ESGP in 2023: a Blurred view

By Jeremy Cohen, Senior Partner

As the dust settles on 2022 and we get into 2023 proper, uncertainty is the thread that we expect to continue to shape the world we live in today. Expect the unexpected. That being said, there are some important ESGP trends that we do expect to create the context for both consumers and businesses in the year ahead.

ESGP Transparency

Expect regulation - right across the globe - to finally start catching up with the opaque world of everything from ESG reporting, to target setting (e.g. Net Zero), right through to advertising claims (read greenwashing). With the era of fudging-the-facts to shape a good narrative coming to an end – or at least being properly challenged - there will be more transparency, leading to more accountability.

Brands that cannot back up targets and claims are likely to become more shy about making them, rather than more deliberate on delivering upon earlier promises. But as EU, UK, and even U.S. regulations get more teeth, the risk of being named and shamed will become greater. EU regulations in particular will make it more difficult for global brands to keep local realities in the shadows.

The Cost of Living Crisis vs. Sustainable Choices

As the cost of living bites deeper, we will be faced with the reality of how extreme this crisis is, particularly in the UK.  We will see at-risk communities experiencing both poverty and a collapse of services and support that might have otherwise helped them out (during COVID for example). But we will also see the middle classes tightening their belts and making buying decisions based on price above all other considerations such as the environment (locally sourced, sustainably packaged etc).

We know that consumers make sustainable choices when cost is equal or nearly equal. But during this crisis cost will come first. That still leaves space to differentiate based on ESGP, but only if that differentiation does not come with a price premium.

Social Expectations of Business and Brands

Greater transparency and more accountability in an uncertain world is a recipe for a shift in society’s expectations of the role of business, and consumer’s expectations of the role of brands. This has been a growing trend for some years, but in 2023 expect a step-change in those expectations. From climate change to the economic crisis, whenever government fails to find solutions, people look to business to step in.

2022 saw businesses step backwards - or at best become passive - on an array of issues (e.g. social justice, cost of living). Society will demand they play a greater role in the year ahead with a focus on impact and solutions rather than future promises and aspirations. And for those corporates in sectors expecting a bumper 2023 (i.e. energy), beware. Against this backdrop, social unrest may well be just a record-quarterly-profit-announcement-away.

ESG Impact Investing

Although the ESG “label” had quite a kicking in 2022, expect ESG investing to solidify in 2023. As reporting and targets become more robust, understanding of what ESG can do for the quality of investments and management of risk will undermine the politicisation of the term. The U.S. will lag in this respect, but putting aside the politics, a majority of all investors are coalescing around the idea that good ESG strategy is simply good business. A flawed decarbonisation strategy, for example, represents increased business risk. For ESG funds in particular, impact investing will get greater attention in 2023. Solutions that make a difference, from fusion and renewable energy, to flood management and drought tolerant agriculture, will attract more funding. Impact and outcomes will be the order of the day.

A Climate-Shaped World

The here-and-now effects of climate change will shape agendas, attitudes and actions in 2023. The climate events we saw in 2022 will undoubtedly continue, and the effects of last year’s record-breaking extremes (droughts for example) will be felt into this year, shaping a new environmental reality. Climate adaptation will start to become as widely discussed as decarbonisation, and hyped-up past labels (e.g. Net Zero) will be increasingly dismissed.  

The diplomatic conflict between the G77 and G7 will escalate into acrimony, undermining any chance of COP working, and domestic tensions on short-term (energy security) and long-term priorities (decarbonisation) will deepen national political divides. It will become increasingly difficult to separate climate change from any issue, and this will need to be factored into both strategic and brand considerations. 

There is of course much more. DEI and other “S” issues will further evolve and increase in importance. Climate Change and Biodiversity will be a chicken-or-egg debate (ultimately totally irrelevant). Material questions will be posed around the future of widely-accepted concepts like Circularity. But as societal expectations grow along with uncertainty, frustrations risk spilling over into anger. As Greta Thunburg put it last year, more “blah, blah, blah” will not cut it. When thinking about ESGP in 2023, business and brands would be wise to focus on Impact.

Stuart Lambert