The ROI of ESG for Restaurant Brands

    Data experts weigh in on the relationship between customers and brand responsibility.

    ESG concept of environmental, social, and governance.
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    A Deliverect survey found that more than 50 percent of customers are frustrated by large amounts of food waste.

    There is no single, clear-cut strategy for brands to address all environmental, social, and governance (ESG) issues. ESG has always been crucial for brands to consider—and is perhaps more relevant than ever in the current moment—but the plethora of areas that it encompasses can make developing a solid plan for addressing ESG a murky, overwhelming process. But at its core, ESG is about consumer trust. While the label applies to a number of concerns from employee wellness, to community involvement, to sustainable operations, it is most closely associated with how customers perceive brands.

    “[With ESG we look at] themes and topics around the environment, social issues, governance, and general trust—those come together to form a brand’s purpose,” says Bradley Taylor, senior strategist with Converseon, a conversation intelligence company that analyzes consumer conversation using artificial intelligence (AI). “And what jumps out to us about ESG in the industry is that there is a lack of trust in general, for [quick-serve] restaurants.”

    Since the beginning of 2021, Converseon has used its AI technology to monitor and assess conversations surrounding customer experiences with several brands, including over a dozen quick-service chains, across social media channels, producing a report with its findings at the end of each quarter. Using a proprietary consumer memory metric, Converseon’s technology filters social media posts and reproduces survey-like results by incorporating consumer “memory” (lasting perceptions of an experience with a brand) into the rather immediate comments sourced from social platforms. While online comments vary widely in subject and tone, Converseon’s technology is able to extract clearly defined topics and themes from unstructured feedback.

    The company’s recent data gathered around quick-serve brands is broken into specific ESG categories—environmental responsibility, customer experience, social responsibility, corporate citizenship, and trust—and then split into further, more specific areas of interest for targeted brand feedback. Converseon has used the data to produce a heatmap showing areas of immediate attention for brands. A score for each brand in each category is produced from data and then placed along a scale from  negative 100 to plus 100 (and red to green); Taylor reports lower scores for customer perception of quick-service brands’ social justice efforts than for environmental initiatives.

    “The industry as a whole is actually doing very well when it comes to sustainability, recycling, pollution, and reducing emissions,” he says. “We can contrast that with social issues—layoffs, support of the LGBTQ community, anti-racism—that's where the industry really struggles. That is really where the struggle is happening, where people are shouting about it, where people are disappointed and upset with the industry, but in terms of the environment, there is progress.”

    Still, while brands’ efforts surrounding social issues might garner less satisfaction than those same companies’ approaches to sustainability, the environment still holds the most potential for loss (or gain) of revenues. For quick-service brands in particular, Converseon finds that environmental practices typically generate or detract the most from revenues (about $140 million per quarter) with social justice causes detracting or adding around $110 million per quarter. This indicates a key area for concepts looking to develop more robust ESG strategies or improve customer perception of efforts around these concerns. The industry overall shows low scores in the “trust” category of Converseon’s study, and environmental efforts have potential for bolstering consumer faith in concepts.  

    Widespread consumer concern over sustainability efforts was also indicated in a recent survey of 7,000 global consumers conducted by Censuswide and Deliverect, a delivery management platform, and released in April. The survey focused on customers’ sustainability expectations as related to off-premises orders and found that, while 65 percent of customers find sustainable dining to be more expensive, almost half (43 percent) are willing to pay more for visible sustainability efforts on the part of brands—even efforts like curbing food waste that, ultimately, save revenues for the brand itself.

    “We think consumers always want more, but actually in this case, it's sometimes less is more,” Zhong Xu, CEO and cofounder of Deliverect, says. “Consumers hate waste. Which is actually good news, right? Inflation and food costs are rising for restaurants; maybe instead of increasing your prices, because customers are very sensitive about pricing, how about you make it a bit more sustainable, and make your portion size 10 percent less?”

    Deliverect’s survey found that more than 50 percent of customers are frustrated by large amounts of food waste, and see food waste as an issue that will stop them from ordering from an offending restaurant twice. An even greater percentage (63 percent) of surveyed customers reported that sustainable packaging is important to them, with more than half preferring to order from a brand that removes excess packaging from its orders.

    Xu recommends that brands research sustainability strategies that are “low threshold” for the consumer, recommending efforts that add marginal price increases to menus. But equally impactful to new initiatives is brand communication about efforts already in place. While consumers surveyed by Deliverect and Censuswide indicated that they perceived Chick-fil-A, Panera Bread, and Starbucks to be the most sustainable companies based on in-store and delivery experiences, a majority, 56 percent, feel concepts as a whole are not transparent about sustainability practices. Furthermore, over half of the consumers surveyed reported a desire for restaurants to better show how they are in the process of making orders more sustainable.

    While companies should steer clear from overstating efforts—Converseon’s Taylor warns that this could result in harmful consumer perceptions of brands “greenwashing” or purposefully disseminating misleading information and could further deplete consumer trust—a focus on a concept’s core values can help improve brand-to-consumer communication around ESG. Returning to the mission at the heart of a brand and then working to convey that mission to customers through clear communication could be a valuable first step for companies looking to improve perception of their ESG efforts.

    “It’s not just about packaging, it’s about storytelling,” Xu says. “If you make the effort to tell your brand’s story, customers will care.”