Sustainability and the Corporate Brand By Professor Simon Knox This article examines the issue of sustainability and the corporate brand. Today many multinationals are putting sustainability into practice – at least at a policy and public relations level. Since there is lots of ambiguity about just what sustainability means in business, let’s start with a common understanding. One way of thinking about sustainability is consideration of the so‐called triple bottom line: profit alone isn’t sufficient in generating shareholder value, it has to be supplemented increasingly by addressing environmental concerns and people concerns, in other words people working within your organisation. So the triple bottom line ‐profit, people and planet‐is under consideration more and more in companies, particularly multinationals, who are recording their investment and activities in the environment and in their people who produce the products and services that are sold to the market. Are customers really interested in sustainable products and sustainability? A recent report by McKinsey on the green consumer suggested that most consumers believe that green is good – that is the positive observation. However, what they are also saying is that consumers are not really prepared to pay a price premium for any green product or service and that they are not prepared to make tradeoffs. So for instance, sustainable light bulbs somehow don’t deliver brightness and they can be a bit dark; there is consumer resistance to trading off this lesser quality for performance. Realistically, it is just not going to happen without quality standards and the competitive price tags that consumers have become accustomed to. However, in a business‐to‐business situation, increasingly companies that are tendering for new business are being asked about their sustainable practices and policies and most people would agree that if you are deficient in this area, it is likely there will be a downside risk in any tendering process. All in all, however, the benefits of green credentials to consumers and sometimes to companies themselves, is not that clear. A Political Imperative But, of course, there is an imperative both politically and legislatively to reduce carbon dioxide emissions in many countries and I think general managers and business leaders are feeling the pressure to engage. Ultimately, the CEOs of the major multinationals are making the decision that it is ‘the right thing to do’. Good for reputation, good for employees In a qualitative sense, going green is good for reputation, and it is also good for employees. All the evidence suggests that employees engage in sustainable practices very willingly and very freely, and that it is highly motivational. So whilst it is maybe difficult to put a cost‐
benefit analysis against much of this activity, it is undeniably the direction that most businesses need to go in. www.cranfieldknowledgeinterchange.com © Cranfield Unviersity 2011 1
What about reputation? Some companies such as Marks & Spencer and Tesco seem to trumpet their sustainable record So some companies are taking bold initiatives, whereas others are letting it develop and seeing where it goes for their reputation. Marks & Spencer have their so‐called Plan A. They are very active across all of their operations and they have very detailed information available for people to look at, both online and in‐store, but to say it is core to their reputation is possibly an exaggeration. At the moment, it is happening, but they haven’t really linked it closely with their reputation. Tesco, on the other hand, are making a virtue of their green credentials, having established the world’s first zero‐carbon store to enhance their customer’s shopping experiences (see below) and by introducing over 1000 product lines that have their carbon footprint clearly marked on outer packaging. General Electric, though, have put sustainability absolutely central to their reputation – the so‐called Ecomagination development, which is a huge investment on behalf of General Electric. In fact, they are spending more money on green projects than the US government, and the benefits are there to see. They are making Ecomagination absolutely central to their reputation – they have even developed some advertisements showing their investment in green products and sustainable practices. In summary, what is the essence of message on sustainability? Point number one is that there is little choice for companies to engage in sustainable practice, whether it is environment, whether it is people issues and employment issues. Secondly, there seems to be evidence emerging that considerable cost savings can be made. For instance on the Tesco sustainable policy, £500 million has been set aside for sustainable investment and 2009 was the year in which they saved a £100 million on sustainable practices. We are seeing emerging cost savings against the necessary upfront investment. My belief is that over time, sustainability will become a self funding activity, but it takes the brave to make that investment in the first place. Professor Simon Knox is Visiting Professor of Marketing at Cranfield School of Management www.cranfieldknowledgeinterchange.com © Cranfield Unviersity 2011 2