ESG can give agencies the competitive edge, IPA research says

Results reveal it can be a valuable differentiator to clients choosing an agency.

By Sara Nelson

[Nur Photo/Getty Images]

Agencies that promote and demonstrate their environmental, social and governance (ESG) values and actions to brands could hold an edge over their competitors, according to new research commissioned by the Institute of Practitioners in Advertising.

The results reveal that while proof of commitment to ESG may not win new business outright, it can be a valuable differentiator for clients choosing an agency.

This week, Mark Read, chief executive of WPP, the world’s biggest agency group with 100,000 staff, told Campaign that demand for ESG-related work is “off the scale”. Read said there is “significant” potential revenue growth in advising clients in areas such as climate change, racial equity, privacy and responsible marketing, although he added that it is hard to quantify the exact upside in financial terms.

The IPA report advises agencies to “get under the skin” of clients’ brands, to provide value-added content and to make ESG part of the conversation and demonstrate its relevance.

Of the marcomms leaders surveyed, 84% agreed that ESG is and will become increasingly important in day-to-day practices, with 51% saying the coronavirus pandemic has accelerated this demand.

However, the same research found that brands continue to prioritise other factors over ESG credentials such as demonstrating effectiveness (15.3%), offering creative solutions (15.3%), sharing values (7.9%) and strong chemistry (14.1%.)

Commenting on the findings, Julian Douglas, IPA president and vice chairman of VCCP, said: “This report highlights the need for agencies to walk the talk when it comes to demonstrating their commitment to their brands’ and their own environmental, social and governance credentials.

“Not only is it the right thing to do, but it will increasingly become a business imperative. As the evidence shows, brands do look to us for effective, creative solutions coupled with great chemistry as our fundamental offering. But increasingly we need to have all this coupled with a leading advantage in the field of ESG to have that vital competitive edge.”

Marc Nohr, IPA commercial leadership group chair and group chief executive of Miroma Agencies, added: “ESG is not just an issue for agencies, it’s an issue for businesses, governments and society.

“A moral imperative is becoming a commercial necessity and the agencies that put this at the heart of their strategy for growth will be well-positioned in the future. But we must do more than pay lip service to it. And that will mean asking ourselves some tough questions about where our responsibility to society and the planet begins and ends.”

The research was carried out by Opinium. It investigated the role of ESG by using both quantitative and qualitative interviews with marcomms leaders from across the financial services, FMCG and food and drink sectors.