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3P's of Sustainable Marketing Adam Joseph April 2010

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  • 1. PM.APR02.PG030.pdf Page 30 17/3/10, 12:42 PM Feature CSR When it comes to sustainability and corporate social responsibility, marketers can definitely add value, writes Adam Joseph. Sustainable marketing and CSR: Just do it Corporate social responsibility (CSR) is the responsibility of an in a company so it makes the most sense for them to apply these skills organisation for the impacts of its decisions and activities on society and internally. Indeed, the CIM thinks marketers can be “at the heart of the the environment. triple bottom line process, acting as the contact point between all stake- As a business issue, CSR is not new. It’s been around ever since com- holders”. If this is the ideal, it’s certainly not the reality yet in Australia. merce began, with concerns about the corporate excesses of the East A recent survey by the Australian Centre for Corporate Social India Company expressed as far back as the 17th Century. Responsibility (ACCSR) showed that fewer than one in ten CSR managers A popular way of thinking about good corporate citizenship is in come from a marketing or public relations background. terms of the “Triple Bottom Line”, comprised of People, Planet and Profit. In its most recent polling of Australian CSR managers, the second Marketers can think of this as the 3Ps of Sustainable Marketing, highest priority issue for 2010 was furthering the understanding of CSR another set of Ps to add to their treasured 7Ps collection. within their own organisation, which came second only to reducing envi- In a white paper on Marketing and the Triple Bottom Line, the ronmental impact. Chartered Institute of Marketing (CIM) argued that marketers can make a Marketers can definitely add value here. But first, let’s get to the bot- fundamental difference when it comes to championing CSR. tom of this bottom line business. Marketers are the company employees closest to the consumer, and much of the growing interest in sustainability is coming from customers. 1. PLANET These days the buyer wants to know what’s behind the label and where As far as social movements go, the rise of environmentalism has been you’re coming from. nothing short of spectacular in the recent decade. The CIM argues that marketers are the lead external communicators The implications for marketers are wide-ranging and far-reaching, and 30 | PROFESSIONAL MARKETING | April–June 2010
  • 2. PM.APR02.PG031.pdf Page 31 17/3/10, 12:42 PM one thing worth mentioning here is “greenwashing”. The Oxford English Dictionary defines this as “disinformation disseminated by an organisation Focus on Nike so as to present an environmentally responsible public image”. On 1 January 2010 the Australian Association of National Advertisers’ Nike was founded in Oregon, USA in 1964. (AANA) new Environmental Claims in Advertising & Marketing Code came By 1980 it had reached a 50% market share in the US athletic shoe into effect. market, and in 1988 the term “Just Do It” was coined for an At press time, CEO Scott McClellan confirmed only one complaint had advertising campaign. been received by the Advertising Standards Bureau in relation to the new Then came the 1990s. Among certain consumer segments, the word Nike came to be synonymous with the term “sweatshop”. environmental code – for an automotive manufacturer. Nike took flak in Naomi Klein’s 2000 book No Logo and on Michael He also pointed out that: “Recently the ACCC cited concerns with the Moore’s documentary The Big One. advertising practices in the energy sector. The AANA is urging all According to one Harvard Business Review paper, Nike once claimed: advertisers in this sector to follow the Environment Claims Code and “It’s not our job to worry about other countries’ labour conditions”, when faced with protesters rallying over sweatshop conditions in its support industry self-regulation” third-world operations. The marketing police are now well and truly working on the Fast forward to 2010. Nike releases its latest CSR report, in which Operation Greenwash case file. president and CEO Mark Parker states: “Sustainability is key to Nike’s growth and innovation. Making our business more sustainable benefits our consumers who expect products and experiences with low environ- 2. PEOPLE mental impact, contract factory workers who will gain from more sus- Good corporate citizenship means being nice to your actual flesh-and- tainable manufacturing and our employees and shareholders who will blood citizens – your customers, employees, suppliers, shareholders and be rewarded by a company that is prepared for the future.” so on. For Nike, more than a decade of intensive focus on CSR seems to have produced enormous benefits for the global brand. The popular term for this in CSR circles is “stakeholder engagement”, A recent report by Brand Finance puts Nike as the international bench- an area where marketers often excel through their closeness to one group mark for the apparel category. It suggests that 71% of Nike’s total – in particular, customers. enterprise value is contributed by its intangible brand value. According to Leeora Black, managing director of the aforementioned On this, Kaye Meyers, Nike communications senior manager, based in the United States, says: "There are numerous intangible elements that ACCSR, stakeholder engagement should be seen as the single most add to brand value and at Nike our work in corporate responsibility exciting area of corporate social responsibility for marketers. would be one contributing factor. For marketers, this implies ever-greater dialogue and collaboration “Nike has come a long way in its CSR journey and we now with customers in terms of product and service innovation. Consumer value the work we do here as a source of innovation and growth for the company. insights will be more important than ever, but whether in-house market “We’ve done a lot of work on the sustainability front research people will ever become regarded as rock stars is yet to be seen. from reducing our CO2 footprint to producing more sustainable products across all our sporting cate- 3. PROFIT gories under the company ethos of Considered Design. The economist Milton Friedman once said the only social “Importantly workers remain at the responsibility of business is to increase its profits. heart of our efforts when it comes to The final P from the 3Ps of sustainable marketing is profit, the original improving conditions in contract and still the best. The job of the other two Ps is to keep this one honest. factories around the world" For Nike, what a difference The big question when it comes to corporate social responsibility is a decade makes. whether being good is actually good for business. The CIM puts forward a five-point business case for sustainability (see page 33). Leeora Black argues that while there is a strong business case for CSR, April–June 2010 | PROFESSIONAL MARKETING | 31
  • 3. PM.APR02.PG033.pdf Page 33 17/3/10, 1:27 PM there is no magic formula. “The benefits will be different for each organi- investing. Consumers don’t care: they want to know what difference sation and are also long term. The discussion about the benefits is in any you're making.” case yesterday's discussion. CSR is so central to the effective manage- This advice is backed up with insights from a major research project ment of organisations that the better question is what is the business commissioned by Cavill+Co, entitled Real Not Spiel. case for not doing it?” As part of this study, Australian consumers were asked which brands In discussions of corporate citizenship, the terms ‘brand’ and ‘reputa- they thought were leaders when it came to CSR issues. tion’ are often used inter-changeably by analysts. This is because prob- While about two-thirds could not name one single brand, the most lems with a corporation’s reputation can quickly tarnish the organisa- mentioned by the other third of consumers were McDonalds and Westpac tion’s brands, like hungry termites eating away inside the company’s with 3% each. brand architecture. The presence of McDonalds might surprise some people, given the There is no doubt that a brand can successfully differentiate itself negative publicity about fast food in the ongoing debate about obesity. from competitors through embracing the principles and practice of CSR. But the answers lie in the McLegends of the brand’s heritage. The The Body Shop and Nike are obvious examples. most recent CSR report from McDonald’s Australia states how founder Ray Tim Heberden, managing director of Brand Finance (Australia), is an Kroc was a man passionate about community issues from the start. expert on brand valuation. He argues: “CSR can increase corporate value. Evidence of this ethos at work Down Under can be observed in the To be effective, social responsibility needs to be closely aligned to the Ronald McDonald House Charities, which has an Australian history since brand identity and carried out consistently. the 1980s. “This can influence the perceptions and behaviour of a range of The first RMcD house was opened in 1981 at the Royal Alexandra stakeholders, including customers, staff, government officials and Hospital for Children in NSW. There are now more than a dozen houses investors. If favourably influenced, these stakeholders can influence in Australia with hundreds of rooms available every night for families in demand, productivity and even the cost of capital.” However, Heberden concedes that companies who add value through CSR are the exception – many utilise it in an ad hoc rather than strategic manner. THE BEST KIND OF VICE – ADVICE So what’s a professional marketer to do? Many marketers view CSR activities as a way to win trust and build goodwill with consumers, so getting the message right is critical for brand reputation. Getting the message or tone wrong means consumers are likely to be sceptical and cynical towards your brand. Hailey Cavill, founder and director of Cavill+Co, a leading Melbourne consultancy, advises brand guardians to keep it real. According to Hailey: “Authenticity is the key when it comes to con- sumer perceptions. My advice to companies wishing to generate goodwill in this space is first, find a cause that fits with your brand and makes sense to consumers. Second, stick with it over a long period – at least three years but the longer the better. And third, don't talk about how much money you are THE BUSINESS CASE FOR SUSTAINABILITY • REPUTATION IMPACT: COMPLIANCE WITH SUSTAINABILITY REDUCES THE RISK OF PUBLIC DISILLUSION, BOYCOTTS AND NEGATIVE PRESS. • STIMULATE INNOVATION AND FIND NEW SOLUTIONS IN R&D. • CREATE COMPETITIVE ADVANTAGE THROUGH CUSTOMERS WANTING TO BUY FROM, OR INVEST IN, ETHICALLY-MINDED Your future COMPANIES. is our future • GENERATE COST SAVINGS: LOCALLY SOURCING PRODUCE SAVES The larger an organisation, the greater its responsibilities to customers, communities and the environment. TRANSPORTATION COSTS; CREATING A CULTURE OF REDUCING Westpac has been recognised by the Dow Jones Sustainability USAGE AND WASTAGE LOWERS COSTS. Index as one of the world’s ‘Most Sustainable Companies’ for the seventh year running. This year, we also received • COMPANIES THAT REDUCE THEIR ENERGY BILL BY 20% COULD ADD Australia’s top award for sustainability at the Banksia Awards. Why does Westpac have such a focus on sustainability? THE SAME AMOUNT TO THEIR PROFIT AS A 5% RISE IN SALES. Because your future is our future. CHARTERED INSTITUTE OF MARKETING “THE GOOD, THE BAD & THE INDIFFERENT” 2007 westpac.com.au April–June 2010 | PROFESSIONAL MARKETING | 33
  • 4. PM.APR02.PG034.pdf Page 34 17/3/10, 12:42 PM Feature CSR CONTINUED FROM PAGE 33 STATE OF CSR 2009 - TOP SCORING ORGANISATIONS need. When it comes to corporate citizenship, Maccas certainly doesn’t • AXA AUSTRALIA clown around. • COCA COLA AMATIL However, in my mind the ‘poster child’ for Australian blue-chip busi- • LIHIR GOLD LIMITED ness is Westpac, one of the first Australian companies to develop and • NATIONAL AUSTRALIA BANK implement an organisation-wide approach to CSR. With banking in • RIO TINTO mind, I’d now like to turn the spotlight on this particular industry sector. • SENSIS (WHOLLY OWNED SUBSIDIARY OF TELSTRA) • WESTPAC BANKING CORPORATION* CSR & BANKING The Australian banking sector is very interesting when it comes to corpo- rate social responsibility. The big banks all produce impressive sustainability reports packed with compelling stats and evidence they are good corporate citizens. Brand focus: The Body Shop Australian financial organisations feature prominently in the The Body Shop’s first store was opened in 1976 in Brighton, England, Australian Centre for Corporate Social Responsibility’s latest annual best by founder Anita Roddick and her husband Gordon. practice capability ratings (see box at right). The Body Shop opened with the mission statement: “To dedicate our business to the pursuit of social and environmental change.” However, it should be pointed out these ratings are based on self- In 2006 The Body Shop was bought by cosmetics giant L’Oreal, assessment by management rather than independent ranking by con- prompting Roddick to say it was the best 30th-birthday present for the sumers. At the risk of losing friends in the banking sector, I think there business. are two key issues where banks still more often than not deserve horns The Body Shop has five core global values – against animal testing, support community trade, activate self esteem, defend human rights rather than halos. and protect our planet. These values drive the business and have always done so. NUMBER ONE, CORPORATE GREED To get the local view on a global brand I spoke to Adam Valvasori, The big Australian banks make some of the healthiest profits to be found values manager for The Body Shop Australia. In terms of the five core values, climate change is presently the top priority locally. on the ASX, emerging from the global financial crisis in rather rude Adam says: “Climate is the one issue that underpins everything we do health. Advocates of capitalism would argue what’s wrong with that? and care about. We publicly participate in the big-picture debate for And to many investors and analysts, profit is just profit. Australia to adopt much more responsible emissions reductions targets. At the heart of this debate is the issue of ‘good’ versus ‘bad’ profits. I think most Australians trust that we’re not jumping on any green- wash ‘brand wagon’ here, because we’ve shown our genuine commit- Grahame Dowling, a professor at the Australian School of Business in ment to Protect our Planet throughout our entire history”. NSW, explains it this way: “Bad profits are those that people think are Defending human rights in the region is another key priority for Body Shop Australia. As Adam explains: “Another important and ignored human rights abuse we’re focusing on is the sinister trafficking of women and children for the com- mercial sex trade. It affects every country in the world and Australian sex tourists are certainly responsible for contributing towards the demand.” In Australia, The Body Shop is increasingly harnessing social media. The Body Shop Activist Blog at http://blog.thebodyshop.com.au/ was established in 2007 as a platform to raise awareness of campaigns. Adam says: “We started having a bigger social media presence – Twitter, Facebook and YouTube – in order to tap into different audi- ences and to support other great organisations, causes and cam- paigns out there and facilitate dis- cussion about important social or environmental news.” For The Body Shop, being good is good for business. 34 | PROFESSIONAL MARKETING | April–June 2010
  • 5. PM.APR02.PG035.pdf Page 35 17/3/10, 12:43 PM made at the expense of exploiting employees package of $10.9 million; Westpac’s Gail Kelly or customers. Good profits are made without “Bad profits are... made is in seventh with $10.6 million; while CBA’s this perception. Ralph Norris is eighth with an annual package “Bad profits adversely affect the reputa- at the expense of $9.2 million. tion of the company. Broad-based corporate exploiting employees or The term “responsible lending” is some- social responsibility programs will not negate thing we’ve come to hear and read a lot this effect.” customers.” about as a result of the GFC. But what about The Commonwealth Bank of Australia Professor Grahame Dowling responsible paying? (CBA) provides one example. The ultimate brand guardian within any A recent report pointed out CBA had lift- organisation is the CEO. This being the case, ed its market share of home loans from 23% what if this Brand Jedi embodies excessive cor- to 26%, one of several contributing factors to porate greediness? its huge profit figure. I think this is a growing reputational chal- This is more likely to be viewed as a “good” profit by cynical lenge for CEOs and organisations. consumers because it was driven by CBA being more competitive in the marketplace. BRAND FUTURE-PROOFING Winning market share from rival banks, while keeping interest rates The 3Ps of sustainable marketing are people, planet and profit. The in line with the market, delivers on the “determined to be different” triple bottom line is an important consideration for brand equity in the brand promise. future. However, Westpac – CSR poster child – provides a contrasting Earlier this year in the UK the Marketing Society published a report in example. Last year Westpac enraged the nation by raising its variable conjunction with Business in the Community entitled “How can marketers mortgage rate by 20 basis points above the Reserve Bank of Australia’s build sustainable success?” cash rate rise. One of the contributors to this was Gavin Neath, senior vice presi- This prompted Kevin Rudd to say “I think Westpac should have a dent of global communications for FMCG giant Unilever. long hard look at itself”. It was a gesture of greed against the backdrop He poses a very interesting question – is CSR the next stage in the of the GFC. evolution of brands? Behaviour like this is highly likely to be viewed by increasingly cynical In the beginning, brands were marketed on functional needs. For consumers as driving “bad” profits. example, “Persil washes whiter!”. Modern brands are marketed on func- The patronising banana smoothie analogy – which picked up the tional and emotional needs – “Persil - tough but gentle”. Mumbrella ‘Marketing Disaster of the Year 2009’ award – didn’t help the “Future brands” as Neath calls them, will increasingly be marketed cause either. on functional, emotional and societal needs. The holy trinity of brand equity. NUMBER TWO, GREEDY CEOS As Persil expresses it, “Better things now come in small packages”. Excessive executive remuneration is a big issue across all blue-chip I think this is good advice for all marketers across all sectors. Australian companies, but the big banks are an especially soft target. According to consulting firm Guerdon Associates, the leaders of all Adam Joseph is readership director at the Herald Sun, Melbourne. but one of the big four banks feature in the list of the 10 highest-paid He twitters at http://twitter.com/adamjoseph1. Australian CEOs. The ANZ’s Mike Smith is in fifth place with a total remuneration April–June 2010 | PROFESSIONAL MARKETING | 35