ESG and Behavioural Science

ESG (Environmental, Social, and Governance) is a set of criteria used to evaluate an organization’s performance and impact in three key areas. The environmental aspect focuses on a company’s environmental practices and their impact on the planet, covering factors such as carbon emissions, energy efficiency, waste management, water usage, biodiversity conservation, and efforts to mitigate environmental risks.

A behavioral science research consultancy can play a crucial role in helping a company fulfill environmental criteria in ESG by applying behavioral insights to drive positive environmental actions and changes within the organization. Here are some ways they can contribute:

1. Behavioral Change Campaigns: Leveraging insights from behavioral science, a consultancy can design targeted campaigns to promote specific environmental initiatives, such as reducing energy consumption, water conservation, or lowering carbon emissions. These campaigns can utilize social norms, incentives, and other behavioral triggers to foster positive changes.

Case in point: Opower, a customer engagement solutions provider for utility companies, works with over 85 utility partners and serves more than 18 million consumers across seven countries. 1 Their digital platform allows residential customers to compare their energy usage with similar homes and receive personalized tips on how to save energy (see figure 1 below). Social comparison is a powerful motivator. 2 In fact, in a study conducted in 2010 using data from randomized natural field experiments at 600,000 treatment and control households across the United States, it was estimated that the average program reduces energy consumption by 2.0%. 3 Not surprisingly, Opower’s energy efficiency recommendations have saved more than 32 terawatt hours of energy and $3.3 billion off energy bills. 4

2. Communication: Behavioral science can assist in effectively crafting communication strategies to present information in a clear, compelling, and persuasive manner.

Case in point: In the food and beverage industry, there is a growing trend of displaying carbon footprints on product labels. 1 However, understanding carbon footprints, usually communicated in terms of kg CO2e, can be challenging for consumers, as it is still a relatively unfamiliar concept for the average person. 2 While other methods of showing the environmental impact of a product like carbon certificate labels or climate ratings have been explored, they can be too vague. To address this challenge, the industry can draw inspiration from other sectors, such as health care and security, where colors have been effectively used to inform the risks of different events. For instance, the Department of Homeland Security in the USA once used color-coded systems to indicate different threat levels for terrorist attacks. Would this work? In an online experiment involving 402 participants, each tasked with choosing 20 food products from a fictitious online shop, researchers compared different food labeling conditions (see figure 2 below). 3 The results showed that the color-coded label led to the largest reduction in overall CO2e emissions (measured in grams) through increased purchases of green-labeled products (e.g., low carbon footprint meat like chicken) and decreased purchases of red-labeled products (e.g., high carbon footprint meat like beef). The effectiveness of colors lies in their ability to convey meaning that is nearly universally understood. For instance, green often symbolizes “good” or environmentally friendly, while red is associated with “bad” or higher carbon impact. Leveraging these color-coded labels can provide consumers with a quick and easily understood visual cue, facilitating informed choices about the environmental impact of their purchases.

3. Gamification: Leveraging gamification principles can encourage users to adopt more eco-friendly habits and incentivize sustainable actions, increasing user engagement and retention.

Case in point: Alipay, a digital lifestyle platform by Alibaba, introduced the Ant Forest game, which encourages users to engage in low-carbon activities such as cycling and reducing disposable utensil use. Users earn points for these actions, and once enough points are accumulated, Alipay plants a tree on their behalf. The game strategically leverages human psychology by providing real-time feedback, stimulating healthy competition, and promoting social collaboration among users. For example, within the app, users can challenge each other and compete to steal energy from one another. Additionally, they can collaborate with fellow users to collect points. Crucially, the game’s instant feedback mechanism allows users to understand which actions have the most significant environmental impact. This immediate feedback helps users consolidate these connections in their long-term memory, increasing the likelihood that they will continue adopting eco-friendly actions even when they are not actively using the app. 1 The success of the Ant Forest Game exemplifies the value of applying behavioral science to enhance sustainability efforts. With over 500 million users participating, Alipay’s Ant Forest has managed to plant over 100 million trees in arid regions of China, making a substantial positive impact on the environment (see figure 3 below for the effect that Alipay Ant Forest has had on the environment). 2

In conclusion, applying behavioral science principles to sustainability initiatives that are in line with ESG criteria can lead to more effective and impactful outcomes. Understanding human psychology is crucial for designing interventions that motivate positive environmental behaviors. By working with a behavioral science research consultancy like EcoNudge, enterprises can leverage data-driven insights to increase the likelihood of success in their sustainability practices.