Eco-Friendly Claims Friendlier To Bottom Line? Study Says Yes



CPG products that made environmental, social or governance (ESG) claims over a five-year period averaged cumulative sales growth of 28%, versus 20% for products without such claims, according to an analysis by McKinsey & Company and NielsenIQ.

When the companies examined the data, there were no fewer than 93 different ESG-related claims—embodied in such terms as “cage-free,” “vegan,” “eco-friendly” and “biodegradable.”

For example, products making ESG-related claims generated “outsize growth” in 15 food categories and in three out of four personal-care categories—but only two out of nine beverage categories.

“Shopping data alone can’t explain the reasons for such variances,” notes a report on the analysis.

“In the children’s formula and nutritional-beverage category, for example, it’s possible that buying decisions reflect advice from doctors and that consumers probably won’t let ESG-related claims outweigh clinical recommendations.”

The analysis covers U.S. sales data from 2017 to June of 2023 encompassing 32 categories, 44,000 brands and 600,000 product SKUs.

It is correlational—as opposed to causal—because it did not control for such factors as marketing investments, distribution or promotional activity.

Sales growth was not uniform across categories.

In this interview, edited for brevity and clarity, Sherry Frey, health and wellness industry leader at NielsenIQ, talks about topline takeaways from the data.

CPG Insider: Was it surprising that there were 93 different ESG claims?

Frey: We’ve seen an explosion of claims. But when you look at them, they converge into six buckets or pillars: animal welfare, environmental sustainability, organic-farming methods, plant-based ingredients, social responsibility and sustainable packaging.

CPG Insider: What are some of the key learnings?

Frey: We anticipated that challenger brands would drive a lot of the ESG growth—new brands that are more mission-based. That actually did come to play. What we were surprised to see is that private-label sustainable products drove so much of the growth.

I think it was exciting to see that big brands also were able to drive growth. We didn’t see the growth we were expecting in medium-size brands.

CPG Insider: What’s a common business case when brands consider ESG claims?

Frey: Whether they can charge a premium. The reality is it was all over the board. In some cases, there was an opportunity to charge a premium, often because it was a claim that was new and innovative in the space.

The question may not be can I charge a premium—because that window might be small—but can this drive loyalty? We do see that claims are driving higher consumer loyalty.

CPG Insider: What else do brands want to know?

Frey: What claims they should make.

There’s no silver bullet. Brands that play across multiple pillars did better. We hypothesized that consumers are saying “Hey, they’re really committed—this is really part of their ethos.” So the takeaway for brands to think about is it’s not about one pillar, but hitting multiple ones.

CPG Insider: What about consumers?

Frey: Consumers have told us “I want to buy more sustainable [products] and be personally more sustainable” but they don’t always see it on-package. I know that’s valuable real estate for brands and retailers, but that’s where consumers are looking for that level of information. So that communication on-pack is really important—or through digital discovery on a retailer’s site.


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