Saul Klein: Businesses must lean-in on climate change, both for their own good and for the good of our planet

November 4, 2021 - For many organizations, finding solutions to address a changing climate is part of the brave new world of doing business in the 21st century.

As international leaders gather in Glasgow for COP26, attention is turning to businesses and how they contribute to meeting emission targets, and whether they are helping or hindering progress in combating climate change.

In the face of widespread attention, businesses must lean-in, both for their own good and for the good of our planet.

At the Gustavson School of Business, we created the Gustavson Brand Trust Index to understand Canadian consumers’ trust in brands across a variety of dimensions to determine what factors drive brand trust and loyalty.

What we’ve observed over the years is that consumers expect businesses to play a bigger role in addressing social issues than ever before. Further, there are enormous opportunities for brands to differentiate themselves from others when it comes to how they respond to social issues.

We’ve identified a growing trend where trust in a brand is fundamentally linked to its perceived authenticity and the actions it pursues in terms of playing a positive role in society.

The global environmental movement is showing governments just how concerned people are about this issue. It has also highlighted that there is a void in the current system that business can fill.

Consumers are taking a hard look at the brands they support and more importantly, the values that these brands espouse, and are putting their dollars behind brands that are perceived to be doing good in society. While consumer trust is good for generating brand loyalty and positive word of mouth among consumers, brand trust also has a positive effect on attracting and retaining talent in the organization and on enhancing investor relations.

Especially during the pandemic, consumers demanded and expected more from brands, rewarding those who responded favourably with greater support, and punished those brands whose actions were felt not to align with their values. One of these values, that is certainly gaining more attention, reflects the extent to which brands are seen as respecting and protecting their environment. According to Edelman’s 2021 Trust Barometer, employees ranked climate change as their second overall fear.

During the pandemic, businesses focused on employee engagement and health and safety, and placed less attention on environmental factors. Despite this, carbon emissions declined with a slowdown in economic activity. Now that economic activity is rebounding and climate change is on the tip of everyone’s tongues with COP26, attention is turning back to environmental impacts.

Not only is there external pressure to act, there is a huge opportunity for businesses to bolster their competitive advantage and stay relevant for the future by re-focusing their efforts on what matters to their consumers, employees and investors alike. This opportunity is particularly pronounced for the younger generation, that is, for those on whom future business success depends.

We have observed that while millennials are less trusting than older generations overall, brands that scored high on authenticity also scored high with them on overall brand trust.

This year we saw that those aged 18-35 recognized Patagonia as their most trusted brand, rewarding the brand’s support for climate activism. Similarly, last year we saw Lush Cosmetics with the highest brand score among millennials, earning trust through their history of donating to progressive groups and supporting grassroots campaigns that advocate for the environment, human rights and animal welfare.

While this trend in linking brand authenticity to purchase consideration started with the millennial generation, it is growing across other age groups too.

The global environmental movement is showing governments just how concerned people are about this issue. It has also highlighted that there is a void in the current system that business can fill.

Over the past two years, we have witnessed a megafire in Australia, deadly flooding in Germany and the most extreme heatwave in western North America. Eco-anxiety and climate grief have become new terms in our vocabulary and there is a collective feeling that there’s no time to waste.

Creating green business goals that prioritize the environment is critical if we are to address climate change. The issue is certainly greater than profits — it’s creating a better world for future generations. To quote UN Secretary-General António Guterres during his speech at Columbia University, “Making peace with nature is the defining task of the 21st century.”

At the same time, profits will follow from responsible actions. Brands that put climate action at the centre of their strategic decision-making will be rewarded by consumers, employees and investors. Those that fail to act will be punished in a competitive marketplace where people will vote with their feet, and their dollars, for proactive environmental approaches.

Saul Klein, PhD
Dean of the Gustavson School of Business

Originally published in the Vancouver Sun