A first of its kind study has revealed the financial value of sustainability perceptions of the world’s biggest brands. The Brand Finance Sustainability Perceptions Index, released recently in association with the International Advertising Association at the World Economic Forum in Davos, reveals that major brands like Amazon, Tesla, Apple and Alphabet each have billions of dollars contingent on carefully managing a reputation for commitment to sustainability.
What were the main findings of the study?
Amazon as a company has the most at stake with a sustainability perception value total of US $19.9 billion. Other examples of the world’s biggest brands at the top of this ranking include global companies like Tesla (US $17.8 bn), Apple (US $14.65 bn), and Google (US $14.6 bn).
Brand Finance Strategy and Sustainability Director Robert Haigh commented, “Global companies see the financial value that is tied to a reputation for acting sustainably. Whether they are seen as sustainability champions or not, the world’s biggest brands have hundreds of millions of dollars’ worth of value contingent on how sustainable they are perceived to be.”
Dagmara Szulc, Managing Director, IAA Global commented, “We see this as an incredibly potent tool to incentivize direct action in line with the UN SDGs and wider sustainability aims of the UNGC. By highlighting the immense financial value that is contingent on brand sustainability perceptions, we hope to harness businesses’ profit motive, moving them past the point where they see sustainability as a ‘hygiene factor’, to a point of rapid, concerted action.”
As part of the analysis, Brand Finance determines the relative importance of sustainability as a driver of value for brands. This reveals that Tesla is financially reliant on sustainability perceptions. 26.9% of Tesla’s brand value is associated with a reputation for sustainability.
In fact, the luxury autos sector accounted for a number of brands that performed extremely well in terms of general sustainability perception, companies such as Porsche and Mercedes-Benz. The research has revealed the important role of sustainability perception in driving choice amongst consumers in the sector, reflected through an average driver score of 22.9%.
Mr Haigh continued, “It might seem counterintuitive that brands associated with high fuel consumption are so reliant on a reputation for sustainability however, our research with the Brand Finance Sustainability Perceptions Index has found that at the premium end of all sectors, sustainability plays a powerful role. In luxury auto, where the purchase is discretionary and the brand is publicly expressed, the role of sustainability is further enhanced.”
How did the study asses the current perceptions?
As part of the analysis, Brand Finance also evaluated how sustainable each brand/company is currently perceived to be, allocating a ‘Sustainability Perceptions Score’. This strips back the impact of revenues to see which brands consumers think are the most committed to sustainability. Tesla, IKEA and Patagonia performed well across a wide range of markets.
Lush and The Body Shop scored very highly in the UK. In France, Yves Rocher and tyre brand Michelin stood out, while Brazilian cosmetics giant Natura scored highly in its home market.
Furthermore, the Brand Finance research revealed that consumers are typically fairly trusting of brands’ sustainability related communications, with 62% believing claims about sustainability made by brands. However, 79% of consumers also said that they had reduced their use of a particular brand having discovered it was acting in an unsustainable was, reinforcing the imperative for brands to communicate clearly, authentically and accurately about sustainability.
Robert Haigh concluded, “Failing to communicate about ESG topics puts value at risk. Consumers are relatively trusting of sustainability claims, and value brand’s commitment to sustainability, so under-communicating or ‘green-hushing’ is quite menacing. On the other hand, communication must be authentic and supported by action, because over-claiming or ‘greenwashing’ exposes businesses to hundreds of millions of dollars of reputational damage.”