Acting sustainably and being seen to do so is critical for brands, but sustainability is a multifaceted concept that can be hard for business leaders to navigate. Investors, CFOs, and CEOs are told by campaigners, NGOs, consultants, and sustainability teams that committing to sustainability is both the right thing to do and a business imperative. There are indeed many opportunities, whether in supplying products and services that facilitate the transition to a green economy, or simply by differentiating your brand as a sustainable alternative.

However, it can be hard to determine the business case for sustainability action without articulating it in financial terms. The Sustainability Perceptions Index is intended to be the first step to addressing this challenge. By quantifying the value of sustainability perceptions, we hope to make the value of action on sustainability more tangible.

Our research shows that even for individual businesses, there could be billions of dollars of financial value to be gained from enhanced action and associated communication. Equally, there can be billions at risk from insufficient action that leads to accusations of greenwashing, or even misallocated or excessive investments in sustainability communication that does not cut through.

We hope this report is a useful first step in understanding the financial role of sustainability perceptions to your business and making a persuasive case to leadership. If you would like to continue the conversation, please get in touch.

Sustainability Perceptions Scores

In the US, Trader Joe’s stands out for perceived environmental sustainability. Trader Joe’s brand positioning is not overtly sustainability aligned. However, it has successfully curated a personable, quirky, and engaging brand personality and strong brand affinity as a result. Affinity can create a halo effect, raising perceptions of a brand in all areas, including sustainability: this seems to be the case with Trader Joe’s. This of course presents a risk– if consumer beliefs about a brand’s conduct run ahead of reality, there is an underlying reputational risk. Brands can and have faced backlash and accusations of greenwashing, even if it did not make any direct claims to begin with. Trader Joe’s appears sensitive to such risk, recently announcing a major drive to reduce plastic use.

In Germany, health food retailer Alnatura is perceived to have the strongest commitment to environmental sustainability. Environmental sustainability has been at the core of Alnatura’s operations since its foundation in 1984, when the chain was an early pioneer of organic food at a time when it was a niche proposition. And though organic has since been popularized and mainstreamed alongside broader sustainability issues, Alnatura has maintained a distinctive, differentiated reputation for sustainability that underpins value.

Another early sustainability pioneer, The Body Shop, ranks amongst the top five brands in the UK on each of environmental, social, and governance perceptions. Founded by Anita Roddick, The Body Shop had iconic status in the UK—many would argue that it kickstarted the drive for sustainability in the cosmetics industry, where environmental themes now permeate the sector perhaps more than any other. More recently, the Body Shop has made headlines for collapsing into administration only three months after its acquisition by private equity firm Aurelius from Natura. Though the outlook for its physical retail footprint may be bleak, its brand image at least in the UK remains strongly differentiated and aligned with its founding ethos, and is therefore a critical resource for its recovery.

In India, Tata Group is a standout performer across all three metrics. Tata has a long and storied history, having been established in 1868. Tata highlights that as early as 1886, its Empress Mills in Nagpur pioneered employee welfare initiatives, long before any requirement to do so. This is one of many highlights of Tata’s enduring ‘people first’ approach. Tata’s reputation for philanthropy and sustainability is very well established in its home market. However, many people outside of India have much more limited awareness of this, even where they are familiar with the Tata brand. A precautionary approach to communicating sustainability commitments can be advisable, but as an undeniably global brand with broad and longstanding sustainability credentials, Tata could perhaps afford to communicate more confidently with its international stakeholders.

Sustainability Perceptions Value

Apple has the highest sustainability perceptions value of any brand, at USD33.3 billion. This may come as a surprise to some. Like many of the world’s top brands, Apple has a substantial scope for impact due to the sheer scale of its operations.

It has been subject to regular criticism on issues such as diverse as labour conditions in its production facilities, links to conflict zones in the sourcing of key minerals, greenhouse gas emissions at various scope levels, and alleged planned obsolescence. More recently, its claims about the carbon neutrality of its products received backlash from EU regulators.

It is important to reiterate that Apple’s position at the top of the table is not an assessment of its overall sustainability performance. Instead, we are focussed on perception. Regardless of Apple’s track record, consumers around the world have clear confidence that Apple is minimising its negative impacts and is committed to sustainability, or at least that Apple is committed enough for them to continue to use its products.

However, this result should by no means be seen as a cause for complacency. Sustainability drives 6.6% of consumer choice in the Consumer Electronics sector, demonstrating a material role for sustainability. Apple’s USD33.3 billion of value is contingent on maintaining its reputation for (a certain level of) sustainability. Consumer expectations may change in response to enhanced reporting requirements, sustainability-related awareness and education, and media coverage. If Apple fails to keep pace in improving its sustainability performance and communicate clearly and honestly about its progress, those billions of dollars of value could be at risk.

Microsoft has the second highest sustainability perception value at USD22.7 billion.

Microsoft has engaged extensively in sustainable initiatives, including committing to becoming carbon neutral, water positive, and zero waste by 2030. As well as ensuring it is operating more sustainably, Microsoft has invested heavily to create impact beyond its own business by utilising its extensive network and capabilities. In 2022, Microsoft introduced the Microsoft Cloud for Sustainability, a collection of enterprise-grade sustainability management tools. This looks to drive operational and cost efficiencies to help other businesses reach sustainability goals, thereby hoping to provide the tools for a wider network of sustainably conscious businesses.

Sustainability Gap Value

Microsoft is demonstrating leadership on sustainability, especially amongst the world’s very biggest brands, and creating brand value as a result. Yet, Microsoft could potentially generate even more value from communication about its sustainability initiatives.

Microsoft has the highest ‘Gap Value’ of any brand in the Sustainability Perceptions Index. The Gap Value represents the difference between perceived sustainability and actual sustainability performance. A positive value indicates that a brand’s sustainability performance is better than its perceptions would suggest. This implies that with concerted effort to communicate its sustainability achievements more effectively, businesses could add significant value for shareholders. In Microsoft’s case, this value exceeds USD3 billion.

Conversely, where perception exceeds performance, value is at imminent risk, as brands leave themselves open to public backlash, reputational damage, and a downward ‘correction’ of their sustainability perceptions value.

Tesla is one such brand that holds a negative gap value. Tesla is well known as a first mover in the development of electric vehicles and battery technology aiding the transition to a lower carbon economy. This image has carried across into the perceptions held by global consumers. Within the Auto sector, Tesla is seen in several countries as the brand with the greatest commitment to environmental sustainability, including Mexico and the UK. It has one of the highest proportions of brand value underpinned by sustainability perceptions of any brand (23.4%), resulting in a Sustainability Perceptions Value of USD13.7 billion, the 6^th highest in the Sustainability Perceptions Index.

However, the strength of this perception creates its own risk. Whilst Tesla performs fairly well on perceived sustainability, it falls significantly short of peer average sustainability performance across all three dimensions of ESG. As a result, Tesla has USD1.5 billion of value at risk.