Why brands need to address the sustainability gap

Many brands’ claims on sustainability don’t always match their actual performance, but it’s also true that some brands avoid overclaiming and consequently their performance exceeds consumer perceptions – and that creates an opportunity to boost brand value, a new study says.

The Sustainability Gap Index 

The research builds on work published earlier this year when the Sustainability Perceptions Index, from Brand Finance, first highlighted how major brands have hundreds of millions of dollars’ worth of value contingent on how sustainable they are perceived to be. Brand Finance has now recalculated the valuations of each brand by considering their ESG performance, utilising data from specialist ratings company CSRHub. 

The Sustainability Gap Index takes those newly derived values, in conjunction with the Sustainability Perceptions Scores (SPS) disclosed in that earlier report, and exposes whether the public perceptions align with the actual performance of each brand.

Why it matters

Where performance exceeds perception, there is an opportunity to generate value, by communicating the brand’s genuine commitment to sustainability more effectively. Conversely, where perception exceeds performance, value is at risk, as brands leave themselves open to public backlash and a ‘correction’ of their sustainability perceptions value.

Takeaways 

• Amazon has the highest sustainability perceptions value of any brand, at $19.9bn. Whatever the reality of its operations, consumers appear to have confidence that it is committed enough to minimising impacts for them to continue to use its services. 
• EV manufacturer Tesla has the highest proportion of value underpinned by sustainability perceptions of any brand (26.9%) resulting in a Sustainability Perceptions Value of $17.8bn. But while Tesla performs well on environmental components of sustainability, it is weaker on governance and measures of social sustainability, which creates a value at risk of up to $4.1bn, more than any other brand analysed.

• Tech company Microsoft has the highest positive gap value of all the brands analysed, in terms of its sustainability performance exceeding its sustainability perception: there is an opportunity for Microsoft to generate up to $1.5bn in value through enhanced communication of its sustainability initiatives and services.
• Luxury fashion house Chanel is an example of a brand that has both a (relatively) high Sustainability Perceptions Score (4.88/10) and a high CSRHub score. By engaging with a wide range of stakeholder groups, Chanel can better align its sustainability performance with its sustainability perception, based on strong, authentic sustainability communication.

Sourced from Brand Finance