note: written while at Cohn Marketing
Sustainable initiatives are launching in companies both large and small to address a new paradigm of resource scarcity and ‘interested parties’ expansion creating increased scrutiny of environmental and social performance of the business community. Prolific and instantaneous access to information has created a new level of corporate transparency and resulted in exciting new possibilities and new challenges for companies and their brands worldwide. Corporations are suddenly finding themselves in need of expanding their stakeholder circle to consumers, non-governmental organizations (NGOs), an investment community increasingly concerned with environmental and social performance, the scientific and technology communities, and in some cases, the government. Sustainability is rapidly being adopted as a key tool in business strategy to create new, innovative best business practices. These efforts can be used to strengthen a brand’s value and generate customer loyalty and, like the digital revolution, is here to stay.
A brand is a company’s or product’s unique distinction in the marketplace. For Apple computers, it is their ability to identify consumer needs and deliver products of intentional simplicity and desirability. Disneyland has created a brand around “The happiest place on Earth” supported internally by “We create happiness.” Essentially, a brand personifies a company’s mission, vision and values, not as they appear on paper or through brainstorming sessions, but as they are performed in the marketplace. Each touchpoint either builds or detracts from your brand and adjusts its perceived value. It is here that brands and sustainability intersect, where they can truly intertwine and become inseparable.
How Sustainability Adds Brand Value
So, how does sustainability, with a widely varying definition, contribute to brand value? The Dow Jones Sustainability Indexes define sustainability as “a business approach that creates long-term shareholder value by embracing opportunities and managing risks driving from economic, environmental and social developments.” 1 How stakeholders perceive a company’s level of social and environmental responsibility increasingly influences a brand’s image. What brands and sustainability have in common is the ability to influence behavior. As much as Apple is able create desirability by creating sleek, simple products consumers line up to buy, so can sustainability help influence buying one product or service over another based on the perception of how “good” a company is or is trying to become. Sustainability is increasingly influencing brand image and consumer perception of businesses whether the consumer is the general public or a business-to-business consumer. Sustainability, from a purely business standpoint, looks at internal drivers such as cost reduction, risk management, increased top line (sales) performance and creating corporate culture. Incorporating sustainability as a business strategy will not only increase brand value, but also create a long-term, sustainable organization. A brand generates value for a company by creating demand and customer loyalty through its unique offering.
By tapping into what motivates the buyer, brands can use their distinction to sway customers to their brand over another. For example, a study from Carbon Trust, a UK-based consultancy, shows that social and environmental initiatives by companies can influence consumer behavior especially where ‘issues of immediate personal impact’ and ‘realistic available choices’ are addressed. For example, Honda recognized the growing increase in fuel prices and was thus motivated to create a product line of fuel-efficient cars. While the Toyota Prius may get more press coverage, it was Honda that realized the sole position of reporting better US sales in 2008 than in 2007. Honda has experienced a 28% increase in brand value since 2004. 2
Honda operates in an industry where sustainability is already a critical business issue, but there are brands that seek opportunity in sustainability as their core function to address consumer needs and build brand value. Method is a sustainable cleaning products company with a brand position of “Method creates products for people against dirty.” Method looked at the process of cleaning clothes and reverse engineered a green product whose process has since been adopted by conglomerates such as Proctor and Gamble. Method saw the enormous packaging of laundry detergent and looked at the main ingredient: water. They found a way to create a cleaning product with one-third the water usage thus significantly reducing packaging. This innovation created demand for sustainable products in a product category that had yet to be addressed or garner public attention. Then Wal-mart began leading the distribution charge by committing to only selling concentrated liquid detergents in their stores starting in May 2008 while helping brands maintain their visibility on sales shelves. 3
A brand’s value isn’t just its current perception, but its ability to navigate future risks and continue to generate future earnings. A brand’s value is influential in business investments it either receives or acquires, in establishing and protecting a brand’s reputation and its relationship with its customers. Customers are typically more understanding and forgiving of a brand’s misstep or change in strategic direction when the lines of communication between the brand and the consumer are open. Honest Beverages, makers of boutique beverage Honest Tea, built its brand around ethical identity and its pledge to “create honest relationships with our employees, suppliers, customers and with the communities in which we do business.” This brand was challenged when, in order to increase its profits, it needed access to a larger distribution channel. Enter megabrand, Coca-Cola. The founder of Honest Beverages watched as other boutique brands were swallowed up by the soft drink giant only to be extinct in a couple of years. Honest Beverages did end up making the deal with Coca-Cola. Several announcement strategies were discussed including ‘hiding’ Coca-Cola behind a private investment firm. But Honest Beverages wanted to live up to its brand and made the announcement itself to its shareholders and customers alike explaining that the deal was inked to increase distribution while retaining majority control over the brand. There was some backlash from loyal customers and large conglomerate dissidents, but overall, Honest Beverages did not shy away from these conversations and has maintained its customer loyalty and increased its market share.
Developing Your Strategy
Sustainability is not a trend or a passing fad. It’s the new way of doing business; a shift in business strategy in response to a new paradigm where resources (energy, carbon, water and materials) are a constraint, companies are transparent and “everyone” is a stakeholder. Even in today’s economy, sustainable initiatives are still moving forward.
Marketers today live in glass houses. Every action is watched, analyzed and discussed with lightning speed. Knowledgeable consumers are now making decisions based on much more information than in the past. These decisions are not necessarily made on what the marketer offers via messaging, packaging and design, but on how products and services are brought to the marketplace. Embracing the old saying, “the best defense is a good, fast offense” is imperative as it relates to incorporating sustainability directly into your brand strategy.
Brand strategy starts with a discovery process involving key stakeholders within and outside of your organization. The discovery phase uncovers facts about your company,
realized or desired, that begin to form the unique selling propositions (USPs) for your company or brand. This unique distinction is what sets one brand apart from another and begins to define how to carve out market share and customer loyalty from a brand’s target audiences. Each USP provides a platform for a brand to deliver via proof and validation. This proof and validation point is key in avoiding greenwashing, which is becoming rampant as brands throw out turnkey programs to ‘address’ sustainability without actually incorporating it into the fiber of the company and brand. By intertwining sustainability into a brand’s USPs, it allows a company to define how and when it will incorporate sustainability into its triple bottom line. Beyond that it provides the structure to state what a brand wants to become and to validate that structure through measurable actions and reasons to believe a brand’s claims.
The challenge, and the imperative, is to make sustainability part of a company’s DNA the same way that digital needs, and globalization for larger corporations, affect nearly all business decisions today. The synergy between brands and sustainability is an excellent vehicle to engage stakeholders – externally and internally – with the brand pillars so that they are breathed consistently and powerfully into the marketplace.
Telling the Story – Brand Engagement
When living in a glass house, the best way to survive is first knowing how your operations are run. Where are you doing well, where there is room for improvement, and how quickly can the changes be made. Second, run the cleanest, smartest, most honest business that you can. Finally, be the one to tell your story. There is a lot of confusion about when and how to tell your sustainability story. The development of a company’s brand strategy will help to define the timing and frame the story’s content using the framework of the defined USPs and the brand’s essence. Most importantly, however, is telling your story first and in the manner appropriate to your brand. Allowing others to “scoop” your sustainable strategy means they tell it on their terms without the full knowledge of the thought behind your efforts, and almost always to serve their agenda, good or bad, with sometimes irrelevant information.
The proof and validation steps for implementing your sustainability strategy under the brand umbrella will tell you when it’s appropriate to discuss your sustainable story. If you’re already playing in a heavily sustainable focused industry, the sooner the better (once your sound strategy is in place, no ad hocking it, please). If you are developing a new way of providing more sustainable options, you may be better off fully defining your plans before crafting your story. In the end, it’s the brand, the business environment, and the target audiences that will drive both your story and your timing.
- http://www.sustainability-index.com/07_htmle/sustainability/corpsustainability.html, (September 10, 2009).
- Paula Oliveira and Andrea Sullivan, “Sustainability and its impact on brand value”, Best Global Brands 2008.
- http://walmartstores.com/FactsNews/NewsRoom/6742.aspx, (September 10, 2009).