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The ESG disruption of financial services: A roadmap for Experience Management teams

Customers, colleagues and citizens all care increasingly about issues including single-use plastic, carbon emissions, labor conditions and whether an organization is practicing inclusion. According to PwC, two thirds of financial institutions are prioritizing environmental, social and governance (ESG) considerations in their transformation plans.

And yet, so far, Experience Management (XM) teams have done little more than tinker around the edges of ESG.

XM must be a key player in making ESG work. Reports and satisfaction metrics are not sufficient, when leaders are grappling with challenges as intractable as saving the planet and the continued viability of their business models. XM teams should broaden their focus to encompass the most important ESG themes for businesses. 

Experience managers can follow four key steps to ensure they are supporting ESG in financial institutions.


1. Product development

Banks and investment managers are doubling down on curating ESG indexes and mutual funds to meet investor demand. As organizations invest in these new offerings, they need to channel an active community voice into proposition development.

Typically, for ESG, this might take the form of inserting additional questions into in-flight relationship feedback programs, to understand key drivers of client satisfaction. A common mistake, however, is to squeeze ESG questions into post-interaction customer support feedback programs, rather than cadence-based relationship ones. Not only is the support experience quite separate from the product experience, but this approach also risks soliciting negatively biased ESG feedback from customers who simply want to vent about poor service.

Other organizations take a more sophisticated approach. One wealth management firm is planning to launch a fund that will invest only in clients that have a tangible plan for sustainability, diversity and inclusion. As part of that, they are exploring options around how they might capture signals from people who actually work for those companies, so they can understand what they are really like. 

In this way, the work of the firm’s XM team has the potential to affect the composition of the product itself. It is a good illustration of how experience techniques can become a lens for measuring promises made versus promises kept — in this example, holding the firm’s leadership to account by ensuring the firm does not inadvertently ‘greenwash’ its customers.


2. Shaping consumer habits

Forrester has dubbed the past decade the age of the customer. It is true that consumers have been firmly in the driving seat: most companies’ XM programs are rooted in the principle of “the customer is always right” — from resolving individual customers’ issues to identifying areas for structural change. In the emerging field of ESG, however, there will be times when a company’s proposition is a few steps ahead of where its customers are. 

So, what about those occasions when the customer may not be “right”? 

As Harvard Business Review observes, “Behaviors, such as how we commute to work, what we buy [...] are part of our regular routines. Often the key to spreading sustainable consumer behaviors is to first break bad habits and then encourage good ones.” Forward-thinking XM teams can play a critical role in fuelling these efforts to educate customers about ESG offerings.

In financial services, despite the increasing availability of ESG indexes and funds, it can be difficult for retail investors to get started, as the impact and composition of those products remains opaque. In solving this, companies must listen to their customers. An entry-level approach might be to A/B-test messages on the product pages of a company’s website, to understand what resonates with the public. 

More advanced organizations are rethinking their approach to legacy research methodologies altogether. One online trading platform took a tech-enabled approach to capturing insights, moving from reactive, manual analysis to real-time, continuous feedback. Not only did this empower a small team to double the volume of research conducted, it also halved the time spent conducting advertising research, driving down advertising costs by 70 per cent.

Companies should apply the same principle to ESG-centric campaigns, to measure customer perceptions and fine-tune their communications in a rapid, iterative way.


3. Creating a purpose-driven culture

Another key plank in an organization’s ESG plan should be its strategy for employee engagement. 

Millennial and generation-Z employees want to work for companies that have a purpose. As Washington State University’s Carson College of Business notes, “Gen Z employees hold vastly different values and expectations than employees from older generations.“ The department’s report finds that 83 per cent of younger employees want to have a positive impact on the world, with 70 per cent expressing a clear desire to work for a company whose values align with their own.

Many organizations fall short. As Gallup observes, while managers recognize the importance of understanding millennials, “they tend to fall back on their existing policies and performance management systems, or they try to rapidly change their work environment to create what they think millennials want. They put pingpong tables and free snacks in every corner of the office”. 

Pingpong and snacks are perks, not culture – and they are certainly not “purpose”. So what do purpose-driven brands do differently? And how can organizations measure whether employees feel part of their employer’s ESG agenda, or if voices are being missed? 

A starting point should be to incorporate questions around ESG in regular employee pulses — for example: asking colleagues how satisfied they are with their employer’s commitment to ESG, the extent to which they feel their role has a meaningful impact on their employer’s ESG mission, or what really matters when working in an inclusive environment. Organizations should look to leverage text mining solutions, to understand themes and how they differ across employee demographics. 

The same techniques should be employed in contexts other than employee engagement alone. Financial institutions should also connect with customers to measure purpose from a brand perspective. To return to the example of the investment management firm creating an ESG fund — what will that do to the brand overall? How will customers feel about engaging with the firm?


4. Engaging in ESG dialogues

The challenges that businesses are grappling with today are highly complex. To solve them, companies need to start harnessing the creativity of their customers, employees and shareholders. 

In other words: to drive real change, organizations must engage in real dialogue. 

This doesn’t happen nearly enough. When it comes to climate change, for instance, Dr Anthony Leiserowitz, Director of the Yale Program on Climate Change Communication, identifies a spiral of silence: “I may want to talk about climate change, but I don't know what you think, and so I don't want to cause waves [...] And as a result, we end up in this downward spiral, spiral, spiral of nobody talking about it.”

And yet, the work done by Dr Leiserowitz’s program shows that only a small minority of individuals remain firmly in denial about climate change — ranging from just 2-4 per cent in countries as diverse as Brazil, France and Japan to 12 per cent in the United States. So, the first step in overcoming this spiral of silence is surely to facilitate conversations where the like-minded majority can focus their thoughts into ideation.

Leaders in XM are already looking to harness customer ideas to improve known friction points. Digital bank Illimity analyses all customer suggestions in relation to their predicted impact, and then translates them into actions. In year one alone, 50 significant enhancements to the overall experience drove the bank’s customer perception score to 48 versus a banking market average of 9 — a 12-point year-on-year increase in customers being willing to recommend the bank. Notably, over the same time period, the bank reported a 35 per cent increase in net customer loans and investments.

Financial institutions that have not already incorporated ESG into their insights-to-action programs are missing opportunities to crowdsource suggestions for diversifying hiring pipelines, which societal initiatives to sponsor, innovations for reaching carbon offset and conservation goals, and more.


Time for XM Teams to lean into ESG

Customers, colleagues, executives and shareholders care deeply about ESG. Experience functions need to care too — not least for the bottom-line impact that ESG offers for those who get it right, but primarily because, as a society and as a species, we can no longer afford to get ESG wrong. Best-in-class XM can help financial institutions contribute towards making a real difference — no longer just one micro-interaction at a time, but on a planetary level as well.

 

 

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Comments: (1)

Richard Peers
Richard Peers - ResponsibleRisk Ltd - London 05 August, 2022, 09:59Be the first to give this comment the thumbs up 0 likes

Thanks for bringing these important points to the forefront of XM.  I agree and you may want to check out rewired earth re demand signals work and join our conference and hackathon SustainableFinance.Live to experiement and learn

Christopher Colley

Christopher Colley

Chief Industry Advisor, Financial Services

Qualtrics

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