Why is sustainable marketing important?

The evolution of sustainable marketing

Sustainable marketing centers on organizations' environmental, social and governance (ESG) practices. The concept evolved from green marketing, a type of marketing that focuses mostly on the environment.

Green marketing took shape in the 1970s as the industrial revolution's environmental effects became increasingly apparent. Governments had few environmental regulations in the 1960s, so air and waterway pollution increased. As a result, the U.S. and European Union (EU) implemented major environmental regulations in the early 1970s to incentivize more responsible business practices. Some organizations adopted green marketing strategies in this period to build trust with environmentally conscious consumers, although many business leaders viewed it as a fringe practice.

People grew more interested in climate issues in the 1990s due to the topic's increased media coverage. As a result, green marketing saw a small uptick in interest. Some organizations created green marketing campaigns around recycling efforts and energy efficient products. However, most organizations still saw environmental protection and green marketing as optional and costly endeavors.

Then, in 2004, the United Nations released a report that called for governments, investors and financial analysts to more strongly focus on organizations' ESG practices. Subsequently, many organizations created ESG initiatives and began sustainable marketing initiatives. Since the mid-2000s, consumers have become increasingly aware of environmental and social issues, and sustainable marketing has become a more common business practice.

Why is sustainable marketing important?

Sustainable marketing can improve how organizations relate to the environment and their stakeholders. In turn, this strategy can help organizations increase brand loyalty, improve employee satisfaction, achieve compliance with regulations and increase profits.

1. Increases brand loyalty

Organizations that honestly engage in sustainable marketing can build brand loyalty with environmentally and socially conscious consumers. Brand loyalty is a commitment to a brand based on its perceived trustworthiness and values. If organizations successfully link their brand image to a larger environmental or social mission, such as the fight against climate change or discrimination, they could increase customer retention rates.

Customers that show loyalty to brands often make frequent purchases, even if competitors offer lower prices. Repeat business costs organizations less in advertising than new customer acquisition and can drive a significant portion of revenue.

2. Improves employee engagement

Just as consumers want to spend money with brands that share their values, employees want to feel like the work they do has a positive effect. Honest sustainable marketing requires organizations to improve their ESG practices, which can make employees more engaged in their work. Employees that value sustainability may feel a sense of fulfillment if they work for organizations that prioritize ESG.

Organizations can also implement social sustainability policies -- the social aspect of ESG -- to potentially improve employees' daily lives. For example, an organization may implement a flexible paid time-off policy to prioritize employee work-life balance over short-term profit. This type of social sustainability policy can improve employee satisfaction and reduce turnover.

3. Supports regulatory compliance

To launch effective sustainable marketing campaigns, business leaders should address their organizations' environmental and social effects. For instance, an organization can reduce its greenhouse gas emissions and voluntarily disclose its emission levels before it engages in sustainable marketing. These practices can help organizations comply with a growing number of ESG regulations.

For example, in January 2023, the EU finalized the corporate sustainability reporting directive, which expanded the number of organizations required to publicly disclose their ESG data. Similarly, the U.S. Security and Exchange Commission proposed an expanded version of its reporting rules in March 2022, which it may finalize by spring 2023. The expanded rules would require large U.S. organizations to disclose environmental data, such as greenhouse gas emissions, in regular reports.

Sustainable marketing encourages organizations to improve their environmental and social business practices, which can help them comply with current -- and potentially future -- regulations.

4. Increases profits

In the past, many business leaders viewed sustainability initiatives as constraints to success because they can require costly up-front investments. However, sustainable practices can increase organizations' profits. For instance, a sustainable marketing campaign may center around and organization's reduction in energy and water consumption. As organizations implement more energy-efficient technologies, appliances and processes, they can reduce operational costs.

Investors also use ESG ratings -- which gauge organizations' long-term exposure to environmental and social risks -- to identify profitable investments. Organizations with high ESG ratings may receive more funding from investors than others, which can create opportunities for growth and lead to increased profits.

If organizations embrace sustainable marketing strategies, they can become more competitive in their markets. However, if they knowingly or unknowingly make false claims about their sustainability initiatives -- a practice known as greenwashing -- their campaigns can backfire. Before organizations launch sustainable marketing campaigns, they can meet with sustainability consultants to learn how to implement effective ESG initiatives.