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By Ellen Pearlman
Strategic Thinkers: Sheila Bonini, Greg Hintz, Lenny Mendonca
Credentials: Bonini is a consultant in McKinsey's Silicon Valley office, Hintz is a consultant in the New Jersey office, Mendonca is a director in the San Francisco office.
Big Idea: Businesses must act on global warming to narrow a general trust gap with the public
Article: "Addressing consumer concerns about climate change" published by The McKinsey Quarterly, March 2008. This article was originally published in The McKinsey Quarterly. Copyright (c) 2008 McKinsey & Company. All rights reserved. Reprinted by permission.
In September 2007, The McKinsey Quarterly conducted a survey of 2,687 global executives-one-third of the respondents were C-level executives-and 7,751 consumers in eight countries. The consumer survey explored the role business plays in society, the way large global organizations deal with sociopolitical questions, and the issues facing four industries-food and beverages, high-tech, petroleum, and retailing.
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The results point to a strong concern for environmental issues, including climate change. In fact, consumers and executives were in lockstep in naming environmental concerns the most important issue that will be faced in the next five years; 55% of consumers and 51% of executives selected this choice. What's interesting is how much this has changed from a year ago, when 50% of consumers and only 31% of executives named this as important in the next five years. Clearly executives are waking up to what consumers have already identified as their most pressing concern.
The other most pressing issues for consumers are healthier and safer products and retirement and health care benefits for employees. Executives, on the other hand, selected privacy and data security and job losses from moving jobs overseas as their next most important issues.
Both groups believe that large corporations should play a broader role in society (90% of consumers and 85% of executives) and majorities also believe that both companies and governments should have an equally important role in handling sociopolitical issues. And while 70% of North American executives said their contribution to the public good was mostly or somewhat positive, only 40% of consumers agreed (in Europe the gap is even wider). Clearly there is room for corporations to polish up their image and gain the trust of consumers.
Some industries have better opportunities than others to make an impact environmentally, but all have a chance to demonstrate that they are reducing their impact on the environment. Of the industries studied in the survey, petroleum had the greatest trust problem with consumers. In the U.S. their trust rating was 29%, up from 17% in last year's survey. Consumers were most interested in seeing petroleum companies invest in renewable and alternative energy sources. And 25% said they'd pay a slight premium for environmentally friendly products.
The food and beverage industry had strong trust ratings-70% to 90%. But still consumers wanted to see this sector improve their performance in health and safety, the environment and sustainability and other ethical business practices. Customers were also more likely to say they would both punish and reward companies in this sector for their actions. Food and beverage companies also need to do a better job of publicizing their green efforts, since consumers were not well-informed about which company among the top players was doing the most to protect the environment.
Retailers did almost as well as the food and beverage companies in earning customer trust, except in the U.S. and Canada where their ratings were about 15 percentage points lower. And while 20% of retail consumers said they pay extra for products with environmental and social benefits, that still leaves 80% that are either not willing, not concerned or still haven't reached into their pockets to show their concern.
Finally, the high-tech industry had the highest trust ratings of the four industry groups. But consumers still believe that the industry is not doing enough to protect the environment. The recommendations vary greatly by country, but overall aggressive action to reduce energy consumption and prevent climate change was the number one change global consumers wanted (in the U.S. this rated number 7).
As environmental issues continue to attract attention, business executives can look for ways to make a difference to their company, their customers and to the global community. Those that ignore this will miss an opportunity to beat the competition and have a chance to do something meaningful for the planet.
Also of interest:
- "The state of corporate philanthropy: A McKinsey Global Survey" published by McKinsey, February 2008. The January 2007 survey received responses from 721 global executives-74% were C-level executives-to their questions about the role businesses should play in society. The survey indicates that companies are not using corporate philanthropy as well as they could to meet social goals or their shareholders expectations. In this study, respondents picked environmental issues, including climate change, as the issue that is most likely to have an impact on shareholder value in the next five years. However, in North America this was the second choice, health care and other benefits ranked as the number one issue.
CIOZone Question:
What steps is your organization taking to reduce energy consumption?
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