The consumer staples sector encompasses many of the products and retailers we use daily. The sector covers issues ranging from the distribution of products to the impact of end products we consume, such as beverages, household products, and even tobacco. The sector is well-positioned to produce ESG winners precisely because, regardless of external economic conditions (even tariff wars), consumers still need to purchase staple products. This means ESG investment can be a long-term investment without the risks that cyclical sectors create. ESG budget resilience, according to Morgan Stanley, makes consumer staples a safer bet. Moreover, when economic times get tough, institutional investors often flock to consumer staples brands, further reducing the investment risk more commonly associated with corporate ESG programs in other sectors.
In the table below, we provide a deeper examination of the ESG issues associated with the sub-sectors of consumer staples.
| Sub-Sector | Tertiary Sub-Sector | ESG Trends |
|---|---|---|
| Consumer Staples Distribution & Retail | Consumer Staples Distribution & Retail |
|
| Food, Beverage & Tobacco | Beverages |
|
| Food Products |
| |
| Tobacco |
| |
| Household & Personal Products | Household Products |
|
| Personal Care Products |
|
Given that the retail sector has the most impact on the ESG profile of many consumer staples, it’s a subsector worth assessing. In the US alone, consumer spending accounts for over $14 trillion annually, representing two-thirds of the country’s GDP. According to JP Morgan, global spending on consumer staples is expected to rise in 2025, driven by factors such as robust job growth and subdued inflation.
When it comes to ESG, consumer staples still have a long way to go, as they hold underweight positions in global and US-focused sustainable funds. Progress is being made on emissions tracking, particularly for Scope 3 GHG emissions, and Science-Based Targets are gaining popularity, as are DE&I initiatives. This provides ESG leaders with an opportunity to shine in a sector where, according to PwC, 78% of companies (in a European study) have not yet conducted an assessment of ESG risks in their supply chains, and approximately half of the surveyed companies lack a comprehensive sustainable development strategy.
The growth potential of ESG leadership is supported by research from McKinsey, which found that products making the least prevalent claims (such as “vegan” or “carbon zero”) grew 8.5% more than peers that didn’t make them. This suggests consumers are becoming more discerning and more skeptical of boilerplate ESG claims, scrutinizing companies for specific ESG commitments and ambitious action plans.
The importance of ESG factors to consumers, stakeholders, and regulators is growing across all industries, and personal care is no exception. Personal care is fascinating because it is a consumer staple. Yet, reputational risks are significantly higher, given its exposure to fashion trends and shifts in consumer behavior, more so than household products. This makes engagement especially important for building trust around the ESG credentials of personal care brands.
According to White & Case, 24% of Gen Z and Millennials check sustainability claims made by brands (compared to only 4% of Baby Boomers), and 21% have stopped buying a product if the brand is not making enough effort to help the environment (compared to 6% of Baby Boomers).
Safety aspects also play a role, as consumers increasingly demand natural products with fewer chemicals and lower environmental impact. In the cosmetics industry, the social dimension is high on the agenda, with ESG leaders linking consumer wellness to social impact throughout the supply chain.
Governance, which influences both social and environmental outcomes, is also crucial in mitigating reputational risks. In fact, 54% of consumers say they are ready to abandon big brands that engage in greenwashing. A commitment to social impact can start internally, with companies setting diversity, equity, and inclusion (DE&I) targets. Several cosmetics brands, including Kylie Cosmetics, Ulta Beauty, and Huda Beauty, have already achieved highly diverse board compositions and employee bases.
When it comes to broad ESG claims, a recent KPMG survey found that 73% of respondents cited exaggerated or unsubstantiated sustainability credentials as the biggest turnoff. Similarly, Cosmetics Business magazine found that four out of five cosmetics consumers are skeptical about the sustainability claims of beauty brands. Even established “green brands” such as The Body Shop are feeling the heat. Once a trailblazer, the iconic brand has lost ground as consumer preferences have shifted beyond “natural” or “healthy” products to those addressing bigger issues, such as carbon impact and social outcomes. Interestingly, The Body Shop fell out of favor only after it was acquired by L’Oréal, perhaps a sign of consumer skepticism about the genuine ESG commitment of large cosmetics companies.
This trend highlights the opportunity for genuine ESG leaders to capture market share while driving positive impact. However, success begins with effective consumer engagement and transparent communication of initiatives that deliver real, tangible impact. Larger brands face the most formidable challenge here, yet also hold the most significant opportunity if they get the ESG story right.
The UAE is making strong progress on climate action. Initiatives like the UAE Energy Strategy 2050 and Saudi Vision 2030 show proactive commitment to tackling climate change while addressing regional issues such as water scarcity and aridity.
In a recent ESG Monitor survey, 87% of UAE residents said it is important to transition to renewable and clean energy sources, and 85% said it is important to act decisively on climate change. Kantar also found that Middle Eastern consumers particularly care about water preservation, food waste, and pollution.
Partnerships offer a way for the UAE to lead. For example, Bee’ah, an environmental management company in the UAE, collaborated with Unilever to create a new plastic recycling plant with an annual capacity of 14,400 tonnes. Another leader is Dubai-based DGrade, which creates Greenspun apparel by repurposing up to 60 million discarded plastic bottles per month. Its print-on-demand business offers sustainable solutions to manufacturers, helping to incubate a circular economy while addressing ESG issues that resonate with MENA consumers.
There is still much to be done to improve the ESG credentials of the consumer staples sector, and this starts with taking consumer ESG trends seriously. As we found with the consumer discretionary sector, relationship management makes up a considerable part of ESG ratings assessment scores.
With many consumer staples leaders still struggling to comply with regulations such as the EU’s Corporate Sustainability Reporting Directive (CSRD), and regional frameworks such as the UAE’s Abu Dhabi Global Market (ADGM) ESG Disclosure Framework, companies that understand their ESG risks will be better protected against reputational fallout.
Indeed, Social risks, says Ipsos, also offer consumer staples the best opportunity to win and maintain consumers’ favour, particularly when companies get serious about ‘the treatment of employees’ and ‘addressing child labour’. With Consumer staples dominated by global players such as Unilever, ESG leaders in MENA can most easily achieve success by partnering with retail giants. This could be by offering sustainable products, cleaner technologies, or socially focused initiatives to support retail value chains.
In short, the UAE and MENA have a great chance to attract impact and ESG-focused capital in the years ahead by leading the consumer staples offering from the front or by partnering with global leaders to achieve impact at scale.
