A recent study by the consulting firm McKinsey shows, based on five years of sales data in the U.S. across categories and products, that most products featuring sustainability messaging saw sales growth. Here are the key findings from this study in Czech.

TL;DR

Products with sustainability claims grew by an average of 28% cumulatively over the past five years, compared with 20% for products that did not include such claims.
Private labels and smaller brands saw the largest growth in sales driven by sustainability messaging
Sales growth was most pronounced in the household goods segment and least pronounced in the beverages segment.
Sales growth driven by sustainability messaging was evident across all price points.
The more specific the message was, the greater the increase in sales.
Brands that have implemented sustainable practices across their product portfolios have gained greater customer loyalty.

Long read

McKinsey, in collaboration with NielsenIQ, analyzed U.S. sales data covering a five-year period, from 2017 to June 2022. The data included 600,000 individual product SKUs, representing $400 billion in annual retail sales. These products came from 44,000 brands across 32 categories in the food, beverage, personal care, and household goods sectors.

NielsenIQ’s measurement capabilities enabled us to identify 93 different ESG-related claims—included in terms such as “cage-free,” “vegan,” “eco-friendly,” and “biodegradable”—printed on the packaging of these products. These claims were divided into six categories: animal welfare, environmental sustainability, organic farming methods, plant-based ingredients, social responsibility, and sustainable packaging. The research also drew on consumer insights from NielsenIQ’s household panel, which tracks the shopping behavior of people in more than 100,000 U.S. households.

We identified six types of ESG claims featured on product packaging: - animal welfare (“cage-free,” “cruelty-free,” “not tested on animals”) - environmental sustainability (“compostable,” “eco-friendly”) - organic farming (organic certification labels) - plant-based agriculture (“plant-based,” “vegan”) - social responsibility (“fair wages,” “ethical”) - sustainable packaging (“plastic-free,” “biodegradable”).

At the most basic level, the analysis examined the sales growth rates of individual products by category over the five-year period from 2017 to 2022. We compared the different growth rates of products with and without ESG-related claims, while controlling for other factors (e.g., brand size, price level, and whether the product is new or established). The results provide insight into whether and by how much products with ESG-related claims outperform their counterparts in terms of growth, and how different types of products and claims fare in comparison to one another.

Not every brand that made such claims saw a positive impact on sales, and the data suggest a number of nuances at the product level. However, across many categories, this study generally revealed a clear and substantial correlation between ESG-related claims and consumer spending. The following four overarching insights are important for consumer companies and retailers that are building portfolios of environmentally and socially responsible products as part of their overall ESG strategies and impact commitments.

Consumers are shifting their spending toward products with sustainability claims

The first objective of the study was to determine whether, over this five-year period, products that include one or more ESG claims on their packaging outperform products that do not include any claims. For comparison, we looked at each product’s initial share of sales within its category and then tracked its five-year growth relative to that share. We found that consumers do indeed back up their stated preferences regarding sustainability with their purchasing behavior.

However, this study generally revealed a clear and significant correlation between ESG-related claims and consumer spending across many categories.

Over the past five years, products with sustainability claims have accounted for 56% of total growth—about 18 percentage points more than would be expected given their market share at the start of the five-year period.

Products with these claims recorded an average cumulative growth of 28% over a five-year period, compared with 20% for products without such claims.

In terms of CAGR (compound annual growth rate), products with sustainability claims outperformed those without such claims by 1.7%—a significant figure in the context of a mature and modestly growing industry. Products with ESG-related claims now account for nearly half of all retail sales in the categories surveyed.

Growth was not uniform across individual categories. For example, products with sustainability-related claims saw significant growth in 11 of 15 food categories and in three of four personal care categories, but in only two of nine beverage categories. Purchasing data alone cannot explain the reasons for these differences. For example, in the baby food and beverages category, it is possible that purchasing decisions reflect doctors’ advice and that consumers are unlikely to allow sustainability claims to outweigh clinical recommendations.

Brands of various sizes that make sustainability claims have experienced different rates of growth

Both large and small brands saw an increase in products with ESG-related claims. In 59% of all categories surveyed, the smallest brands making such claims experienced disproportionate growth. However, in 50% of the categories, the largest brands making these claims also experienced this growth.

Here are a few examples of differences across categories: in sports drinks and hair care, smaller brands grew faster, while in fruit juices and sweet snacks, larger brands grew faster. The data cannot explain the weaker performance of medium-sized brands, but it is possible that they lack the marketing and distribution reach of large brands and the aura of trustworthiness that smaller brands can capitalize on.

What about new and established products?

Newer products with sustainability claims outperformed their newer counterparts without such claims in only 32% of categories.

In 68% of categories, established products with sustainability claims outperformed established products without such claims. Once again, the data do not explain these differences. One hypothesis is that shoppers may expect newer products to feature sustainability claims but are pleasantly surprised when older products do so as well. It is noteworthy that established products that made ESG-related claims also tended to experience a slower decline in sales than established products that did not make such claims.

For products that made ESG claims, similar performance rates were observed across all price levels. The success in lower price tiers may partly reflect the high prevalence of private-label products that make such claims. In 88% of categories, private-label products that made such claims captured a larger-than-expected share of growth.

However, we found that less common claims were associated with higher growth than more widespread claims. This may indicate that claims can serve as a means of differentiation, particularly if they also have a disproportionate impact on a company’s sustainability goals and commitments.

Products that featured the least common claims (such as "vegan" or "carbon-neutral") grew 8.5% more than similar products that did not feature those claims.

Products that featured moderately common claims (such as "sustainable packaging" or "plant-based") showed a 4.7% difference in growth compared to their counterparts.

The most common claims (such as “environmentally sustainable”) were associated with the smallest difference in growth. Nevertheless, even products featuring these common claims recorded growth that was roughly 2% higher than that of products that did not feature them, suggesting that common claims can be a differentiating factor.

Brands that generate more than half of their sales from products with sustainability claims enjoy a repurchase rate of 32 to 34% (meaning that shoppers buy products from that brand three or more times a year).

In contrast, brands that derive less than 50% of their sales from products with sustainability-related claims achieve a repurchase rate of less than 30%. This difference does not prove that consumers reward brands for sustainability claims, but it suggests that a deeper commitment to sustainability issues across a brand’s portfolio can increase consumer loyalty to the brand as a whole.

Combining multiple messages can come across as more authentic

This study also analyzed the effects on growth when multiple types of sustainability claims appeared on a product’s packaging. Products with more claims across the six sustainability classification themes grew, on average, faster than other products. In nearly 80% of categories, the data showed a positive correlation between growth rate and the number of different types of sustainability-related claims a product made. Products that made more types of claims grew approximately twice as fast as products that made only one claim.

We are not suggesting that companies simply print more claims and certifications on their products and expect to be rewarded. These claims must, of course, be backed by actual measures that have a significant impact on sustainability, and companies should heed the serious warning against greenwashing. However, this finding suggests that consumers are more likely to perceive that having multiple claims (rather than just one) on a product correlates with authentic brand behavior related to sustainability. It also suggests that brands should reconsider their commitment to sustainability practices and ensure that they take a holistic view of all the interconnected social and environmental factors that underpin their products.

For companies at the forefront of the production and sale of consumer packaged goods, there is no single formula for investing in environmentally and socially responsible product attributes and claims. Opportunities exist on multiple fronts. It is important for consumer goods companies and retailers, first, to set priorities and invest in sustainability measures that drive the greatest progress toward their overall sustainability commitments, and second, to communicate these measures to customers, including through claims on product labels. Our survey highlights several insights that companies might consider as they seek to advance their ESG commitments while pursuing differentiated growth.

Companies should identify, across their entire organization, the measures that have the greatest impact on sustainability and then, where appropriate, disclose these measures through claims across their product portfolio. Rather than placing a single, large bet on a specific product or category, companies are likely to have a greater impact on sustainability and a better chance of achieving significant growth if they incorporate high-impact sustainability benefits across multiple categories and products.

To ensure that investments in sustainability-related initiatives have the greatest possible impact, companies may consider building strong capabilities for product design that take a comprehensive view of costs, quality, and sustainability-related impacts.

A healthy portfolio generally consists of a balanced mix of new and established products. Sustainability claims can play an important role in both cases. This study suggests that a flagship, established product competing for market share in a highly competitive environment could potentially gain an advantage by offering relevant and differentiating sustainability claims.

ABOUT THE AUTHORS

Jordan Bar Am is a partner at McKinsey’s New Jersey office; Vinit Doshi is a senior consultant at the Stamford office; Anandi Malik is a consultant at the New York office; and Steve Noble is a managing partner at the Minneapolis office. Sherry Frey is vice president of holistic wellness at NielsenIQ.

The authors would like to thank Oskar Brach, Nina Engels, Gurvinder Kauran, Akshay Khuran, and Caroline Ling for their contributions to this article. They would also like to thank NielsenIQ for its contribution to the joint research conducted for this study.

This report is based on joint research conducted by McKinsey & Company and NielsenIQ. The report reflects the authors’ views and was not influenced by any company, government, or other institution.

Sustainability Is Having an Increasingly Positive Impact on Sales, According to McKinsey Research