While governments, citizens, and investors are increasing their ESG focus, companies are failing according to customers.
The European Commission has presented a package with proposals for regulations and sustainable finance. The initiative is linked to the Paris Agreement and the UN 2030. The regulations are intended to facilitate that the EU framework for the financial area embraces assessments of factors related to the environment, social conditions, and corporate governance (ESG - Environmental-Social-Governance). The EU directive was implemented on 21 March this year.
Not surprisingly, customers are increasingly concerned about the environmental effects of the goods and services they buy and consume. For example, sales of sustainable products increased by 30 percent in the period 2013 to 2018. The fact that the same people in their role as investors are increasingly investing in ESG funds reinforces the impression.
The authorities use several instruments to stimulate sustainability. For example, the authorities in Milan have started offering a 20 percent waste tax reduction if companies, rather than throwing away usable food, donate it to charities.
Investors' sustainable investments have doubled between 2012 and 2018. On December 9, the New York State Pension Fund announced that it will dispose of many of its fossil fuel stocks over the next five years and sell its shares in companies that contribute to global heating by 2040.
The message is clear: companies must adhere to the sustainability goals because customers, governments, lenders, and investors demand or expect it. With this as a backdrop, one would think that Norwegian companies would develop several new measures and innovations to better comply with the sustainability goals. But they do not, according to customers.
As part of the Norwegian Innovation Index (NII) at NHH, we include questions about whether customers perceive the companies' solutions as positive for the environment and society, how they prioritize doing good things for the environment and society, and whether the companies regularly come up with new solutions on social and environmental challenges. What we found for 2020 is discouraging for at least two reasons.
Firstly, it is problematic that customers 'experiences of the companies' innovations in environmental and social areas have been declining since 2018. Secondly, it is problematic that the negative development is from low values.
In the top five places on the NII list of social innovations, we find companies (Stormberg, Nordic Choice, IKEA, Toyota, and Finn.no) that for a long time have developed new solutions that benefit the environment and society. Of companies with the lowest scores - those that do little to innovate in social and socially beneficial areas - we find surprises such as Oslo Taxi, Bunnpris, XXL, and Shell.
NHH's annual NII survey uncovers which companies work systematically in this area of innovation and who do not. Because social innovations increase in importance, companies will have everything to gain from improving in this area of innovation. Helping customers maintain responsible consumption and a sustainable lifestyle is very valuable!
