lead supported Grove in co-creation of an exclusive, go-to-market strategy that drove awareness, trial and penetration with mainstream green consumers. Then, with results from the launch and consumer insights in hand, a strong ESG leadership story for other buyers was crafted -- helping to secure major, new distribution wins at Walmart, Amazon, Costco, CVS, and H-E-B, among many others.
ESG & Joint Business Planning (JBP) Considerations
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Consumer First. Ensure that your shared consumer is always at the center of your JBP process around ESG strategy. To succeed, it must be aligned with your consumers’ needs and expectations, while remaining true to your brand and business model.
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Authenticity Differentiates from Competition. Authentically frame your brand purpose to incorporate an ESG goal. Authenticity is the keyword. It needs to be backed by clear, supportive action and aligned with your consumer’s values, as well as those of your retail partner. And it needs to differentiate from your competitors.
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Win-Win Equity Building Collaboration. Reset the JBP discussion by identifying win-win opportunities that will deliver incremental profit growth for both you and your retail partner. Make sure you have a deep understanding of the retailer’s equity, needs, financial goals and investment levels, and strategic initiatives, and identify where they intersect with yours. Where can collaboration create value?
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ESG Co-Creation. Take your JBP process to the next level, co-creating ESG innovations with your customer, and bringing in key vendors and suppliers. Collaborate to create value through co-ownership and cross-functional, co-planning to best serve your shared consumer.
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Data-Driven Innovation that Reflects ESG Priorities. Share trend analyses and granular consumer data to identify breakout ideas for future product innovation that can have real impact for both partners while leaning into each organization’s ESG priorities.
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Need-Driven Solutions that Build Consumer Trust. Always be mindful of evolving consumer behaviors and the expanding role of brands. Think about how you can enable consumers to make purposeful and informed choices, arming them with powerful information and resources to guide them wherever they are on their journey. Provide complete need-driven solutions, while simplifying decision-making and improving their product experience outcomes. Build confidence and trust in brand choice by communicating and delivering on your consumer’s explicit and implicit values.
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Joint Alignment & Accountability towards ESG Goals. Work together to develop go-to-market plans, grounded in ESG and fully embraced on both sides of the desk, to increase chances for success. Hold joint accountability. Ensure enterprise-wide focus and alignment at all levels within the supplier and retailer organizations.