The Generational Shift That Will Change Business Behaviors

Companies integrating environmental and social commitments into their core business are positioning themselves for impending generational shifts

This article was first published by BRINK on June 8, 2020

WEF founder Klaus Schwab has said that “COVID-19 is a litmus test for stakeholder capitalism” — and indeed, young people in particular are watching closely.

In times of crisis, younger generations expect greater corporate responsibility. A recent survey by JUST Capital and The Harris Poll found that 58% of young people believe companies need to better support the health, safety and security of their workforce in light of COVID-19, which is 10% higher than the response of people 35 and older.

But even before COVID-19, there were clear signs that younger generations place greater importance on environmental and social concerns than their predecessors do. For example, the Global Risks Report 2020 finds that in a comparison of concern for environmental and societal risks, young people attribute greater impact to these risks than business and societal leaders do (Exhibits 1 and 2). 

Mounting concern among young people was also abundantly evident in 2019, when the second global school children’s strike in September was estimated to have mobilized 4 million people from 163 countries.

Exhibit 1: Generational Differences in Perceived Impact of Environmental Risks (1-5 scale, 2019)

Source: ESG As a Workforce Strategy based on data from Global Risks Report 2020


Exhibit 2: Generational Differences in Perceived Impact of Societal Risks(1–5 scale, 2019)


Source: ESG As a Workforce Strategy based on data from Global Risks Report 2020


To understand the implications of these generational patterns, there are three consequences that business leaders would do well to consider.

Concerned Children Will Soon Be Concerned Workers

The children who marched in September last year will start to enter the workforce in a few years’ time. Recent analysis of ILOSTAT data shows that millennials and members of Gen Z will make up 72% of the global workforce in the next 10 years. They will want jobs that are compatible with their deep concern for environmental and social issues.

Nearly half of millennials have been vocal in supporting or criticizing their employer’s actions regarding a societal issue, and nearly 40% have accepted one job offer over another because that company was seen as more environmentally sustainable. Their younger successors in Gen Z are likely to have similar views. 

The recent rise in employee activism provides a clue as to potential future trends. Some leading companies have already been able to benefit from the link between environmental, social and governance (ESG) performance and workforce sentiment. 

Our research shows that companies with better ESG performance are likely to have both better employee engagement and greater attractiveness to prospective talent — two of the most important indicators in human capital management. 

This means that businesses need to integrate climate action into their workforce strategies. In recent years, corporations have begun to incorporate climate change into enterprise risk management and corporate planning, informing decisions about supply chain resilience, resource security and new product development. These processes should now inform strategies for recruitment, engagement and development of talent.

These Children Will Soon Be Consumers

Just as the coming generations are likely to expect more from their employers, they are also likely to expect more from the companies and brands they buy from. 

When they are earners, these children may vote with their wallets in a way that previous generations have not. Their immediate predecessors, the millennials, already leverage their purchasing power as a top way of taking action on social issues. 

Existing consumer trends among millennials — such as increasing interest in hybrid/electric vehicles and vegan, vegetarian and flexitarian dietary choices — will likely grow stronger with the next generation. As time goes on and these young consumers become more affluent and consequential in the market, businesses will increasingly need to demonstrate that their products and services are consistent with a conscientious, low-carbon lifestyle. Indeed, Mercer finds that 87% of companies consider rising customer expectations a primary business disruptor.

These Children Will Soon Be Voters

Most of the youth climate strikers will reach voting age within one electoral cycle. Indeed, many were demanding that voting ages be lowered. Their millennial predecessors currently use voting as the most common method of supporting a cause, and Gen Z can be expected to continue this trend. In the U.S., a majority of millennials and nearly three-quarters of Gen Z say the government should do more to solve societal problems — a significant departure from older generations.

There is evidence from multiple countries that millennial voters are more concerned about climate change than earlier generations, while 80% of younger millennials and Gen Z in the U.S. say that climate change is a major threat to human life on Earth as we know it. 

Climate change has already entered mainstream political discourse, and its political salience is likely to only increase as politicians seek to attract young voters with stronger pledges on climate change.

Businesses should therefore plan for governments to deepen and broaden climate policies — turning the dial harder in target sectors such as energy and implementing new policies in hitherto overlooked sectors such as agriculture. The Paris Agreement obliges governments to submit new national emissions targets in 2025, and it seems likely that the next generation of voters will be demanding more from politicians than has been the case in the past.

Looking Ahead

COVID-19 lockdowns mean no school children’s climate marches for the time being, but Generation Z’s concerns about climate change have not abated. Their activism has moved online in response, and it will long outlive the pandemic.

On the other side of the coronavirus crisis, three mutually reinforcing tipping points await, as the current generation of schoolchildren becomes the next generation of workers, consumers and voters. This demographic shift will bring increased expectations for the role business should play in fighting climate change — and positively contributing to society more broadly.

Forward-looking companies are already integrating environmental and social commitments into their core business, thus positioning themselves for these impending generational shifts. But it remains to be seen whether most companies will step up to the plate, or merely wait until they are forced to react.