Why corporate social responsibility is crucial to winning over Gen Z consumers
Already hampered by the COVID-19 pandemic, global supply chains are now facing the rise of Gen Z (people born between approximately 1996-2010) and their close scrutiny of workplace conditions. To these young consumers, companies’ social and ethical practices across the supply chain matter, and they are voting with their wallets. In 2021, 45% of Gen Z consumers stopped purchasing products from brands due to ethical or sustainability concerns.[1] In addition, while Gen Z believe that businesses should have a positive impact on society, only 48% thinks that they do.[2]
Companies hoping to win over Gen Z consumers will need to change that bleak perception, starting by rethinking their supply chain practices. Businesses must understand what is happening across their local and global supply chains, and implement systems for tracking and improving corporate social responsibility (CSR).
What corporate social responsibility means
CSR covers a broad range of workplace issues that affect employees. One major category is onsite health and safety, which aims to limit workplace illnesses and accidents, and increasingly includes hygienic and biosafety aspects. Another area is ethical working conditions, including fair working hours and remuneration, a strict ban on child and forced labor, and the right to collective bargaining. Companies are encouraged to strictly forbid discrimination in all forms and make gender equality a pillar of their social responsibility strategy.
For Gen Z, social responsibility includes one further dimension: transparency. Young consumers want to know where and how products were made, to be able to follow the process from end to end. Which farm did that tomato come from? Was it picked by a migrant worker who was not forced to work abnormal hours? Was that person fairly compensated? Treated with dignity? The questions pile on, and formerly tight-lipped organizations are expected to have the answers – and share them.
Why CSR is challenging, but necessary
Some companies have resisted tackling social conditions for workers throughout the supply chain. Large companies especially may rely on supply chains that span continents, with hundreds or thousands of smaller suppliers spread across many countries. Ensuring that all suppliers and business partners comply with rigorous CSR requirements is a time- and capital-intensive exercise. Many companies are overwhelmed by the thought, uncertain of how to assess their current situation or develop, integrate and maintain uniform control systems.
However, the consequences of paralysis are growing. Companies that are exposed as having poor social and ethical practices risk serious reputational damage, and potential legal action. Calls for increased regulation of corporate activities are growing, including the European Parliament’s 2021 Corporate Sustainability Reporting Directive (CSRD),[3] which demands the adoption of binding CSR requirements. The directive, formally adopted in 2021, requires that EU companies rapidly evolve their CSR policies, addressing both implementation and monitoring.
Financial repercussions are also likely, as Gen Z turns away from companies that fail to disclose CSR information and uphold basic ethical standards. Nearly two-thirds of Gen Z say they prefer to buy from sustainable and socially responsible brands, and 54% claim to be willing to spend 10% more on sustainable products.[4] The cost of ensuring supply chain transparency may pale in comparison to profits lost as Gen Z leaves unethical products, brands or companies behind.
The role of social audits in CSR
Companies looking to show their commitment to CSR throughout the supply chain can undertake – and have suppliers undergo – a social audit. This evaluation assesses to what extent a company is meeting CSR objectives, and helps businesses identify areas for improvement. Social audits can be conducted at a local or global scale, enabling businesses to gain a complete overview of CSR across the supply chain. When verified by a trusted third party, social audits offer proof of business’ compliance with CSR standards.
Social audits require a thorough examination of the workplace, including offices, factories, construction sites, etc. First, auditors review documentation that defines a company’s practices for ensuring the safe and ethical treatment of workers. Auditors then visit onsite to verify that workplace conditions are accurately represented, interviewing workers and checking that health and safety equipment and measures are present. Some social audits include a review of financial documents to safeguard against bribery, corruption and other abuses. Certain workplaces may also be subject to surprise audits, ensuring management cannot hide CSR violations in advance.
The goal of social audits is to help businesses build socially responsible workplaces for all suppliers, as well as at headquarters. This means that employees are guaranteed a living wage, a safe workplace, reasonable working hours, and fair and equal treatment. For the socially conscious consumers of Gen Z, this knowledge is crucial, enabling trust in a company’s CSR practices, both at home and abroad.
How Bureau Veritas supports social responsibility
As a global leader in inspection and certification, Bureau Veritas can perform independent social responsibility audits to industry standards or customized client needs. Our experts go beyond reviewing documentation, ensuring that our clients’ suppliers disclose all relevant information for social and sustainability standards.
Our CSR audits support companies in helping their suppliers perform better, offering insights into key areas for improvement and providing accurate social sustainability reporting. Moreover, we enable our clients to meet the expectations of their consumers, and build a reputation as a responsible company and ethical business partner.
Want to find out more about our corporate social responsibility audit services? Learn more
[1] https://www2.deloitte.com/uk/en/pages/consumer-business/articles/sustainable-consumer.html
[2] https://www2.deloitte.com/me/en/pages/about-deloitte/articles/in-its-10th-year-the-deloitte-global-millennial-and-gen-z-survey-reveals-two-generations-pushing-for-social-change-and-accountability.html
[3] https://ec.europa.eu/info/business-economy-euro/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en
[4] https://ec.europa.eu/info/business-economy-euro/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en