Author: Chuck Davenport
It is easy to see the importance of sustainability and to make commitments that align with ESG targets. Execution of intentions is much more difficult. Over 2/3 of Fortune 500 companies have made timeline-based commitments to various ESG goals. However, 40% of those are falling behind in their progress and several high-profile ones have abandoned some of their key objectives altogether, often because there is not a clear path to value for stakeholders.
Many early success stories are consumer-focused ESG offers. In a recent global study of over 23,000 consumers, respondents reported a willingness to pay a premium for sustainable products - on average, a premium of 12%. This premium should trickle up the value chain, enabling every supplier to receive its commensurate share, but there are many cases where this is not happening. Without a new mindset around pricing and value capture for ESG-enabled products, companies risk missing viable opportunities for this important, purpose-driven business segment.
The path to long-term success in ESG for B2B businesses is not radically different from any business, but there are three important nuances that many companies overlook – context of the business ecosystem, consideration of new currencies of value, and the consequences of expected S-curves and E-curves. As companies launch initiatives, they quickly learn that unilateral efforts are hard to execute – the ecosystem is critical to success. Also, carving out a unique value using a broader range of value currencies enables stronger monetization. Finally, planning, communication, and executing against realistic expectations of progression of customer adoption and production efficiency enhance the viability of these important initiatives.
I would love to see all of you at my keynote presentation in the spring PPS conference in Chicago April 23-26. I will be speaking on Friday at 11:15.
About: Chuck Davenport is a Pricing Expert Partner at Bain and Company. He has over 27 years of experience in Pricing and Profitability Management, both as a business executive and as a consultant and leads Bain’s efforts in Pricing for ESG and Dynamic Pricing. He has also published, spoken, and lectured extensively on the subject of Pricing to MBA student at schools such as Emory, UNC Chapel Hill, Duke, Yale, Cornell, and University of Rochester. Chuck holds an Electrical Engineering degree from Georgia Tech and an MBA from Emory University.