Analyst Comment

Gen Z’s fraught relationship with ESG‑friendly missions

While some Gen Z shoppers have turned to second-hand shops, others have simply moved to online budget retailers that follow fast fashion practices.

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Across the board, pressure is mounting for companies to address their ESG performance. 

Evidence of this came in August 2019, when the influential Business Roundtable in the US redefined the purpose of a corporation, saying that businesses should promote “an economy that serves all Americans,” including customers, employees, suppliers, and communities, not just shareholders. In today’s world, the ESG posturing of a company is especially important to Gen Z consumers. 

ESG is a vital consideration for Gen Z… 

For many Gen-Zers, focusing on ESG has become a regular part of their thinking, instead of just a defining characteristic for specific subcultures as in previous generations. This foregrounding of ESG concerns by the many Gen-Zers is seen in the popularity of second-hand fashion both on- and offline and their involvement in climate protesting. 

For many Gen-Zers, ethical and sustainable considerations of their purchases have entered everyday thought; for example, choosing carbon-neutral or cruelty-free products and services. These trends mean companies must combine their traditional profit motive with sustainable practices to survive. 

…most of the time

However, despite Gen Z’s outward preference to work for and buy from companies with a mission beyond making a profit and enriching shareholders, there are several dramatic examples where Gen Z is not adhering to its own ESG values. 

This is seen in the popularity of the online Chinese fast fashion retailer Shein. The company appeals heavily to US and European young people, with sales greater than H&M and Zara combined, despite breaching almost every ESG criterion. 

This illustrates the fraught relationship many Gen-Zers have with ESG-friendly purchasing as they face a growing cost-of-living crisis. While some Gen Z shoppers have turned to second-hand shops, others have simply moved to online budget retailers that follow fast fashion practices. 

Another way Gen Z is running opposite to their hope for a more sustainable future is the demand for frictionless, time-saving, and gamified consumer experiences. The appetite for time-saving products and services is a mega-trend, especially for younger consumers. Gen Z’s desire for an instantly gratifying shopping experience is now a real possibility across sectors. 

For example, the rise of self-service checkout systems, contactless payments, direct-to-consumer delivery, and shopping apps. Much of these frictionless shopping experiences, such as next-day delivery, contribute to environmental degradation rather than support any work of protection. 

While many of Gen Z’s actions seem fraught with their ESG-focused mission this can be explained away by global economic anxieties, especially among youth populations. But the purposeful lowering of consumption and boycotting of specific brands and spending habits, all while holding companies accountable to an ESG framework, are the likely next steps.