While ESG is top of mind for many brands, a key stakeholder that is increasingly driving and impacting business is Gen Z – a generation of self-drivers who value diversity, collaboration, and taking action to address social and environmental issues. In fact, a recent survey by APCO found that 88% of Gen Z believe that companies have a role to play in addressing the major challenges facing society.
As both ESG and Gen Z become increasingly important elements of organizational strategy, and as Gen Z’s views also influence other generations, it’s essential that leaders thoughtfully consider where these two intersect.
HOW DOES GEN Z DEFINE ESG?
APCO’s 2022 survey of 2,005 U.S. adults found that although just 32% of Gen Z report being familiar with the term “ESG,” 79% of those who are familiar report a favorable view – with only a handful (6%) holding a very negative opinion. What’s most notable is that it is the younger generations (Millennials and Gen Z) that feel most favorable towards ESG, suggesting that it is younger Americans who will be most interested in hearing about a company’s ESG initiatives.
WHAT ESG ACTIONS DOES GEN Z THINK COMPANIES SHOULD TAKE?
When asked what issues they feel it’s okay for companies to take a stand on, mental health and access to healthcare are seen as the most acceptable issues, followed closely by buying U.S.-made products and gender equality. Income inequality and racial equity and discrimination are also both issues that 83% of Gen Z believe companies can take a stand on.
When it comes to effectively taking a stand on these issues, Gen Z is seeking for companies to have an impact in more than one way. As the most active and engaged generation on issues related to climate and environmentalism, and as the first generation that has lived the entirety of their lives in an online world, it comes as no surprise that Gen Z sees advocating for government action and issuing a public statement or social media post indicating support as one of the most effective ways companies can take a stand on an issue.
RETAINING AND RECRUITING THE BEST GEN Z TALENT
Taking action is critical not only through a reputational lens, but for talent retention as well. Although Gen Z (66%) is more likely than any other generations to believe their company shares their viewpoints on issues, they are also more likely than any other generation to leave employers who never share their opinion on social and environmental issues. In fact, 55% of Gen Z employees who feel their employer never shares their opinions on such issues report they plan to stay with their employer for less than one year. It’s clear that this cohort has high expectations of their employers to have an impact more so than older generations.
WHAT DOES THIS MEAN FOR BRANDS?
Brand experiences extend far beyond face-to-face interactions, especially for Gen Z. They encompass brands’ complete connection with the consumer. For Gen Z, it is not optional for brands to share their thoughts on the issues that matter most to them; it is expected. Brands should not only clearly define their ESG ideologies but also clarify the specific methods they employ to realize them, as Gen Z also requires more transparency and accountability around ESG metrics. Gen Z seeks brands that align with their own values and performativity will not win them over.
A company’s ESG efforts will only become more important as Gen Z’s influence continues to grow. Gen Z wants action, and companies that implement more sustainable business practices are anticipated to perform better. Likewise, a business’ social media presence and relationship with consumers is more crucial than ever in an age where consumers want to see them take a stand. A firm commitment to good governance and sustainability will be essential for brands looking to win over Gen Z in the long run.