ESG factors affecting consumer choice

Figure Officials of the Korea Chamber of Commerce and Industry (KCCI) participate in a forum about ESG management criteria at the KCCI Headquarters in Seoul in this May 24 photo. Yonhap

By Bahk Eun-ji

Public expectations of companies’ social role are growing, and environmental, social and corporate governance (ESG) principles have become a new set of criteria influencing consumer choice, according to a recent survey published Monday.

ESG principles refer to a set of standards for evaluating the performance of companies according to their commitments to social responsibility ― via, for example, reducing carbon emissions, increasing gender equality, creating better conditions for workers and respecting the environment.

According to the survey, conducted on 300 people by the Korea Chamber of Commerce and Industry (KCCI) in early May, 63 percent of respondents said that companies’ ESG activities affected their purchase of products.

More than 70 percent of respondents answered that they have not purchased goods from specific companies, because they had poor evaluations in terms of ESG practices. At the same time, 88.3 percent said they were willing to pay more for products of companies that were rated excellent for their ESG practices ― measured by their eco-friendliness, active social contributions and fair treatment of employees ― even though their rivals might sell products of similar quality at a lower price.

Concerning the ESG performances of companies in general, 41.3 percent of respondents said that companies here were weak at quality governance, while 35 percent said companies needed to improve their actions concerning the environment, and 23.7 percent said that Korean companies lacked social responsibility.

The survey was divided into the three ESG fields. In the “environment” field, 36.7 percent of respondents said companies need to pay attention to ecosystem pollution caused by the excessive use of plastics. This concern was followed by the need for companies to address: “accelerated climate change” at 21 percent, “endocrine-disrupting hormones” at 19.7 percent, “micro dust” pollution at 15 percent, “ground/tap water pollution” at 3.3%, the “extinction of animals and plants” at 2.3 percent and “heavy metal pollution of the soil” at 1.7 percent.

In the “social issues” field of the survey, respondents said that companies need to make efforts to resolve the shortage of jobs, with 31.7 percent saying so. Other issues respondents focused on were human rights and employee safety, at 31 percent; income polarization, 14 percent; and discrimination against non-regular workers, 9.7 percent.

In the “governance” field, the largest number of respondents, or 36.3 percent, said that companies needed to prevent inappropriate means of management succession. Immoral practices ― such as embezzlement ― by high-ranking officials and corporate executives, and sharing power with audit organizations and minor shareholders, were other issues that respondents indicated as important in the “governance” category.

“Following the ESG management criteria can have positive effects for companies, such as attracting investment and increasing sales, and doing so is also effective in risk management to prevent problems,” said Rhee Jay-hyuk, a professor at Korea University’s Business School.

“With the development of social media and video platforms, ESG-related issues can be easily shared by the public, so companies should pay more attention to ESG management principles and practices.”