Consumers Say They Care about ESG, but Don’t Spend Like They Do

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.”