How to grow your business faster, and more profitably. Because ethical business works.

I am just back from my trip to the UK for Incrediballs, and I have updates! Also, on this episode of 'Now, That's What I Call Business' we're talking how to grow your business faster, and more profitably. But maybe not in the way you think. Think ethical practices and profits don't mix? Prepare to have your mind changed!Join me as we delve into compelling data from The Wharton School, McKinsey, and others. I'm breaking down hard facts and studies, proving that sustainable and ethical business isn't just a 'nice-to-have'; it's a powerful driver for increasing product sales.In this episode, we explore how businesses embracing ESG principles are not only doing the right thing but are also seeing tangible financial benefits. It’s time to debunk the myth that being environmentally and socially responsible means sacrificing profitability.

Our sister podcast is called 'Now, That's What I Call Green'.

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Transcript:

Kia ora and welcome to Now That's What I Call Business. I'm your host, Brianne West, and today we're going to talk about one of my favourite topics. Ethical business. Ethical business, but make it profitable. Oh wait, statistically, they already are more profitable, but we'll get into that. This isn't about opinions or trends or revolutions anymore. This is cold, hard statistical proof. Businesses with strong ESG credentials, so environmental, social and governance, they're not just taking a nice to have box, they're genuinely boosting their sales. And it's not just me saying that, there are shit loads of studies to back it up, but more on that soon. But first, I wanna do a quick update on Incredibles, because I literally just got back from the UK, and our mission to revolutionise the beverage industry is making waves. It's fizzing, or I'm fizzing, and I am very excited about sharing these developments with you. The most important thing we went over there is for flavours, right? So we were trying to do backwards and forwards, sending products here, it's just too hard, it's just too slow. If we want to hit the market in April, May, and now I'm beginning to start saying May because I'm beginning to get a little bit nervous about that deadline, we need to have those flavours nailed by the end of the year. We've nailed down eight that I absolutely love. No, you know what, that's not true. I don't love all of them because my taste isn't everybody's taste. I like really sweet things. Does everybody else? Who knows? That's why we're doing Taste Test Parties. We're sending out tablets to a whole bunch of people, but we're also going to have a couple of in-person focus groups if you like. One in Ōtautahi Christchurch one in Tamaki Makaurau, Auckland, hopefully before the end of the year. If you haven't gone and signed up to Incredibles.com, if you aren't, within the next week or so you're going to miss out on attending one of our Taste Test Parties, and I can say, I throw great parties. Pretty excited about it. But the flavours are fab. We have had a few tweaks. It looks like now we'll probably have three launches next year So we will have our initial launch in April probably a subsequent one in let's say July Plastic free July anybody and then another one which will potentially be our functional range a little bit later So I'm excited. So what do you know about packaging too? Packaging is a nightmare It's gotta be one of the things I'm asked about the absolute most

Which is why the format of the product is so important, right? Ethique's packaging was easy because the format of the product was a hard bit Incredibles packaging is easy because the format of the product is a hard bit. Same difference, I just seem to focus it a little bit backwards. Because we have found a tablet that is stable in all environments, unlike every other effervescent tablet on the market, we're good to go. With home compostable cardboard packaging, we're just figuring out the shape because the wheel really is our oyster. And finally we had a chat about our sort of phase two, our functional

range. So the idea way back when, right, was that we would launch with two ranges at once. We'd have flavour delicious range that you could just drink whenever you wanted. We'd also have the functional range which fills more of the idea of the the Barocco brief if you like. But we've decided not to do that because we don't want people to pigeonhole the brand as a Barocco brand. You know first and foremost we are about delicious taste and look our flavour range has a health benefit already. I just haven't told you what it is yet. My PR company have told me I've got to keep something secret. But our functional range is now in the works already because we had an opportunity come up for the UK. As we were flying out of the UK, I literally got an email from an old business colleague back from my teak days who said, hey, I'm doing this now and I'd love to introduce you to Insurge, a massive UK supermarket chain here. So opportunities are coming up. It's very exciting, but it does mean we sometimes have to fast forward launch dates. It's fine. It's exciting. This sort of thing is what makes startups so exciting for me. But okay, there's enough about Incredibles. Now I want to talk about making your business grow faster and make more money. So I recently spoke at the Craggy Range Business Speakers Lunch a few weeks ago, I think I talked about it on the last episode, and I spoke about the success of businesses who actually give a shit about people and planets, so things beyond money.

Now the audience is one I don't normally talk to. It was financiers, corporates, accountants, by and large, right? And there was some eye rolling which sucked a bit. Never mind. Now I used to be so frightened of public speaking that it used to make me vomit. So it's quite cool to see actually how far I've gone and how much that didn't worry me because that would have felt awful eight years ago. But I did care about the fact that that's kind of reflective of a lot of people's attitudes about the idea of ethical business. I've decided to stop calling it mission-driven businesses because you're getting corporates out there who are like,

Oh, we're mission-driven and then their product is the most exploitative, wasteful thing on earth. So I'm talking ethical business, right? So it's a higher bar, because at the end of the day, I'm an idealistic person. I believe that every business should embrace ethical principles or go out of business. But seeing those eye rolls was really disappointing, because it does point out that so many business people still hold the belief that you cannot care about people and planet and be profitable. And unfortunately, a lot of people in that room are very powerful. But I did meet some wonderful people who are going to be on the right side of history, so I remain optimistic. So let's debunk that myth, shall we? I'm gonna use some data to prove to you that building a business with these ethical principles as the foundation is key. So we've got three big sources. Now, source number one is titled, Do Customers Care About ESG?

Evidence from barcode-level sales data. So this is about behaviour, it's about sales, not about people saying what they think. Because of course, what people say and what people do are very different things. This study was conducted by a bunch of very clever people from the Wharton School and London Business School. And they used Nielsen data from the United States, that's actual sales data. So they simply analysed the relationship between a company's environmental and social factors, whether positive or negative, and their product sales. So things like employee relations, community contributions, social causes, environmental credentials, so on and so forth. They used an eight year period, so that's a big study, from 2008 to 2016, and there were about 35,000 participating stores from 90 resale chains. So you're catching a big demographic. This is a robust study. And it was across 886 product categories. So the key takeaways, these values really matter. The higher the environmental and social ratings of companies massively influence their product sales. A one standard deviation from the norm in those environmental and social ratings which created a 10% sales increase.

Something to note of course, Democratic voters and higher income earners are more influenced by these credentials which makes sense for a variety of reasons from income levels, education, so on. Second key takeaway is that people pick products based on how the companies treat the environment and their employees. So when a company is known for being good at both these things, it makes other people want to support them. This is not a shock. And the best bit about that, of course, is that when one company is rewarded for doing good, other companies see that and want to do the same thing too. And finally, the last key takeaway. When other companies do better with the environment and their social issues, it hurts the other company's sales because they are comparing the two. Interestingly enough, and again, not really surprising, when there are massive environmental disasters like floods and cyclones, this goes up.

It becomes more front of mind and dramatically affects their choices to buy. The closer they are to the issue, the more it affects that. For those of you saying, oh, how do you know this wasn't just a product quality thing, they had a really interesting control variable for that, so it wasn't related to product quality. All the studies are going to be in the show notes, you can go and have a read. The second study was again by Nielsen, because they have more data than anything else, and McKinsey & Co.

Now, McKinsey & Co. are one of the oldest and largest management consultancy on earth. And their simple message to businesses was, yeah, customers care about sustainability, and they back it up with what they choose to buy. This was five years of US sales data from 2017 to 2022, so a little bit more recent. It was across 600,000 different products, and represented $400 billion in annual retail revenue.

It was across 44,000 brands across 32 categories. So again, big study. And the overall trend was clear. In two-thirds of those categories, products that had robust ESG-related claims grew faster than those that didn't. Again, higher-income households were more likely to show this effect greater, but still, the research shows that a wide range of consumers across incomes, across life stages, ages, races, geographies are buying brands based on their ESG claims. It's not limited to niche audiences or demographics, and McKinsey & Co.'s stance is that it's making genuine headway with broad sways across America. That is so positive for the future of the planet, I just hope that it continues and grows faster. Now this is true for both large and small brands, so for those of you out there saying I'm too small for this to really be relevant, incorrect. Both large and small brands saw growth. They did not find that one single claim actually performed better than others, which did surprise me because I would have thought people resonate with something like plastic-free for example or carbon neutral more than they do something that's a little bit more obscure like palm oil free. And this is where I talk about messaging hierarchy and knowing what resonates with your consumer. But perhaps that doesn't matter as much as you think it does. Now if that brand had multiple ESG claims like carbon neutral, palm oil free, cruelty free, so on, the growth was even faster. That goes to show that consumers are really appreciating the multiple efforts towards showing environmental and social responsibility, because it shows it's authentic. It shows that it's built into the company, so they are much more likely to trust the brand. At the end of the day, meaningful ESG is what matters. Greenwashers, watch out. Interestingly, McKinsey & Co. had the hypothesis that shoppers expect new products to come built in with a lot of these claims, and are very happily surprised when older products begin to embody them. So it doesn't matter how long you've been in business, you can still take advantage of this.

And another note, not only those more established products, those big CPG companies, they decline slower when they make ESG brands. Because at the end of the day, no product lasts forever. So big businesses, that is a hell of a call to start implementing better ESG, authentic, giving a shit into what you do as a business. And finally, let's wrap up with a study from Deloitte. Funnily enough, there were a few Deloitte people in the room at the Craggy Ranger event.

Anyway, Deloitte tells us that in 2023, across several categories, there was a higher proportion of consumers that did not buy a brand because of ethical sustainability concerns. So that's one in three consumers who are actively choosing not to buy a product or support a brand because it is not fulfilling their values. Their research has told us that consumers want businesses and institutions to take the lead in supporting them to be more environmentally friendly. And as they should, because at the end of the day the onus is on businesses to do these things. Because businesses created the plastic crisis. But you know what?

I'm not going to go about on that rant today. For 32% of those surveyed, they said their trust in a brand would be vastly improved if they had a transparent, accountable and socially responsible supply chain. What is that? That's fair trade. How good is that? This is what we've been saying. Businesses that have the ethical supply chain not only really genuinely change the world and empower communities around the world, but customers care about it too. So you are doing better for your business. Okay, that was a lot of statistics and studies I threw at you and I just really wanted to hammer home the point that I have been going on about for what feels like my entire professional life, that ethical businesses do better. You do not have to sacrifice profit to be ethical. And at the end of the day, profit is not a dirty word. I do get a lot of people who come to me and say, hey, I want to start a business, but I don't want to make money because that makes me feel ick. Well, profit is not a dirty word. Profit is what enables you to go and do better things. It was first profitable in 2017 whilst still doing all the good stuff we did. Incredibles, well, it probably won't be profitable in the first year or so, that's okay, but we will actively be working towards being a profitable company because at the end of the day that's financially responsible and means we can give back more.

Businesses that care about doing more than just making money, ironically, make more money. So if you are still grappling with the myth that financial sustainability and doing good are mutually exclusive, I hope these studies have helped. Or if you have a board or advisors or if you're in a corporate and the people around you don't believe this, show them these studies. Hire ENS environmental and social ratings, positively influence sales, positively improve trust, loyalty, the feeling of community, all of these things that we now need to be building into business. I mean I feel like business nowadays is harder right? But that's good because it is making us do better as brands.

And again, whilst the strongest effects are seen in higher income demographics, that is not to say that only those aiming at that premium category should implement this because it is still occurring in every group, it is just stronger in that higher income group. It is a myth that only high income households buy sustainable products. And in fact, there's plenty of studies that show lower income households care more about people and planet than those at higher income. They just may not be able to support them all because, of course, more ethical, sustainable products do tend to come with a higher price tag.

It's all a bit grey, but the statistics prove it's worth doing. And of course, another implication is clear. Cream washing ain't it? I mean, this is a moral thing anyway. Lying about what your business does to try and get sales is gross. And a lot of it's inadvertent, and people get excited, and they don't know what they're doing is wrong, but a lot of businesses that know they're doing wrong, well, that's immoral.

But it's also seen through by consumers. So if you want to capitalise on this revolution, it needs to be genuine. I mean, the word of the year is authentic, right? As much as I don't like that, if you have to tell people to be authentic, I mean, how authentic can they really be? But it is fitting for this conversation. Committing to sustainability is not just about doing the right thing, it's also a path to success.

So I hope that has convinced some of you. For those of you already on your way to becoming an ethical business, let's keep this information up your sleeve because you may need to change board members' minds or investors' who knows in the future. And, of course, you won't be perfect. No business is perfect. So you can continue to evolve, improve your operations, and always remember, of course, it's progress, not perfection.

Let's recognise ESG principles for what they are, a powerful driver of sales, a source of trust, a foundation for a better, more sustainable future. If you're not convinced, don't take my word for it. Sources are in the show notes. And if you are convinced, great! This is what my entire life has been about and it's what I talk about a lot. So you're in the right place. In all seriousness though, this is why Business With Better exists. To help organisations embed more ethical principles into everything they do, without being overwhelming. And it's free. You can also listen to my previous podcast episodes that go over some of these principles and follow along on social media because I have a lot of rants about this sort of thing. Other sources of information, you can't beat taking your business through the B Corp assessment. Even if you don't want to be a B Corp just yet, because that's overwhelming, going through the assessment shows you your weak spots, your holes, where you've not done the right thing, or the best business practice just yet. It'll give you an idea of what you're doing well, and what you could be doing better. And we can all do better. I mean, some of the things I did last week for Incredibles, I checked the home compostability certifications for all the packaging, I looked into our supply chain for the ingredients and made sure I knew where things were coming from. I started working on how on earth we're going to calculate our carbon footprint for these tabs because I know exactly where we're going to put our carbon offset money and we're going to work to minimise that to just 10%. We can't actually do that till launch but it's good to plan ahead. And of course we double offset all our carbon emissions involved with travel. So that is a wrap for today. I hope it has been interesting and insightful because I found these studies fascinating. If you already agree with my way of thinking, fabulous.

But if you don't, I hope I have convinced you. So let's continue to challenge business norms, do business better, and prove that business can be a force for good. Thank you for listening. This has been Now That's What I Call Business, where we don't just talk about business. where we don't just talk about business. We are here to change the world.

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