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The New Ageof CorporateCitizenship:Doing strategic goodthat builds brand valueCreating and managingbrand value TM
Interbrand | Pg. 1The New Age ofCorporate Citizenship:Doing strategic good thatbuilds brand valueby Tom ZaraIntroduction new paradigm emerging that shifts us away How did we get here? Historical from narrow notions of corporate social background and present contextWhen it comes to corporate social responsibility and towards a model we callresponsibility (CSR), it is out with the old The notion that corporations have some “corporate citizenship.”and in with the new. The old cosmetic unique responsibility to the larger socialapproach to CSR, the idea that CSR is milieu in which they do business—andmerely a necessary cost of doing business To seize this moment, we advise to the people who help manufacture andseparate from your brand identity, and the corporate entities to think of consume their goods and services—isdefensive position of CSR to stay one step almost as old as the corporation itself. Early themselves as full citizens of theahead of government regulation are no British industrialists like Lord Lever took alonger relevant. Instead, a recent study by world. paternalistic view of capitalism. Lever builtInterbrand and Hall & Partners suggests that an entire town for the employees of his Leverwhat’s “in” is a strategic way of using CSR to Corporate citizenship (CC) is the sum total Brothers factory, encouraging them to walkenhance your brand’s established identity of how a company treats every entity that to work and engage in a kind of early profit-and grow your brand value. depends upon it, and upon which it is sharing plan. He named it Port Sunlight, dependent—its employees, customers and after the Sunlight Soap brand that was soToday’s corporations face a stark choice suppliers, the government(s) responsible integral to the accumulation of his fortune.in these increasingly transparent times: for both regulating and assisting it, the Similar “company towns” became a hallmarkDevelop and implement strategies to communities in which it does business, and of industry across the Atlantic as well, withcarve out a meaningful presence as a good the larger environment it shares with the Carnegie, Mellon and other captains ofcorporate citizen, or run the risk of seeing whole planet. industry adding their own American twistsyour brand value erode and your business to the model.suffer. Billions of dollars of brand value Previous research on CSR took people’sare tied to various forms of corporate stated preferences and reactions at face Corporate social responsibility may notsocial responsibility—Coca-Cola, IBM and value. The present study uses regression be new, but it is not a static concept,Microsoft alone tally almost $4 billion analysis to discern real as opposed to stated either: Early CSR initiatives like thoseengaged in CSR.1 behaviors and attitudes toward CSR. It outlined above, shared a commitment to is groundbreaking work that offers new “improving” the lives of the working class.But our proprietary research into CSR points insights into the wisest ways to spend on Corporate philanthropy even helped forestalltoward several ways to allocate those dollars CSR, the most and least effective ways to use government regulation—for a time. Butwisely, allowing corporations to transcend CSR to drive customer choice, and how to as industry came of age in the early 20ththe PR model and effectively leverage their leverage the current zeitgeist to grow brand century, writers and journalists blew theCSR spend to grow brand value. Armed with value. lid off the realities of child labor, unsafeinsights into the consumer and customer factories and tainted food, ushering in azeitgeist, Interbrand is convinced that, like The implications of this new model are huge. proliferation of government regulations.most transitional moments, this is a time We believe the opportunities are as well. At the same time, the seeds of socialismrich with opportunity—for those firms If we all work to maximize them, we may were taking plant across the sea and madeprepared to evolve their approach. There is a be able to do a lot of good for the world we the voyage to the United States along share—and for our brands.1 Interbrand 2009 Best Global Brands andIB/H&P 2009 CC study
The New Age of Corporate Citizenship: Doing strategic good that builds brand value Interbrand | Pg. 2 Consumers are getting “green fatigue”FIGURE 1 : GREEN FAT IGUE Corporate Interest in Sustainability Consumer Interest in Sustainability Serious internal Product Little tangible corporate action investment and change innovation EPA DDT Three Mile Brundtland Exxon Kyoto Dow Jones Inconvenient BP Oil Founded Banned Island Report Valdez Protocol Sustainability Truth Spill Index 1970 1975 1980 1985 1990 1995 2000 2005 … 2010 33 | Operationalizing our CSR/Sustainability offering | September 25, 2009with the immigrants who teemed to In the wake of the near-universal adoption consumers—are pressuring corporations toAmerican factories and farms and the state. of sustainability targets, green is the walk the walk when it comes to issues fromGovernment soon came to be seen as the new black. It’s almost passé by now, and economic development in the Third World toarbiter of social responsibility for all. beyond sustainability, corporate entities’ gay rights in America. Senior management responses to environmental concerns have is now largely composed of the baby boomToday, through both original research and run the gamut from genuine and innovative generation, a group of individuals whodealings with a diverse array of corporate engagement to “greenwashing.” One thing bring their 1960s-bred legacy of values toclients, Interbrand discerns the next shift in is by now well established: Environmental the boardroom. Meanwhile, millennialsthe CSR paradigm. Today’s corporations are awareness has driven the discussion of the have come of working age with a level ofwillingly adopting holistic strategies that role of corporations in the wider world. high tech that blurs the traditional work/benefit the world around them, as well as life balance; they therefore feel entitled totheir brands (see Figure 1). What’s new is the way an attention to detail demand that companies reflect their own about corporate action, begun specificallyTake sustainability. The green movement values. To recruit the best of this generation, around environmental concerns, hasshowed corporate officers that sometimes firms are finding they must be responsive begun to migrate and replicate across thesocial conscience was not only compatible to millennials’ desire to work for those broader social field. Stakeholders of allwith business sense, but that doing the right companies that not only produce a better stripes—employees, B-to-B customers andthing socially was also the right thing forone’s brand value and bottom line.
The New Age of Corporate Citizenship: Doing strategic good that builds brand value Interbrand | Pg. 3...the mutually dependent worldof the supply chain is whereCorporate Citizenship efforts willyield the greatest results.widget, but also do something more positive But it’s not just stakeholder expectations CSR is increasingly seen, quite rightly, as partfor the world. that are driving the change in CSR. It’s the of any sensible risk management program. evolving business context as well. With theMeanwhile, in the B-to-B world, everyone In sum, a twisted and sometimes recession squeezing earnings, we all needhas a sustainability target to hit, so ambivalent history of corporate positioning every advantage we can get. Brand hasevery customer along the supply chain is vis-à-vis the broader social environment become even more important in separatingdemanding more from their suppliers than has led us to a place of tumultuous change, the winners from the losers in a marketplacein the past. The Walmart effect has put a unprecedented transparency, participatory where corporate reputations have beennew premium on greening the supply chain. richness and—we believe—remarkable battered by scandal and bruised byAnd purchasers understand that they can possibility. To seize this moment, we advise recession. Transparency is now an essentialbe held accountable by the public for their corporate entities to think of themselves as for any company seeking an edge. In thissuppliers’ actions. So pressure that begins full citizens of the world. environment, effective CSR initiatives,externally—in the net’s 24-hour court of well told, can help significantly bolster From CSR to corporate citizenship:public opinion and among a press ready to stakeholder trust—and boost bottom lines. The findingsfeed the beast—winds up being passed alongevery link in the chain. CSR can also help mitigate risk. Consider the It is no longer descriptively rich enough to guilt-by-association question. Examine your speak of “corporate social responsibility.”Finally, the power of consumers as a group supply chain and ask: Is everyone safe to do We must move beyond CSR’s connotationis on the rise. Companies’ performances can business with? Prominent corporations in of an extra gloss, amended to a company’sbe scrutinized in real time, narrowcast to particular can take a major public hit when identity. In the new paradigm, we see thatfriends and followers, and circulated to the suppliers’ social practices are problematic. how a corporation interacts at every level isblogosphere and the traditional press. Brand an essential and integral part of its identity.conversations are richer than they’ve ever There is tremendous potential upside tobeen, so the PR talk is really not convincing initiating positive social responsibility Corporate Citizenship, then, is theanymore without the walk—what one does programs. With a return to increased understanding people have of a company’sis now more common knowledge, so what government regulation a real possibility, positive contribution to society based onone says not only matters less but may and the public’s awareness of corporations’ the way it treats the core elements of itssubject a company to scrutiny and antipathy environmental impact peaking, business—which we call the six fields ofshould the gulf between words and deeds sustainability measures will help cut play —employees, customers and suppliers;be too wide. Finally, transparency is at an business costs and demonstrating the communities in which it operates; theall-time high, and that means conscientious willingness to self-police may forestall more governments that influence its operations;consumerism, with the threat of boycotts aggressive regulation. and the planet it relies on for its existenceand ‘buycotts’, is greater than ever as well (see Figure 2). Finally, a penny’s worth of prevention is(note the speed and scope of the consumer worth a dollar’s cure. Two simple letters So what is really emerging is a holistic notionresponse to Target’s recent campaign come to mind: BP. In the wake of the spill of the corporation as a global citizen—ascontributions if you have any doubt). in the Gulf of Mexico, their entire brand is a vital member of communities and part tainted, their market position eroded and at of multiple, covalent and interlockingThe maturing of the whole notion risk of further deterioration, and their profits processes, whose actions affect and areof green has engendered a shift to in peril. It is worth underlining that the cost impacted by all it touches. If doing gooda broader sense of altruism. of rectifying problems after they’ve exploded for the sake of a PR bump or to keep the is far greater than the price of prevention. regulator at bay was the hallmark of CSR
The New Age of Corporate Citizenship: Doing strategic good that builds brand value Interbrand | Pg. 4 in recent times, the opportunity now can brand choice (intention to purchase); brand FIGURE 2 : SI X FIELDS OF PL AY be summed up in a simple equation: Doing commitment (level of loyalty); and brand good, and doing it strategically, yields better advocacy (likelihood of talking to others mers brand value. sto Su positively about a brand) (see Figure 3). Cu p pl ie Interbrand and Hall & Partners sought While brand choice was only minimally es rs Employe to understand the role that corporate driven by our seven CC factors (2 percent), Commun citizenship plays in driving decisions for CC accounted for 13 percent of the overall both consumers (end users) and corporate favorable impression of a brand, and almost purchasers (B-to-B users). Our quantitative a tenth of what drove brand advocacy. it y t ne research sample was robust: Over 5,200 Pl a Go Interestingly, these numbers all rose in ve consumers between 18–65 with a role rnment the B-to-B context, suggesting that the in purchase decision-making, and 1,861 mutually dependent world of the supply corporate purchasers across small, medium chain is where corporate citizenship efforts as the way a company treats its workforce, and enterprise businesses, spanning six will yield the greatest results. It’s also geographies from the U.S. and Europe whether it offers environmentally worth noting that in certain sectors, both responsible products, whether it provides to China, Japan and Brazil. All tolled, ten consumer and B-to-B purchasing decisions industry categories were examined. support for nonprofit organizations, etc.) were noticeably higher than the mean— against other types of drivers (convenience, particularly in beverages, automotive and We used regression analysis that compared pricing, quality, service, etc.). Our goal was chocolate for consumers; financial services the role played by several industry-specific to gauge the role that is played by CC drivers and wireless for B-to-B customers; and the drivers in stakeholder behavior. In the relative to other motivating factors, when it computer business for both (see Figure 4). case of each industry, we were, in effect, comes to four types of stakeholder behavior: The more considered a purchase decision We the impact citizenship drivers (such pitting corporate Corporate Citizenshipfavorability (overall impression); fied quantified the impact Corporate Citizenship has even moreeven more brand has And realized it realized it is important And is important to B2B to B2Bmer consumer opinion on opinion corporate purchasers corporate purchasers FIGURE 3 : SUMMARY OF CC CONTR IBUT IONS: REGRESSION ANALYSISC Summary: Regression Analysis Contribution of CC Summary: Regression Analysis Consumer Contribution of CCContributionRegression Analysis Summary: of CC Summary: Regression Analysis B-to-B(across countries & categories) Consumer & B2B (across countries & categories) Consumer & B2B (across countries & categories) Consumer & B2B (across countries & categories) Brand Choice Brand Choice Commitment Commitment Brand Choice Brand Choice Commitment Commitment ntention to purchase) (Intention to purchase) (How loyal someone (How loyal (Intention to purchase) someone (Intention to purchase) (How loyal someone (How loyal someo is to a brand) is to a brand) is to a brand) is to a brand) Consumer B2B B2B Contribution of: Contribution of: Contribution of: Advocacy Advocacy Brand Favorability Brand Favorability Advocacy Advocacy Brand Favorability Brand Favorabilch people would go out of their would go out of their (How much people (Overall impression of (Howimpression of would go out of their would go out of their (Overall much people (How much people (Overall impression of (Overall impressiontalk about a brandto talk about a brand to others) way to others) a brand) way to talk about a brand to talk about a brand to others) a brand) way to others) a brand) a brand) 17% 17% 13% 13% 4 | Defining the|Value of Corporate Citizenship | 26th May 2010 ate Citizenship 26th May 2010 15 | Defining the Value of Corporate Defining the| Value May 2010 15 | Citizenship 26th of Corporate Citizenship | 26th May 2010 Whilst CC has a relatively low impact on purchase decision making, its contribution should not be ignored Comparison of drivers choice: Consumers 8% 7% 6% 5% 4% CC Other Factors Convenience 3% Convenience Convenience Convenience 2% Variety PricePrice Price Price 1% Variety Price Price 0% Computers Automotive Beverage Oil&Gas Chocolate Choice Comparative Driver Contribution of CC Summary: Regression Analysis 16 Consumer 16 | Defining the Value of Corporate Citizenship | 26th May 2010
The New Age of Corporate Citizenship: Doing strategic good that builds brand value Interbrand | Pg. 5FIGURE 4 : COMPAR ISON OF DR I VERS OF CHOICEConsumer B-to-B8%7%6%5%4%3% Convenience Convenience2% Variety Price Price Price Price Price Price1%0% Computers Automotive Beverage Oil & Gas Chocolate Wireless Financial Computers Machines Percentage of purchase choice Comparative Driver attributable to CCContribution of CC Summary: Regression AnalysisConsumeris, the higher CC concerns rank as a driver economy. Meanwhile, in countries altruism anywhere across the six fieldsof choice. This also helps account for the where the notion of CC is newer and of play. Put another way: People tendincreased significance of CC in the B-to-B potentially more newsworthy—such as to give credit across the CC spectrumcontext, as virtually every B-to-B decision is, China, Brazil and the U.S.—its impact on to companies who have successful CCby definition, a well-considered one. opinion is amplified. initiatives concentrated in one area, be it in their supply chain, through governmentIf there is one statistic that stands out As some companies race to catch the partnerships, in their dealings withbeyond all others, it is the 13 percent green wagon, they may be interested employees or as a force for good in theaverage contribution CC makes to overall to learn our data strongly suggests that communities in which they do business.brand favorability. If 13 percent of the consumers are getting “green fatigue,”favorable opinion of a brand consists of CC with consumer interest in sustainability Doing good to do better: Building aattributes, and since by definition those peaking around 2005, while corporate corporate citizenship strategyattributes refer to the company rather than interest continues to rise into the realm There are several clear implications foran individual product, then that makes 13 of product and service innovation corporate strategy once one digestspercent the bare minimum degree to which (see Figure 1). This means in part the data. First, when it comes to the sixthe favorability towards a brand is affected that the public demand for corporate fields of play, a concentrated effort inby the view of the corporate entity. sustainability has peaked, but it also one area rather than a scattershot one means that operational sustainability isBy disaggregating the data by country, will yield a greater return on investment; now a table stake, and only innovationwe were able to discern a story arc for the halo effect that accompanies a well- will differentiate your firm in ancorporate citizenship. It appears that, in executed CC strategy in one realm is more increasingly green marketplace. Thecountries with more of a CC legacy such effective in building value than several maturing of the whole notion of greenas Japan, Germany and the U.K.—where ill-coordinated initiatives across multiple has engendered a shift to a broadersocial concerns have long been part of the fields. sense of altruism.equation for industry—CC levels off over Related, determining what to focus one’stime as a differentiating factor in decision Finally, our research indicated that a CC spend on requires an understandingmaking; it comes to function more as “halo effect” applies when a company of where in the customer journey CCtable stakes — the price to be part of the clearly demonstrates this sort of
The New Age of Corporate Citizenship: Doing strategic good that builds brand value Interbrand | Pg. 6 4. Stakeholder CitizenshipFIGURE 5 : STAKEHOLDER BEHAV IOR BY COUNTRY Expectations – Understand what keyAs the notion of corporate citizenship matures, it becomes less differentiating stakeholders expect of your company in the realm of CC 16% 5. Citizenship Driver Analysis – Use an analytic process to determine the most 14% powerful drivers of your CC 12% 6. Citizenship Strategy – Compare your brand identity with your citizenship 10% drivers to determine the most relevant, impactful ways to proceed 8% 7. Citizenship Activation Plan – Explore 6% the most appropriate methods for bringing your citizenship strategy 4% to life and—crucially—expressing Price it and broadcasting it to your key 2% stakeholders. 0% The moment is fluid when it comes Brazil U.S. China Germany U.K. Japan to corporations’ ideas around social engagement, and increasingly, the field is Commitment Advocacy Favorability full of firms using some form of CC to vie for differentiation and prominence. Thankfully, there is a lot of competition in CC and the winners will be those brands that are innovators in their industry and in the liveshas the most impact. Social engagement So, how do you engage with your key of their consumers.ultimately has a greater effect on overall stakeholders to make the most of your CCbrand favorability than on purchase choice, strategy? There are seven discrete steps Indeed, our findings indicate that aso focusing one’s CC spend on how people that will help you fulfill your brand promise citizenship strategy that aligns with yourengage rather than how they buy is crucial. through corporate citizenship: brand, a tight focus on one of the six fields of play, and a targeted method forThird, choosing a CC approach that bears 1. Sync Up Your Strategies – Ensure broadcasting your engagement—in thata fundamental relation to your business that your business and brand strategies order—are the differentiating factors forwill redound to your benefit because the are aligned before determining your firms ready to move from CSR to the boldbusiness and the CC measures will be citizenship strategy: All three must new world of corporate citizenship. ■mutually reinforcing. So, for example, a intersect to effect a meaningfulfinancial sector entity might be advised to corporate citizenship commitment.support micro-lending in the developing 2. Citizenship Audit – Undertake anworld rather than AIDS research, while an exhaustive review of your company’senergy company would do well to focus on current CSR initiativesR&D for sustainable energy sources. Thestories become clear and compelling and 3. Competitive Citizenshipdovetail with the larger brand if they are tied Benchmarking – Execute a competitiveto the core brand strategy. field audit; examine the CSR initiatives of your key competitors
Tom ZaraTom is an Executive Director in Interbrand’sNew York office managing the brandstrategy practice across offices and clientsin North America. Tom has the benefitof over 30 years of brand consultingexperience with a deep and diverse insightinto how brands influence cultures andcustomers, and shape markets on a nationaland international scale. He has strongCEO relationships and understands howorganizations behave and communicateeffectively as an extension of the CEO Visionthrough the definition of a brand. Tom leadsthe Corporate Citizenship initiative as agrowth area for Interbrand and is focusedon creating and managing brand valuethrough the lens of corporate citizenship.Interbrand seeks to leverage brands astangible assets that create value, raisethe stakes and use the power of brand toinfluence behavior. Creating and managinginterbrand.com brand value TM