There’s good news and bad news for marketers in the latest report on sustainability and new business models from the Economist Intelligence Unit. In late 2013, the report surveyed 285 senior executives, mostly in Asia-Pacific, Europe and North America, on their approaches to corporate sustainability, their experiences in measuring and reporting sustainability outcomes, and their plans to explore new business models to ensure long-term sustainability.
The good news is that a significant majority of executives (66%) still believes there is a strong link between sustainability and long-term financial performance. In fact, companies that implement sustainability policies tend to enjoy all kinds of benefits, such as lower cost of capital.
Then came the not-so-great news. In a perverse twist, all of this good news is reducing the belief in sustainability as a marketing strategy. The thinking among executives is that, as green practices become more mainstream, there is less opportunity to use them to differentiate your brand. Say what? That’s like P&G saying that since brand management is now practiced by many consumer goods companies, it no longer believes in the practice as a way to differentiate its products.
Time for marketers to step up and do their part.
Sure, consumers see through green-washing, and the token reference to a charity or more environmentally friendly packaging might not make the registers ring. But every day brings more evidence that a “deep-green” approach (my coinage) that brings sustainability practices into the core business model, can help you reap a whole other kind of green — the one shareholders love.
Take Brazilian cosmetics company Natura Cosméticos. It introduced the Crer para Ver (“To Believe is to See”) product line in 1995, earmarking the earnings from these products for the Natura Institute, a corporate body that funds education projects. Since 1995, the institute has invested R$15.5 million (€5.1 million; $6.3 million) in local elementary schools. The company says that its overall focus on sustainability issues has helped drive annual revenue to R$6.3 billion, from R$429 million in 1995.
Similarly, Coke’s Coletivo initiative, also in Brazil, trains impoverished youths from the favelas and helps them find jobs. The program has resulted in not just an improvement in Coke’s reputation, but also in sales.
Which brings us to another interesting aspect of the study: developing markets demonstrate the highest commitment to sustainability. When you think about it, this makes sense, though. A combination of scarce, expensive natural resources and a more price-sensitive consumer ensure that these companies don’t indulge in green-washing but, rather, look at sustainable practices as a key business strategy. Like Coke, they are adopting the “shared value” model, where a business initiative has a profit outcome as well as a social benefit and in the best cases, an environmental outcome as well. This is triple bottom line thinking at its best. This is the sustainable version of what the late C.K. Prahalad of the University of Michigan called The Fortune at the Bottom of the Pyramid. And, maybe, this is something developed markets can learn from developing — work with your consumers to develop economic systems that enhance their wealth and well-being while selling your products.
A few years ago, I had the opportunity to interact with Erik Simanis of Cornell University's Johnson School of Management and Entrepreneurship. He was working on two social entrepreneurship projects at the time, one of which was with SC Johnson in Kenya. The company employed teams of locals to build and operate paid public lavatories across the country — providing a valuable, even life-critical service, that also necessitated the use of the company’s products. Grameen Phone, the offshoot of Grameen Bank in Bangladesh, used the same model to expand their service: by giving phones to women in villages, who could then rent them out for phone calls, they drove usage while empowering women. There is no doubt that both these projects built the brand’s reputation even as it brought new customers into the fold and made the world better.
If you are in marketing, don’t let the production folks and financial wizards hog this opportunity to make a difference. There can be no better way to build your brand than a shared value, triple bottom line enterprise. All you have to do is find the one that suits your brand.
Here’s to a sustainable holiday season and a greener new year.