Listen: Next in Tech | Episode 61: Consumer ESG Perspectives

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Eric Hanselman

Welcome to Next in Tech, an S&P Global Market Intelligence podcast where the world of emerging tech lives. I'm your host, Eric Hanselman , Principal Research Analyst for the 451 Research arm of S&P Global Market Intelligence. And today, we're going to be discussing consumer perspectives on ESG, environmental, social and governance issues with returning guest, Sheryl Kingstone, the Head of our Customer Experience and Commerce team. Sheryl, we'll come back to the podcast.

Sheryl Kingstone

Welcome back. I always love these discussions.

Eric Hanselman

Well, and it sounds like ones that are particularly timely. This is a report that is hot off the presses. And actually, I think it's this really interesting extension. We talked last about customer experience and digitization and sort of got down into the weeds, the technology pieces. But this is data that's really looking at consumer perspectives, about an area that I think we've all focused on ESG aspects. And there's just some really interesting data that the report digs into. So why don't we dig into it ourselves?

Sheryl Kingstone

Yes, absolutely, right? So let's just talk about this. When we talk about ESG and we look at it from the consumer perspective, let's not forget that we can't say ESG, right? It's a lot more complex than that. Things that are really driving attitudes towards ESGs that we probed in at has to do with things like privacy and data protection, a very hot issue for both businesses and consumers, right?

Now let's take a look at other things like energy efficiency and reducing carbon footprint. All of the E that have captured the attention and have [indiscernible] everything from where we're going with carbon and energy efficiency to the attitudes towards climate. And so that's where those come into play. But we also have other areas that are interestingly lower in priority as it shouldn't be, right?

So top of mind across the stack is things like health, safety, labor standards, which is important, especially in the age of COVID. So that has gotten up this area. Fair wages and benefits, as we're talking about skilled workforces and employees and where that's going, absolutely top of mind. Understanding some elements here, what's lower on the list, surprisingly, has to do with -- and it's really not that low, but it's lower compared to everything else, things like human rights and racial justice and workplace diversity. Those are falling a little bit lower on the list than I would say the privacy, data protection, energy and health and safety. And I really just think is when you're stack ranking some of these, you've got to understand where the Maslow's hierarchy of needs are coming in and how it truly impacts themselves directly.

Eric Hanselman

It all comes back to that personal perspective. It's interesting that there are these concerns about those aspects that are just a little bit outside itself, the fair pay kinds of pieces. Although, I guess most people consider their own pay and maybe that reflects back into their concerns there as well.

Sheryl Kingstone

Yes. So fair wages and benefits is absolutely crucial, and it's actually probably escalated. So I bet you in 2022 when we refuel that, it's going to grow in priority of importance. And the other thing you have to look at is this is normalized across the consumer population representative. So bringing it down are the older generation, the 55 and plus and where that's trying to go.

The ones that are really prioritizing the fair wages angle is the ones that are really in the middle of their career, not the early, early ones, but the 25 to 44, they find that very, very important. And so that's just an interesting aspect from that standpoint. There is a very different take across the board for all of these elements when it comes to the differences in generations. And workplace diversity, for example, really low on the priority aspect of the older generation, but much higher for, I would say, the 25 to 44. So we're talking millennials are really putting this front and center, along with some of the health and safety.

When we look at energy efficiency, that becomes more normalized. Everyone is really focused on the climate and what we're trying to do. And so those pretty much wind up being a lot closer in consistency across age groups.

Eric Hanselman

Wow. Well, how about the one that's near and dear to my heart when I'm wearing my security hat, data privacy. Do you get that same kind of variability or was that consistent?

Sheryl Kingstone

We do get that same variability. And so when you do look at things like trust and privacy, the older generation actually is the one that really talks about it as extremely important. So I'm talking massive differences here. So when we look at generations, Gen Z, only 33% of privacy and data protection put it as very important. Now if you look at the greatest generation in the baby boomers, look at that 57%, much higher, right? So it's really interesting, almost double as much of a priority when you're older versus the ones that are just [indiscernible].

Eric Hanselman

Okay. Boomer, well, well. Well, what I was going to dig into was one thing that you mentioned alongside data privacy was trust.

Sheryl Kingstone

Yes. Very good question to bring up, right? Because the other thing that we look at that's different than the ESG, this is something we track quarter-over-quarter, has to do with the level of trust that consumers are having with U.S. businesses. That has to do with like honesty, reliability, fair trade, that angle. And so over time, we see that maturity of U.S. consumers are actually becoming less trusting of businesses, right? So even taking a look at the differences between a year ago, 2021 Q2 versus today, only 14% of individuals are less or more trusting of businesses today as compared to 22% are less trusting.

Now granted there's not a lot of change in the middle, but the trust factor is significantly eroding in this day and age. And I think it's a combination of a couple of things. One, the education factor of understanding the role of trust and privacy. Two, some major issues about data breaches that are up there. And then if we really think about where we are today with cybersecurity and all of the negativity that's out there and the data breaches that we're having, a lot of consumers are very nervous about making sure their digital identities are really protected in the age of these digital experiences of where they are today.

Eric Hanselman

That's a really interesting point, especially when used in that combination because I know on the security side, we've always wondered when do we get to a point at which businesses are going to be punished for breaches. It seems that time and again, breaches happen and there are minor blips in business, but that it doesn't seem to make other than a few handful of really egregious cases, that it doesn't seem to really impact business all that much. But it sounds like maybe just this accumulation is starting to raise a level of awareness that consumers are now really starting to see that this is an important aspect. They understand the implications, which I think may have been some of the problems originally. If you just get a new credit card, how bad can it be. But now when identities are compromised and more of your life is digital, maybe that's starting to sync in a bit that those impacts actually do have a much greater drive in terms of consumer behavior.

Sheryl Kingstone

Yes, it does. And if we really look at it from the point of view of brand lovers, right? So 80% of brand lovers are really saying that a company's privacy and data protection is actually influencing their loyalty and influencing their behavior. So once we start seeing that this is impacting that top line, impacting everyone who's trying to get a brand advocacy. If you break that trust, all that effort and all those marketing campaigns and all those corporate communications that you've really invested in is going to go out the door. And so we really do have to understand how we're dealing with trust and privacy.

And this is where a lot of my energy comes in, in my customer experience and commerce research because when we look at a lot of the data and the technology investments for improving CX, and it really does start with where businesses are focusing on for digital transformation, right? So when you tie it to digital transformation, you tie it towards trust and privacy and the correlation there and the fact that we are really looking to be much more around a data-driven experience economy, that's where we're going to start really seeing businesses take it seriously. We're going to prioritize data governance. We're going to make sure that we have consent-based marketing really nailed properly. We have to really empower the businesses to understand to really start tracking what is consented data and what is not.

Eric Hanselman

Well, and I will get a plug-in for our earlier episode as well as the report that covers all of this, which has some great data about the technology aspects and I'll reiterate this piece that I think that we've been talking with, with our clients sort of very broadly about, which is the idea that you pointed out that really those digitally driven customers are really motivated and in fact, are willing to pay a premium for the technology that helps drive the experience. And now we're getting to the actual customer preference pieces that more emotional consumption driver and this gets borne out again. Your most ardent fans are the ones that you really need to be able to dedicate yourselves to in terms of improving their experience to ensure that they stay that way.

Sheryl Kingstone

Right, absolutely. Because we do see that digitally driven organizations are making much more strategic investments in things like privacy and data governance in ways to use technology that's reducing friction at point of interaction in a safe and secure way and also making sure that they're actually putting the right tools and technologies in place to manage those customer preferences.

Eric Hanselman

Now there's another piece about the report that I think is also important to draw out is that you're talking about ensuring that digital leaders are making those investments, but this is also something that customers need to know that that's happened as well. And that was something that you'd found that there seem to be some gaps there.

Sheryl Kingstone

When we look at the difference between importance towards consumers when choosing a brand versus like merchants or brands making these investments, yes, they are investing in privacy and data protection. But they're not really understanding the role that, that correlates maybe to their ESG. And yes, we're looking at things like energy efficiency and health and labor standards. But what we're seeing for things like workplace diversity, I don't think is getting the attention that it should across the board. So even consumers are not looking at workplace diversity when choosing a brand, right, it became low. But if you really look at the marketing campaigns and the strides that we come today in just the ability to promote diversity has changed tremendously.

So while it's not maybe a workplace diversity angle, the diversity angle within the customer experience side has dramatically changed over the years. How many times do we now see a broader representation in all the marketing campaigns and a lot of the experiences that we're seeing from the content that's being shown us? Or how are we also showing the fact that we don't only have skinny Minnies out there, model-centric 5, 10 women that weigh 100 pounds, right? We're showing all bodies, all representations, all flavors, whether they are biracial or equity. It's just the way this really has to play out is it isn't about the workplace diversity, it's about diversity in general. And I think that's really where we have to then probe a little bit more to understand when workplace diversity fell down when we know for a fact diversity in itself has increased tremendously in priority.

Eric Hanselman

So that's a good point. And I wonder whether or not that's something where there's a perception that there is already a lot of work underway. But again, to your point, I guess, something that certainly needs a lot more focus when we're digging into a lot of this data from the next generation of the study.

Sheryl Kingstone

Let me just dive a little bit further into that. So one other angle that came out in this report that I do want to point out and why we think it might be table stakes today with respect to diversity and inclusion. But what we have seen is a boost in conversion and loyalty, right? So while we're very aware that this is changing and brands have made these investments, when we look at it from the point of view of the consumer, they are more likely to purchase from a brand or a business. They feel demonstrates inclusivity in their advertising. So 56 totally agree from that standpoint. And then they would spend more money with the brand if those proceeds went to more organizations that supported social justice and diversity and includes donations. So that's one aspect that we do see success in and dollarizing the top line.

Loyalty, right? So 57% will increase their loyalty if a brand is really showing more financially supporting diversity and inclusion. And then lastly, if they're diverse hiring and training and investment, 63%. So we do have the one click down as it relates to the impact, but that's from the consumer standpoint, right? So we do have to understand where the spend is. Now that we see that it's impacting conversion and loyalty, what are business is doing to capitalize on this?

Eric Hanselman

Got it. But it gets back to your original point, there's got to be visibility for it, whether or not it's adding in contribution capabilities as part of the purchase process. They've got to be able to get to that next stage. But that gets back to a focus on needing to have the technology in place to actually get that done, right?

Sheryl Kingstone

Yes, absolutely. And it's not just a one-and-done technology. You need to have the right data platform to make sure because we have to understand all the different personas that are valuing and can really be converted based on diversity and inclusion.

And it is in everyone. I go back to some of the personas that I went earlier in the different generations. So we do need to understand the right data that's going to drive it, then we need more of the technologies around personalization. The ability to target e-mails the right way, the ability to personalize in a privacy-centric way. All of these are going to be strong investments in more modern digital platforms that we can react more intently in real time based on past purchases, but also to make sure that we do have that identity of the person we're speaking to that really understands from their perspective what they want to see.

Eric Hanselman

I mean there's a very narrow line between caring and creepy in terms of that -- what that engagement looks like and what the interaction is. And you've got to have a platform that gives you the capabilities to be able to manage that with the care that's needed.

Sheryl Kingstone

Absolutely.

Eric Hanselman

So what do you think businesses should be looking at? I mean we talked about some of the technology pieces. But from an ESG angle, where do you think businesses need to put focus and additional emphasis in terms of addressing a lot of these consumer concerns?

Sheryl Kingstone

Yes, it's complicated, right? So we do have this entire digital maturity model, right? And I would say ESG should be part of that. So where are we with the processes? How do we make sure that the processes that we're using are actually following through with our ESG commitments, right? So that's one.

Now let's take a layer up with my digital maturity and we look at where we're going with things like the data and the content in the cloud. Again, that's where I was saying we have to make sure that we have more of a trusted view and a single source of the truth for our customers to make sure that we're able to deliver on that trust.

And then when we look at things like advertising and marketing and platforms from that standpoint, helping businesses capture and understand and identify the right moment at the right time to promote these relevant social causes really makes sure that we're nurturing those moments across the customer journey. While that requires better process automation that relies on data and also machine learning algorithms that need to make investments to make sure that those algorithms are actually accurate.

Eric Hanselman

That's one of those things that we've just talked about some of the how do you prove out the lack of bias in AI and ML. Those are big concerns and the provable AI kinds of aspects of that play a big role there.

I'm wondering in terms of -- I was just thinking about reestablishing some of this visibility, letting consumers know more about sort of ESG perspectives. And how that fares in light of the idea that consumers are saying that they are trusting businesses less. It seems like businesses have got to get over that bridge, get up that scale of trust in order to get people to have those messages really resonate with their customers.

Sheryl Kingstone

Yes, absolutely. And that's where I go back to our original podcast when we talked about trust and privacy. There are ways to build that trust to make more transparency there. And it is a delicate balance. But the ability to follow through with your commitments to be much more transparent, the ability to have a consent-based platform where consumers can have the right to delete their actual digital identity, the ability to make that more empowering to give back control to the consumer to make these changes is another way that we can make investments in more of a self-service nature and a platform from this standpoint. So there's ways that we can really change for the future and make this more transparent and claw back that trust.

Eric Hanselman

It's a matter of identifying what that is, transparency, as you said, and then really ensuring that you walk the talk and actually do what you say you're going to do.

Sheryl Kingstone

Absolutely.

Eric Hanselman

Core business values, but so often, we've got the ability to really skip over some of the mechanics just for expediency. But hopefully, if you've got the technologies in place to ensure that it's not hard to get -- to achieve these ends, it will be easier for those organizations to actually get there. And this was -- it was a conversation that we just had with Justin Lam about data security and the data security pieces. And so much of that really depends on ensuring that you've got the technology in place that makes it easy for people to do the right thing.

Sheryl Kingstone

Absolutely. And I see looking ahead, we will continue to explore the intersection between ESG and CX technologies and how it really is shaping that digital customer journey.

Eric Hanselman

Well, it's a key part of success and competitiveness and making this all work. Well, I look forward to seeing the next round of data. What's coming up next and what should listeners be on the lookout for?

Sheryl Kingstone

From us, we actually are retaking a look at the 2022 data for ESG that will be coming out soon. And we will be doing a lot more as it relates to the macroeconomic impacts of these technologies.

Eric Hanselman

Well, great stuff. Sheryl, thank you for being back on the broadcast. Always a wealth of information and especially with something that's important as a lot of these perspectives on the consumer side around ESG.

Sheryl Kingstone

Thank you for inviting me.

Eric Hanselman

And that is it for this episode of Next in Tech. Thanks to our audience for staying with us. I hope you'll join us for our next episode where we'll be talking about next stages of data capability and a whole raft of the sort of the next pieces of data management. I hope you'll join us then because there is always something next in tech.