The Brand Finance Sustainability Index is a flagship study that places a financial value on sustainability perceptions for the first time. Its second iteration launched earlier this month, quantifying the value of sustainability perceptions and the gap between perceptions and actual sustainability performance.
As part of its analysis, Brand Finance evaluates the role that sustainability plays in driving choice in each industry. The firm researches the attitudes of over 150,000 members of the general public from over 40 countries about over 6,000 brands. Respondents are asked a wide range of questions, including marketing funnel questions about awareness, familiarity and consideration. They are also asked the following question: “Which of these statements, if any, do you think apply to Brand X?” The list of statements varies by sector, but typically includes attributes such as ‘value for money’, ‘reliable’, etc.
Using the response data, Brand Finance evaluates the role that each attribute plays in driving choice using an analytical technique known as brand drivers’ analysis. Drivers analysis involves running multiple correlation analyses between the consideration of usage of a brand, and the various brand attributes to determine how much explanatory value each attribute has.
The results showed a varying role for sustainability across sectors. For example, a lower role for sustainability in consideration is observed in Airlines (6.5%) and Technology (6.6%), where attributes like trustworthiness and customer service are relatively more important. In contrast, sectors like Supermarkets (11.1%) and Apparel (9.6%) have a more powerful role for sustainability.
Further, the research indicates a significantly enhanced role for sustainability in driving choice in the luxury or premium market segment. This was evaluated in the Auto, Apparel, and Cosmetics sectors, where sustainability driver scores are over 1.5 times higher than for the sector overall.
There may be multiple effects at play here. A brand’s sustainability commitments may imply a slight cost increase that necessitates more premium positioning. Premium-segment consumers also have less price sensitivity, enabling them to seek improvements on other attributes, including sustainability. Lastly, at the premium end of many markets, brands become more than just a guarantee of attributes to the consumer—their products also signal the purchaser’s status, taste, identity, or ethics to others.
This variation in the role of sustainability has significant implications for the financial returns brands can hope to gain from their sustainability action and communication.
Brand Finance also determined the relative importance of the environmental, social and governance (ESG) aspects of sustainability, which revealed significant variation across sectors. For example, the environmental dimension contributes most to the sustainability driver in Oil & Gas, as one might expect from the growing urgency of action on climate change and the energy transition. In a sector like Insurance where fair dealing and prudent management are paramount, ‘governance’ is the most important dimension.
Despite a spectrum of values for all ESG attributes, social sustainability had the smallest effect on consumer consideration across all sectors this year. Emphasis on climate action has steered ESG efforts and hiring practices of many businesses, to the point where many stakeholders view sustainability as exclusively environmental. This comes despite the UN Sustainable Development Goals clearly spanning many social and governance topics. Governance to combat financial misdeeds has been a priority for many years, and the emergence of generative AI and its potential for misuse further enhances the dimension’s importance. The resulting ‘crowding out’ of social sustainability is a concern of both sustainability professionals and community-related stakeholder groups.
Find the full results of the Brand Finance 2024 Sustainability Perceptions Index here.