Clear The Air News Blog Rotating Header Image

Change Of Climate In The Business World

Sheila Bonini, Greg Hintz and Lenny Mendonca – Updated on Apr 07, 2008 – SCMP

Business executives are catching up with consumers in expressing concern about global warming and other environmental issues, two global surveys of senior executives and consumers by McKinsey indicate.

In a sea of change over the past 12 months, executives now regard the environment as the sociopolitical issue that will attract the most attention, by far, from the public and politicians over the next five years.

Consumers also want healthier and safer products, retirement and health-care benefits for employees, and much else besides, though their expectations vary by industry and geography.

What is more, they say clearly that the performance of an industry or a company on a wide range of societal issues affects not only its reputation but also their willingness to buy its products.

Each corporation faces a wide range of risks specific to the industries, regions, and countries in which it operates. But our surveys also reveal that companies have significant opportunities to differentiate themselves and to increase shareholder value by acting responsibly and by providing products and services that address the consumers’ concerns.

Executives and consumers are now equally concerned about environmental issues, including climate change. Fifty-one per cent of the executives – up 20 percentage points from 2006 – pick it as one of three sociopolitical issues that will attract the most attention during the next five years. Among consumers, 55 per cent agree. Almost 90 per cent of executives and consumers say they are personally very or somewhat worried about global warming, and clear majorities see a role for government as well as business and consumers in tackling climate change.

Taking action on global warming and other environmental issues seems critical for narrowing a trust gap between consumers and corporations. But many corporations would be wrong to focus almost all of their efforts on environmental issues and to forget about others that are important in their industries. The industries we covered in the survey – petroleum, food and beverages, retailing, and high-tech – have a common need to tackle environmental issues but otherwise face different societal challenges and opportunities.

In retailing, for example, consumer research suggests that measures such as reducing energy consumption and selling environment-friendly products are important for winning credibility as a socially responsible company.

In food and beverages, most respondents in most of the countries surveyed said they were willing to pay more for food and drink from companies that address the respondents’ most important concerns about health (food safety, fat content, the use of pesticides and genetically modified products) and the environment (waste and pollution, the impact of packaging and global warming).

Hi-tech companies could take a wide range of environmental and social actions to improve their reputations and differentiate themselves from competitors. But such strategies may be complex, as the measures that consumers emphasise vary widely by country.

Business leaders need a nuanced understanding of how the performance of companies in addressing social and environmental issues affects reputations and sales. By tracking consumer attitudes at a fine-grained level, they would improve their chances of gaining a competitive advantage and, at the same time, of addressing global problems.

Sheila Bonini is a consultant in McKinsey’s Silicon Valley office, Greg Hintz is a consultant in the New Jersey office and Lenny Mendonca is a director in the San Francisco office. This article was originally published in the McKinsey Quarterly

Leave a Reply

Your email address will not be published. Required fields are marked *