Business Roundtable: Corporations Should Benefit ALL Stakeholders

One of the most influential business groups in America, the Business Roundtable recently announced it supports the concept of redefining a corporation to benefit all stakeholders, not just shareholders.

This is a major shift away from the idea that profiting shareholders takes precedence over consideration of other stakeholders (employees, customers, vendors, and communities).

Read the entire announcement here.

Polishing the Brand via Corporate Citizenship

Being a good corporate citizen is a good way to polish any brand or company name. So many stakeholders pay attention when companies pursue social responsibility agendas.

For example, Time Warner Cable and Samsung are sponsors of the Space Shuttle Pavilion at New York's Intrepid Sea, Air, and Space Museum. Thousands of visitors see those logos and names as they enter the pavilion, adding to the goodwill of these well-known firms.

In the past, some argued against this kind of expenditure, saying that the point of corporations is to be profitable. Today, many recognize that good corporate citizenship is quite compatible with profitability goals. Remember, corporations and brands serve multiple stakeholders, not just investors.

In fact, one survey in Canada showed that people actually want corporate management to take the lead in socially-responsible actions. So when a company or brand is publicly honored for good citizenship, local residents and customers alike can feel proud of their association with it.

Most Reputable Brands in 2018

Which brands came out on top in the recent Harris Poll consumer survey about reputation? Harris asks about six dimensions affecting reputation, including products, social responsibility, emotional appeal, workplace environment, financial results, and vision/leadership.

Hint: The same company has topped the list for three consecutive years. In other words, this company's reputation has remained the highest among surveyed consumers.

Here's the list of top 10 most reputable brands in 2018:

10. Aldi (deep-discount grocery retailer)
9. Patagonia (retailer of outdoor apparel and equipment)
8. Publix Super Markets (major grocery retailer)
7. UPS (package delivery service)
6. HEB Grocery (Texas-based grocery retailer)
5. Walt Disney (entertainment company)
4. Chick-fil-A (fast-food restaurant chain)
3. Tesla (automotive and solar energy firm)
2. Wegmans (grocery retailer)

and the top firm in this year's poll is . . . . . .

1. Amazon (pioneering online retailer)

Brand Purpose Boosts Unilever Brand Growth

https://twitter.com/Unilever

Some Unilever brands have been emphasizing sustainability and social responsibility initiatives--driving much higher revenue growth for those brands.

Unilever says those purpose-driven brands (including Ben & Jerry's, Lifebuoy, and Dove) are increasing revenue more than 50% faster than its other brands...and helping Unilever continue growing in the global marketplace.

Given the highly competitive nature of the product categories involved (such as ice cream and personal care), Unilever's experience indicates that consumers definitely recognize and respond to differentiation on the basis of non-functional benefits. In other words, many consumers will choose brands because of corporate citizenship and purpose, not just features that deliver benefits.

Yet brand purpose must also go hand-in-hand with brand usefulness, meaning the brand provides value in the form of meeting a consumer need.

Does Reputation Count?

GREENWASHING

The Reputation Institute's 2015 study of global corporate reputations has been released. The top 10 corporations worldwide (determined on the basis of innovation, governance, citizenship, and other criteria) are:

1. BMW
2. Google
3. Daimler
4. Rolex
5. LEGO
6. Disney
7. Canon
8. Apple
9. Sony
10. Intel

The U.S. list has three familiar brands on top: Amazon, Kellogg's, and LEGO. Those are followed by Fruit of the Loom, Campbell Soup, Levi Strauss & Co., Snap-on, Hershey, Panera Bread, and Briggs & Stratton.

A Cone Communications/Ebiquity study of consumer attitudes toward corporate social responsibility indicates that 90% would change brands to support a worthy cause. Moreover, 80% would be willing to purchase an unknown brand associated with a strong social responsibility commitment.

Consumers are increasingly wary of greenwashing and willing to change behavior when they believe a company or brand isn't living up to its statements or commitments.

So does reputation count? Clearly, building and maintaining a reputation for authentic social responsibility can pay back in financial terms, not just goodwill.

B Corps Seek Triple Bottom Line

As shown in this map from the Benefit Corp Info Center, as of May 2014, 24 U.S. states had passed laws governing B corporations--benefit corporations that are motivated by making a contribution to (1) the environment and (2) society as much as by (3) profit-seeking. In other words, the triple bottom line is, well, the bottom line.

Corporations can apply for certification by B Labs to show their stakeholders that they are triple-bottom-line responsible. Customers, employees, suppliers, and other stakeholders generally welcome the transparency and the involvement in their communities and their planet - as represented by the B corp designation. This differentiates one brand from another in a very distinct and meaningful way.

B Corporation's Facebook page celebrates every legislative change and specific events that move the movement forward.

This morning's NPR Morning Edition included a story on B corps and a closer look at one in New Hampshire, W.S. Badger, maker of Badger Balm. Take a look!

Multibranding at Starbucks

If and when the ubiquitous coffee culture cools off after its long reign, Starbucks will be ready with a fridge full of other food products under various brands. This multibrand strategy is important because it facilitates revenue growth without the expense of opening new cafes--and it reinforces the company's toehold in non-coffee products.

Evolution Fresh juices, a 2011 acquisition, will give Starbucks its intro to the fresh-juice refrigerated section of supermarkets like Whole Foods. (Facebook: 10,700 likes for Evolution Fresh.) The company is smart to make the most of established grocery relationships in its marketing channel. Plus from a profit perspective, doesn't it make sense to sell your own products in your own outlets? That's why Evolution Fresh is replacing the Naked Juice line of fresh juices that Starbucks currently sells in its stores. And adding new Evolution Fresh snack bars to Starbucks menu boards.

In addition, Starbucks is partnering with Danone on a line of Greek yogurt parfait-style products, to be marketed under the Evolution Fresh brand. The idea is to sell them in Starbucks stores and through the grocery distribution channel. This is another bit of diversification that will help Starbucks offer more things to more people without going too far out on a limb. Again, it makes sense to boost a home-grown brand rather than bring in outside brands.
 
Starbucks not only has high awareness and positive associations among its customer base, also has a very cost-efficient social media platform for promoting itself and its brands (Facebook: 35.2 million likes; Twitter: 4.8 million followers).

And in the corporate social responsibility area, Starbucks is testing new community stores. These specially-designated stores donate a portion of each transaction to local programs for education, youth, health, etc. The newest community store in Seattle, for instance, expects to donate about $100,000 to the local YWCA. 

Unilever's "Shakti" distribution

It's wholesale, it's retail, it's CSR: Unilever's "Shakti" program has Shakti ammas (mothers) and Shaktimaan (men) selling its personal care and household products in tiny villages throughout India. These rural and sometimes remote areas are places where distributing products through traditional channels can be both difficult and costly.

By helping local people become entrepreneurs representing Unilever products, the company not only expands its distribution reach, it helps fight poverty (the corporate social responsibility angle), improve living standards and build its brand.

Hindustan Lever has been using Shakti distribution in India for years. This distribution system has been so effective that Unilever is expanding it to Kenya, Nigeria, Bangladesh, Sri Lanka and Vietnam.

Shakti reps may soon be selling other non-competing goods and services, such as banking services and telecommunication services, increasing their income and making more offers available to their villages. What's next for Unilever's Shakti distribution?

Shared Value: Michael Porter and Mark Kramer

Marketing for profit alone isn't as powerful as marketing with the larger good in mind. Michael Porter and Mark Kramer endorse a concept they call shared value, the idea that a company can and should profit while...

"...advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress."

By applying the concept of shared value, marketers can tackle real-world issues and keep profit in the equation, rather than simply using profits from business operations to "do good."

Danone and Grameen Bank have been partners for several years in a yogurt business that provides jobs making and distributing nutritious, affordable yogurt in Bangladesh. This is a social business, aimed at addressing poverty in a targeted market. In a limited way, it applies shared value.

On a larger scale, General Electric's ecomagination initiative is creating innovative, sustainable products and services that benefit customers in diverse markets. Between now and 2015, GE is investing $10 billion to research "clean" (green) technologies. Since ecomagination was introduced in 2005, GE has reaped revenues of $85 billion from these goods and services. This is shared value, because GE and its stockholders benefit from the profits while customers and communities benefit from green offerings that are environmentally-safe.

 

Milton Friedman Was Right (For the Wrong Reasons)

A new study by academic experts at Tuck shows that social responsibility can strengthen customer loyalty--if the program affects the customer experience. Intuitively, this makes sense: Customers, employees, stockholders, and suppliers prefer to associate with companies and brands that do good things (save the planet, raise money for good causes, buy local products). Other studies and surveys have also found that customers like buying from companies that make a difference.

A number of studies and meta-analyses have confirmed the positive link between social responsibility and profitability. This doesn't mean that corporate social responsibility is the cause of higher profitability, but there is a definite connection.

Of course, social responsibility entails an economic calculation as well as a marketing calculation. And that's where the views of economist Milton Friedman come in.

Decades ago, Friedman famously called on businesses to focus on their "social responsibility" to serve shareholders by increasing profitability. In other words, profits come first.

These days, analysts and industry observers have noted that many social responsibility programs benefit the company economically, by cutting costs, for example, or by polishing the firm's image for marketing reasons (in the interest of sales and profits).

When heavyweights like Walmart, Procter & Gamble, and McDonald's throw their considerable marketing and economic power behind an issue, they can make a real difference, which gives their brands a boost and helps their competitive position. And companies that seek to protect their supply chains or develop unique products wind up helping their sales and profits while they help the environment, as this recent Time article points out.

So it turns out that Milton Friedman was actually correct: His view of businesses being responsible primarily to shareholders/owners underscores the economic importance of corporate social responsibility in the 21st century.

Businesses that don't act in a socially-responsible manner will be at a disadvantage in maintaining customer loyalty, building profits, and satisfying their shareholders. Social responsibility turns out to be a win-win for businesses and society, in a bottom-line way that Friedman may never have thought possible.

Timberland's "Moral Capitalism"

The UK newspaper Guardian recently ran an opinion piece by Jeffrey Swartz, CEO of Timberland, which is known for its tree-hugging environmentalism as much as for its rugged outdoor apparel and accessories. I was particularly struck by this passage in the piece:

I am an advocate for moral capitalism, for responsible consumerism. Moral capitalism embraces the dialectic of increasing profits and decreasing environmental destruction. Responsible consumerism requires that the CEO re-imagine the goods and services we offer, and the means by which we design and manufacture and deliver those goods and services.

Timberland has been doing this in all kinds of ways, large and small. But being green doesn't mean ignoring customer needs and failing to deliver benefits other than environmental protection. The CEO recognizes that the business side must be totally integrated with social responsibility for Timberland's objectives to be met and for the firm to be successful.

That's why the firm's marketing reflects its dual passions of social responsibility and quality for consumers. The Earthkeepers line of shoes, for example, is partly made from recycled materials and is specifically designed to be taken apart for recycling or reuse after the products have been discarded or are no longer wanted by the consumer. What's next for Timberland?

CSR at the Gap

Corporate social responsibility reports are new for some companies, but not for the Gap. The San Francisco-based retailer got deeply involved in international CSR years ago, after bad publicity about living and working conditions at the overseas factories where its apparel products are made. It instituted strict supplier compliance rules and backed them up with action. It has also focused on going green throughout its value chain.

The Gap has been issuing CSR reports for some time, switching to online-only communications in recent years to save trees and money. Its latest report is a multimedia affair, chock full of info about its factories, suppliers, environmental initiatives, employee engagement and much more.

Check out the Gap's "data dashboard" page with metrics reflecting the retailer's CSR goals and progress. Very well done, easy to understand, and a good tool for letting stakeholders know, at a glance, what the chain has accomplished in CSR.

Google and Giving It Away

Corporate philanthropy is far from dead, even in this economic crisis. Instead it's being reinvented as a key element in corporate strategy and, by extension, in corporate marketing.

Alyson Warhurst (of Warwick Business School in UK, World Economic Forum faculty, and consulting firm Maplecroft) wrote an opinion piece for Business Week in December, saying the economy is forcing companies to trim philanthropy budgets and realign initiatives with their long-term business goals. "We will see investments targeted to help companies manage their risks, responsibilities, and reputation--what I call R3."

Today's New York Times reports that Google's philanthropic unit, Google.org, is fine-tuning its strategy. Now philanthropy will be more closely aligned with Google's goals and strategies "to ensure that we’re better able to build innovative, scalable technology and information solutions,” according to the executive who's stepping down from Google.org.

What does this mean for Google and the world? Professor Vaidhyanathan of the University of Virginia comments: “The habits and ideology of the company will lead the philanthropy rather than the needs of the communities or the planet.”

Even if Google's philanthropy is more narrowly focused, the company's image should remain intact. In fact, this move may reassure stockholders and fans that Google's social responsibility investments have a solid business basis. Sorry, Milton Friedman, this doesn't mean that the only business of business is business. It does mean that businesses can be socially responsible to the world and to their stakeholders at the same time, even during challenging economic times. That's still a strong marketing story for any company.