Do Consumers Care About Sustainability & ESG Claims? Insights from McKinsey & NielsenIQ Study

Overview

McKinsey and NielsenIQ ran a joint study. Their study shows that consumers care about sustainability and ESG claims. Buyers show this care through what they buy. The study uses five years of US consumer packaged goods (CPG) sales data. This work gives clear facts for CPG companies. It helps them add ESG ideas into their plans.

Key Context: The Importance of Sustainability in CPG

• The US consumer market makes over $14 trillion each year.
• CPG is a key part of this market. It covers foods, drinks, cosmetics, and cleaning goods.
• CPG companies now add strong environmental and social commitments. They use terms like "eco-friendly," "fair trade," and "plastic-free" on their products.
• Surveys show that 78% of US consumers care about a sustainable lifestyle. Sixty percent even say they will pay more for sustainable packaging.
• Still, companies find it hard to turn these views into higher sales.

Study Methodology

• Data covers the years 2017 to mid-2022.
• The study looked at 600,000 SKUs from 44,000 brands in 32 CPG categories.
• The total retail revenue studied was $400 billion each year.
• Researchers found 93 unique ESG claims. They put these claims into six groups:

• Animal welfare (for example, "cruelty free," "cage free")
• Environmental sustainability (for example, "eco-friendly," "compostable")
• Organic positioning (for example, "certified organic")
• Plant based (for example, "vegan")
• Social responsibility (for example, "fair wage," "ethical")
• Sustainable packaging (for example, "plastic free," "biodegradable")

Major Findings

1. Products with ESG Claims Outperform Peers in Sales Growth

Over five years, items with at least one ESG claim grew 28% in total. In comparison, products without these claims grew only 20%. ESG products made up 56% of the total growth in the CPG sector. This share is 18% above what one would expect based on market share. This trend holds across many product groups. It shows that buyers now prefer products that carry responsible claims.

2. Consumer Purchase Behavior Aligns with Sustainability Preferences

The study links what consumers say to what they truly spend. It shows that claims of sustainability on packaging can sway buying decisions. For example, in frozen desserts, plant-based products grew 8.5% over five years. Similar products without the claim grew only 4.4%.

3. Nuance at the Product Level

Not every ESG-labeled product saw the same lift in sales. Factors like brand size, price, marketing, and the product category also matter. The study controlled for some factors such as brand type, price, and product age. Still, it did not prove a direct cause because the situation is complex.

4. Importance of Authenticity and Avoidance of Greenwashing

The study shows a link between ESG claims and strong sales. However, it did not check if these claims are true. Authentic ESG efforts are important. Fake claims, known as greenwashing, can hurt trust and invite regulatory issues.

Implications for CPG Companies and Retailers

Companies should see credible ESG claims as both ethical and smart business. They must include consumer demand for sustainability when they plan product development, marketing, and certification. Clear and true ESG efforts help build trust and tap into a market that values responsible measures.

Conclusion

The five-year study by McKinsey and NielsenIQ gives strong evidence of American consumer interest in sustainability and ESG claims. Importantly, consumers show their care with their dollars. For CPG companies, offering authentic, well-promoted ESG products fits with buyer needs. This approach creates a clear growth opportunity in a market that values responsible practices.

Sources:

• McKinsey & Co., Do consumers care about sustainability & ESG claims? (2023)
• NielsenIQ Consumer Panel Data, 2017-2022

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