Building a brand on functional and emotional benefits isn’t entirely good enough today. Beyond the brand promise, brands need to be socially responsible. What does this mean? The most common buzzwords are sustainable (overused word), ethical, corporate socially responsible or CSR, green, eco-friendly, cause-marketing, and community involvement. The sum of all of these terms is doing good or protecting people and/or the planet. Can you buy it?
According to Michael E. Porter and Mark R. Kramer in a Harvard Business Review article Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility, nobody is better equipped to create lasting, sustainable change than businesses. “When a well-run business applies its vast resources, expertise, and management talent to problems that it understands and in which it has a stake, it can have a greater impact on social good than any other institution or philanthropic organization.”
It makes good business sense to be a good brand. Here are six reasons why brands should care:
1. Brand Differentiation
Tom LaForge, global director of human and cultural insights at Coca-Cola, explains, “We’ve all crowded into the same spaces. The 73% of brands that could go away [without consumers caring, according to Havas’ Meaningful Brands study] are not bad brands, but others could fill in that space. … By adding that social level, you become a breakaway brand.”
Successful brands choose a unique position by doing things differently from competitors. These principles apply to a brand’s relationship with society as readily as to its relationship with its customers.
Companies like TOMS shoes and Soapbox Soaps embraced a new business model by implementing a “one-for-one” giving model, tying an easily-identified benefit (like providing shoes to children in need) to a purchase. You get a great product and there is a tangible social benefit resulting from your purchase.
A Nielsen study released in June 2014 showed that a global average of 55% of consumers surveyed said they would pay more for products and services from companies committed to positive social and environmental impact. This was a 10% increase since 2011. Companies that are betting that this trend will continue are high-end brands such as:
As stated on their website, Burt’s Bees have a triple bottom line: people, profit, and the planet. They call it the ‘Greater Good,’ and it’s how they will help change the world. Since the brand’s first sale at a crafts fair with revenue of $200 in beeswax, the company has since expanded to candles, lip balm, and now more than 150 products. Now owned by Clorox, Burt’s Bees’ revenue was more than $5.5 billion in 2011.
The Body Shop
Founded in 1976 by the late British environmental and human rights campaigner Dame Anita Roddick, The Body Shop started life as a small shop selling about 25 products. The Body Shop was built on being one the first cosmetics brands to prohibit testing on animals and also the first company to introduce Fair Trade to the beauty industry. Roddick also ran many controversial marketing campaigns, including working with Greenpeace to help “Save the Whales” before switching to Friends of the Earth following a disagreement with Greenpeace. Today, there are over 300 products and 2,500 stores worldwide, and it was sold to L’Oréal in 2006 for over a billion dollars.
Lululemon was built on wellness and environmental awareness in the trendy Kitsilano beach community of Vancouver, B.C. The story goes that the founder Chip Wilson took his first yoga class, and an underground yoga clothing movement was born. The first store opened in 1998 and shared space with a yoga studio. Today, every Lululemon store offers free yoga classes and is operated by yoga teachers, personal trainers, and run mavens who inspire “Luleulemon’s passion to elevate the world,” as written on their website. Today there are 254 stores in the USA, Canada, Australia, and New Zealand with sales of over $1.6 billion.
3. Cost Savings through Innovation
One of the most accessible places for a company to start engaging in sustainability is to use it as a way to cut costs through innovation. Whether it’s changing business or operational processes, packaging, or consuming less energy or natural resources, these savings add up quickly.
Clorox instituted a recyclable program adapted from their acquisition of Burt’s Bees with the immediate reduction goal of at least 50% in waste to landfills and a commitment towards zero waste to landfill by 2020. Some of their factories have already reached this goal; the rest are on target or will exceed it. Clorox’s sustainability efforts have translated into approximately $15 million in annual cost savings.
Beer giants MillerCoors and Coca-Cola are leaders in the area of water conservation. More than 90% of the average beer is water; additional water is needed to irrigate the growing barley and hops that go into your lager or ale. Many beer makers require as much as six barrels of water for every barrel of beer. Through technology and enhanced efficiencies, Miller Lite, Coors, and Molson use a record-low of 3.82 barrels of water per barrel of beer, down 6.1% from the year before. The Coca-Cola Company has a water replenishment goal of balancing an estimated 68% of the water used in their finished beverages based on 2013 sales volume by 2020. To date, Coca-Cola has replenished an estimated 108.5 billion liters of water back to communities and nature through 509 community water projects in more than 100 countries.
Sustainability initiatives such as these often hit the “sweet spot” of generating tangible operational and environmental benefits simultaneously.
In 2013, Nike took a different approach with their online app called MAKING, which helps companies measure the environmental impact of using different materials—which made up approximately 60% of Nike’s footprint and spurred the creation of the app. “Before, if you asked, ‘Which is better, hemp or cotton?’ nobody had that at hand,” says Hannah Jones, Nike’s VP of sustainable business and innovation. “We created this enormous database of materials and turned it into an index for the entire industry.” Nike’s goal is to eliminate the use of hazardous chemicals in creating its products by 2020.
4. Millennials Care
Millennials are driving an ever-growing trend of capitalism with a conscience through their collective buying power of more than $200 billion annually and their deep-rooted desire to do “good.” Christie Garton, the blogger of Entrepreneur, says, “when 87% of Millennials donate to a nonprofit in 2013, you know they are not content with being passive observers in a brand’s larger plan.”
She goes on to say that Millennials demand a “participation economy” that allows them to contribute, co-create and shape the giving behaviors of brands they love.
According to the 2013 Cone Communications Social Impact Study, when companies support social and environmental issues, millennials respond with an increased trust level of 91% and 89% loyalty and an 89% stronger likelihood to buy those companies’ products and services.
Blake Mycoskie, also a millennial, understood this shift and started Toms Shoes on the premise that for every pair of shoes sold, one pair would be donated to a child in need. This innovative idea resulted from a trip to Argentina, where Mycoskie saw many children without shoes. Toms Shoes’ primary target is millennials, with 30 percent of sales coming from its website. In 2013 Toms’ estimated revenue was over $250 million. Since its launch in 2006, the company has donated more than 10 million pairs of shoes to children in 59 developing countries. Even Imelda Marcos would be envious of all those shoes.
5. License to Operate
It all starts with being a good corporate citizen and abiding by all the laws and regulations. Still, it’s also about governance and upholding corporate values across the operations and supply chain.
Managing corporate social responsibility efforts has become essential for multinationals like Walmart, BP, Loblaw(Joe Fresh), ExxonMobil, Nike, and Apple — who have faced criticism related to labor practices and conditions, the environment, and social and ethical issues. The underlying idea is that brands can not only damage their reputation but lose their right to operate or be restricted by legislation at any level of government. California is an excellent example of a place driven to be socially responsible with some of the strongest environmental and animal protection laws ever. Shareholders are also assessing companies’ performance based on social and ethical concerns. Environics International survey revealed that more than a quarter of share-owning Americans took into account ethical considerations when buying and selling stocks.
It generally takes a crisis or tragedy to bring most injustices to light and under intense scrutiny from NGOs, investors, customers, media, and eventually the legislators. Ultimately, it’s about going above and beyond with safety standards, ethics and regulatory compliance. I am not sure any CSR plan would have saved Loblaw’s Joe Fresh reputation from their Bangladesh factory collapse. Still, I’m sure they will implement new safety standards for suppliers and vendors.
6. Employees Care
Happy employees create happy customers, and business results reflect this unless you’re Air Canada, where they’re not happy until you’re unhappy. In a public opinion survey published in Forbes blog in 2010, 65% of employees would seriously consider leaving their job if their company harmed the environment, and 83% would seriously consider leaving their job if their employer used child labor in sweatshop factories.
In an effort to understand the relationship between employee engagement and perceptions of CSR, Hewitt Associates and CBSR conducted a study. “The findings demonstrate that organizations with high employee engagement have a higher degree of readiness to focus on CSR as a strategy to improve overall organizational performance and better meet the needs of employees and external stakeholders,” says Neil Crawford of Hewitt.
Research conducted in 2006 by Cone Communications on millennials found that out of 1,800 13-25 years old’s, 80% wanted to work for a company that cares about how it impacts and contributes to society. More than half said they would refuse to work for an irresponsible corporation. By the year 2020, it’s estimated that millennials will be 50% of the workforce. So if you want to attract the youngest and brightest into your company, you will need to embrace social responsibility in a big way.
Brands Must Care
Major forces shaping the world, such as climate change, digital connectivity, and the widening gap between the rich and poor, are causing considerable shifts in consumers’ attitudes toward brands. Millennials will drive change as the most socially-conscious consumers to date. Brands that stand out as ‘good’ or ‘socially responsible’ will win, but beware of greenwashing or false promises. Millennials will punish “bad” brands or brands simply not doing any good.
This isn’t all about corporate social responsibility. It’s actually much more significant as Michael E. Porter and Mark R. Kramer reframe it as creating shared value (CSV). CSR programs focus primarily on reputation, whereas CSV is about a company’s policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. This is truly sustainable (OK, I used this word) and honest.
The idea of a triple bottom line of people, profits, and the planet is another way of expressing the same concept of how brands must act and think towards being a “good” brand, or as Burt’s Bees says, it’s about the “Greater Good.”