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- Thought Leadership
Purpose has become a thought leadership buzzword in the corporate world, nowhere more so than in financial services. But is it all just ‘purpose-washing’? In this blog, we take a close look at sustainability in financial services, whether its actions meet the words, and how thought leadership can drive purpose-driven organisational change.
We will draw on key findings from our new report, Leading Lights: Focus on Financial Services, exploring how thought leadership can help drive an authentic, purpose-driven strategy.
Purpose became the new buzzword less than a decade ago. It broadly means acting around goals that are bigger than the company and which have social meaning or impact. Purpose can mean anything from companies helping to alleviate poverty to action on diversity, equity and inclusion (DEI).
The main goal of a purpose-driven mission was to find a way of motivating and uniting employees, of driving commitment. In turn, purpose yields revenue and profit, even if this is not the direct aim of a purpose-driven agenda. Purpose also drives consumer choices (though some argue that purpose will drift as the cost of living bites harder).
But purpose is also about stepping up to make change happen, not just doing better PR. Our sustainability superhero, Earth Angel, always reminds us of the primary ethical mission of purpose:
“If companies are simply doing smart PR but have no intention of following through, or that somehow actions get lost among other priorities, it will have a negative impact. This negative impact includes loss of reputation, liability claims and weakened relationships with stakeholders. Statements on purpose need follow through, always.”
Purpose in financial services – the sustainability agenda
Increasingly, the financial services sector is talking about sustainability. This focus is partly a product of new reporting requirements. For example, the Corporate Sustainability Reporting Directive came into force in the European Union at the start of 2023, including a broad range of companies.
But sustainability also matters for customers and employees. Research by cloud-banking platform Mambu of over 6000 consumers found that nearly half (48%) said that access to green finance had become more important to them over the last five years. 58% would like more control over where their money is invested, and 55% would like some say over what type of green products their bank develops.
In our latest thought leadership report, Leading Lights: Focus on Financial Services, we explore the real-world impact of financial services firms. Drawing on our own prior research around sustainability, we reveal that:
- 55% say a potential business partner’s sustainability credentials are key to a decision to work with them.
- 49% of financial services leaders believe sustainability will drive new customers.
- 89% say it is imperative that their firm is seen as sustainable by customers and partners.
- 48% think employees will work harder for a sustainable business.
- 35% think it makes them more attractive as an employer.
However, in our research, we also found that 38% of respondents felt greenwashing was prevalent across the sector, and this is a huge problem for the financial sector.
The problem of greenwashing in financial services
The financial sector operates in a low-trust environment. In the US, Forrester’s Financial Services Consumer Trust Index revealed that only 2% of financial services brands were considered strong on trust. In comparison, 57% were seen as weak.
Ever since the 2008 to 2009 financial crash, where reckless behaviours, performance-neutral bonus systems and weak regulation led to a crash and years of pain for populations, consumers do not see financial institutions as reliable. A YouGov poll revealed that 66% of UK adults do not trust banks to work in the best interests of society, ten years after the crash.
Unsurprising then that Mambu’s research cited above found that 67% of global consumers believe their financial institution is greenwashing, and only 42% believe their bank clearly communicates its sustainability commitments.
Trust and Transparency in financial services are more important than ever
In a 2023 iResearch Services survey on attitudes to financial services in the UK and USA, trust overall appears high, with 70% saying they believe their bank acts in their best interests. This is up from 63% in 2020, when the survey was last conducted.
12% did not know if they were, which highlights the need for better communication on how banks are supporting customers and acting in an ethical and sustainable way, without greenwashing.
In the same study, 54% said they believe their bank should focus more on ethical and sustainability issues. This is up on the 49% figure in 2020 when short-term focus prevailed, and all eyes and attention were on the pandemic, yet is not as high as we would expect given the increasing focus on the importance of companies operating more ethically and sustainably.
A survey by Saltus also showed the impact of greenwashing. While 44% of high-net-worth individuals (HNWIs) invest in environmental, social and governance initiatives (ESG) and 80% see climate change as a priority, greenwashing is driving down investment.
The connection between purpose and sustainability in financial services
There is no doubt that business leaders believe in purpose. Less obvious is how – and whether – they act on it. A study by PwC found that while 79% of leaders surveyed thought that purpose was central to business success, only 34% thought it guided their decision-making.
Despite this perception, Deloitte reported at the start of 2023 that sustainable finance products (SFPs) were the fastest growing market segment, and green debt issuance overtook fossil fuel financing in 2022. Despite a slight dip in SFPs in 2022, the Economist Intelligence Unit reported recovery throughout 2023.
While progress feels slow given the challenges ahead, there is nevertheless progress.
Communicating purpose and impact through thought leadership
Investing in purpose-driven thought leadership is not only a matter of good ethics; it also makes financial sense.
Our research revealed that 10% of those surveyed felt that increasing investment in thought leadership brought a closer alignment with company purpose.
More strikingly, we found a significant relationship between revenue and purpose. 70% of individuals who recognise a link between thought leadership and revenue increase also have a greater alignment between their thought leadership activities and company purpose (Source: Leading Lights: Focus on Financial Services).
Brandpie’s 2022 CEO Purpose Survey found that 30% of CEOs believe that the primary function of purpose is to guide decision-making across their organizations.
Thought leadership can also help deliver on sustainability and purpose by:
- Indicating mission seriousness – thought leadership requires a different level of investment and a longer-term vision than marketing. It generates trust and loyalty, in employees and customers alike.
- Helping with reporting requirements – companies can play an educative, best-practice role and report on their own progress.
- Changing cultures – thought leadership has significant organisational impacts:
Our research found that financial sector employees were either very (44%) or somewhat (44%) engaged in their firm’s thought leadership (Source: Leading Lights: Focus on Financial Services).
In our survey across different sectors, 47% of those who digest and engage with thought leadership said it led their decision-making, and a further 47% said it helped inform it.
85% of creators of thought leadership said it played a strategic role in the organisation (Source: Leading Lights: Harnessing thought leadership superpowers for commercial and cultural success).
- Finally, thought leadership can help intelligently communicate sustainability missions to customers through compelling copy and media reporting.
Communication is key – and opens up opportunities
How banks and financial services providers communicate with their customers is top of mind. In the 2023 iResearch Services Future of Financial Services study, 42% of respondents say they are currently considering switching banks based on better, more personalized communications.
66% of banking customers surveyed globally feel their current bank is doing a good job communicating with customers – perhaps a relief for many, but still showing considerable room for improvement.
The power of purpose-driven thought leadership
Purpose-driven thought leadership works as a self-fulfilling prophecy. Invest in it, and it will change minds, organisational behaviours and business culture, driving greater commitment to sustainability.
Read Leading Lights: Focus on Financial Services today and find out how to enhance your purpose-driven strategy through thought leadership.Back to Blogs