Martin León Barreto
Regulators increasingly require companies to report environmental, social, and governance information. The US Securities and Exchange Commission adopted new rules in March 2024 requiring public companies to explain climate-related risks when they publish annual reports and registration statements. Beginning with company reports published in 2025, the European Union will apply strengthened rules making large and listed companies disclose the risks and opportunities related to their ESG activities.
Such disclosures provide more information to investors, as well as to consumers who want to align their spending with their values. But does knowing about the ESG activities of a business actually change what shoppers buy?
Sinja Leonelli of New York University, Chicago Booth’s Maximilian Muhn and Thomas Rauter, and NYU’s Gurpal Sran put consumer attitudes to the test. In an experimental survey, they find that companies’ ESG disclosures had little impact on customer spending.
The researchers worked with Numerator, a US market-research company that administers consumer surveys. Numerator tracks respondents’ purchases in stores and online, making it possible to match survey results with spending habits.
Leonelli, Muhn, Rauter, and Sran collected information from more than 24,000 survey participants, initially asking what factors most influence their purchase decisions. “By far, the two most important purchase considerations are product quality and price,” the researchers write. While survey participants said they also consider ESG issues such as working conditions and carbon footprint, these factors ranked much lower.
The researchers also asked participants directly whether they prefer to buy from “ESG-responsible” businesses. Survey respondents had a moderate preference for purchasing from such companies, but 35 percent of participants said they didn’t have information about brands’ ESG activities.
This prompted the researchers to put that information right in front of them. They used survey respondents’ purchase history from Numerator to build each participant an individualized portfolio of 15 products—some of which the participant had previously bought, and some of which were substitutes for those products.
The information in the profiles varied, with different versions randomly assigned to respondents. Some profiles contained information about the company’s ESG performance; some linked to the company’s ESG report; and some contained information not related to ESG, such as financial data or product reviews.
While most consumers reported only a moderate preference for purchasing products made by what researchers termed “ESG-responsible” companies, about a third indicated a strong or very strong preference for such products.
For example, the social-oriented ESG profile of the Jimmy Dean Frozen Meat Lovers Breakfast Bowl included information such as: “Tyson Foods offers financial grants and food product donations to regional food banks serving its communities.” The environmentally focused profile omitted that fact, but reported on Tyson’s use of renewable and recyclable materials. Participants who received profiles with a link to a company’s ESG report had to click through to receive any ESG information, and could choose not to click the link.
The researchers asked participants how likely they were to buy each product over the next six months. Respondents who chose to view the full ESG report for a product showed an increase in purchase intent of 0.18 percentage points—the largest increase out of all the types of information received. Participants also reported being more likely to buy a product when they received information about the business’s social or environmental activities, and to a lesser extent, its efforts at good corporate governance. Reading financial information about a company did not change their interest in buying a product.
A significant aspect of the study was the researchers’ ability to observe the respondents’ subsequent shopping behavior. Despite participants’ expressed interest, the effects on actual purchases were both small and short lived. In the two weeks after viewing a company’s ESG report as part of a product profile, households in the study increased their number of purchases of that product by 1.2 percent. After being told about the social activities of a business, consumers increased purchases by 0.3 percent.
By the third or fourth week after the survey experiment, even those small changes disappeared. To understand why, the researchers sent participants a set of follow-up questions and found that 65 percent of respondents who remembered taking the initial survey said the experiment did not change their shopping behavior, primarily because they did not remember the ESG information or did not have time to consider it.
“There are so many frictions in the real world that prevent this information channel from being as effective as we might wish,” Rauter says. “People don’t have the time; they don’t have the money. They forget. They might care but not act.”
The researchers consider that requiring or encouraging businesses to provide ESG information could indirectly benefit consumers. Investors or other stakeholders might use the information to reward the behavior of certain businesses or pressure others to change their activities. Regulators also could use business disclosures to design certifications or labels that make it easier for consumers to remember and apply ESG information.
Still, “if you want to change something for the good and have firms become more environmentally friendly,” Muhn says, “maybe providing more disclosure geared toward consumers is not the right lever.”
Sinja Leonelli, Maximilian Muhn, Thomas Rauter, and Gurpal Sran, “How Do Consumers Use Firm Disclosure? Evidence from a Randomized Field Experiment,” Working paper, January 2024.
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