What Do Investments Have To Do With Your Brand?

Blog-PiggyBank

The traditional belief in business is to build a decent product and sell it for a competitive price, reduce your costs as much as possible to maximize your profit, and have great marketing or advertising campaign to drive sales.

Well, that doesn’t work anymore.

Times have changed. Consumers have changed. Expectations have changed…and are continuing to change.

Yes, we are in business to make money. If you don’t make money, you won’t be in business. And, consumers are holding companies accountable to another standard—sustainability. How a business operates, how it gives back to its community, and how it protects the environment are now built into brands, both organization and product brands. It’s the socially responsible thing and it's the profitable thing to do, today.

There’s a shift in consumer demand. Consumers today use brands to create a physical representation of how they see themselves. It’s a statement of how they wish others to see themself—cool, smart, creative, religious, republican, democrat, healthy, tree-hugger. It’s a way to instantly connect with others in our increasingly disconnected world.  

As consumers are personally aligning themselves with brands, they are more conscious about what a company does inside and out. This means they are selecting brands, products, nonprofits, and even investments based on this. If you don’t meet or communicate these standards, you’re going to miss out on sales, donations, and investors. Or, when your company receives bad publicity for something that historically has been “acceptable”, you will lose sales, donations, and investors.

Millennial and Gen Z consumers are aligning their purchasing decisions with socially and environmentally positive products and services. This isn’t a new concept; it is new accountability that is now taken all the way to Wall Street.

Socially Responsible Investing (SRI) started in the 1970s as a philosophy that capital should be used for morally “good” industries. Industries like guns, tobacco, gambling, and adult entertainment did not fit into this. All things that to this day are still viewed as morally “wrong”.

A newer term for this is ESG investing. The Environmental, Social, and Governance framework allows investors to invest in companies that follow high standards in these areas. The Financial Times Lexicon defines ESG as “a generic term used in capital markets and used by investors to evaluate corporate behavior and to determine the future financial performance of companies.” It adds that ESG “is a subset of non-financial performance indicators which include sustainable, ethical and corporate governance issues such as managing a company’s carbon footprint and ensuring there are systems in place to ensure accountability.”

Impact investing is considered the most advanced of sustainable investing. It involves measurable environmental and social impact alongside financial returns. Profit and impact may contradict each other, but there is a belief that it is possible to have both financial profitability and a positive environmental and social impact.

It’s been shown that companies that adhere to this are more likely to outperform their peers in the long run. The more that Millennials and Gen Z dominate the market and buy sustainable products and services, the higher profits these companies will have. According to a 2006 study called Cone Millennial Cause Study, Millennials are more likely to trust a company or purchase a company’s products when the company has a reputation of being socially or environmentally responsible. Half of those surveyed are more likely to turn down a product or service from a company perceived to be socially or environmentally irresponsible.

Here are a few areas that consumers are focusing on:

  • Environmental risks are business activities that have an actual or potential negative impact on the air, land, water, ecosystems, or human health.
  • Social risk is the impact that companies can have on society like labor-management relations, protecting human rights (think BLM), and focusing on product lifetime integrity.
  • Governance risks are the way organizations are run such as increasing diversity and accountability of the board, protecting shareholders and their rights, and reporting information.

The more that consumers personally align themselves with brands, the more they will hold organizations accountable in all areas. The market and expectations have shifted, and now you need to as well.