Values drive value
Many businesses are finding that doing good is good business, as consumers increasingly opt for brands with which they resonate. A great example is Dutch supermarket chain Ekoplaza introducing a totally plastic-free aisle.
Aimed at environmentally conscious shoppers in its Amsterdam branch, it is a world first. Everything in the aisle is packaged in recyclable or compostable materials, such as glass, metal and cardboard.
Ekoplaza is not alone. UK supermarket chain Iceland says it will eliminate or drastically reduce the plastic packaging of all its own-label products by the end of 2023. And, in Australia, Coles and Woolworths have also committed to “banning the bag” this year. While these supermarket chains no doubt hope to fire up the conversation about the dangers of plastic, they are also tapping into changing consumer attitudes.
“Public awareness of the power of responsible business has grown over the past 30 years or so,” says Professor Jo Barraket, director at Swinburne’s Centre for Social Impact. “In the early stages, the focus was on the harm – to people and planet – that poor business practices can create. More recently, there has been growing interest in the potential of business to do good beyond its core functions.”
Taking a stand
We are certainly seeing more businesses take a stand on issues. Absolut Vodka, for example, was the major partner for this year’s Sydney Gay and Lesbian Mardi Gras, producing a rainbow bottle to celebrate the event’s 40th anniversary. It also released limited-edition Absolut Botanik cans and created an official cocktail for the occasion.
Qantas chief executive Alan Joyce threw his airline’s support behind the Yes campaign for same-sex marriage. The company has also launched an initiative to encourage staff to stop using gender inappropriate language that might cause offence to the LGBTI community.
Joyce, no doubt, is doing what he believes in. He reportedly donated $1 million of his own money to the Yes campaign. But there is also a business case to ensuring his airline embraces greater inclusion.
A quarter of respondents to a new Deloitte Australia study said an organisation’s stance on marriage equality influenced their buying decisions. The study, Missing Out: The Business Case for Customer Diversity, also found that LGBTI customers, as well as those from an indigenous background or who have a disability, are three times more likely than other customers to avoid an organisation if it has a bad reputation on “diversity issues”.
That said, many Australian companies actually started out with a social good in mind, like Who Gives A Crap, a toilet paper producer that donates half of its profits – more than $1.2 million to date – to help build toilets and improve sanitation in the developing world. It was started after its founders learnt that 2.3 billion people across the world don’t have access to a toilet.
Similarly, Daniel Flynn founded Thankyou in a bid to help the 663 million people around the world who don’t have access to safe water. It donates its total profits from its water, food, bodycare and baby products to help people who need safe water, toilets, hygiene training, safe births and healthcare.
Social enterprises are also springing up across Australia. In a new study, Barraket has identified 3500 social enterprises just in Victoria. She says there are social enterprises in all industries in Australia. “They are increasingly looking at increasing positive social impacts through their supply-chain relationships with corporate partners. There is so much activity in the social enterprise field that it’s hard to isolate just a few interesting examples.”
Their messages appear to resonate with consumers. A Nielsen survey has found that 66 per cent of 30,000 consumers polled in 60 countries are willing to pay more for sustainable brands. And of the millennials surveyed, 73 per cent said they would pay more for sustainable offerings.
Driven by beliefs
Similarly, the 2017 Edelman Earned Brand study shows that 30 per cent of consumers worldwide say they make belief-driven purchase decisions now more than they did three years ago. That means they will buy a brand, switch from it, avoid it and – at the extreme – boycott it over its stance on a controversial or social issue.
David Bersoff, head of thought leadership research at Edelman Intelligence, says the research results make it clear that people no longer make buying decisions simply along dimensions of smartness or good value.
“A consumer’s choices are now the target of moral evaluation and a litmus test of loyalty and love of country. The shopping cart is becoming an ideological war zone, a place where proxy political, nationalism and social values battles will be waged.
“Brands will be the focal points of these battles, sometime purposefully and sometimes despite their best efforts to remain neutral.”
The Edelman study also found that belief-driven consumers are young. Indeed, 60 per cent of millennials are belief-driven buyers, as are 53 per cent of Gen Z and 51 per cent of Gen X.
That said, Barraket does not see the issue as really generational. “It’s stimulated in part by the levels of transparency created by social media and 24/7 news cycles,” she says. “It’s also influenced by changes in the geography of markets, with the growth of middle classes in some developing economies giving rise to more people with the resources to be ethical consumers.”
Indeed, the Edelman study found that belief-driven buyers are most active in developing countries such as China (73 per cent) and India (65 per cent). They also comprise around half of consumers in established markets such as France and the US.
While a fair chunk of industry research suggests the importance of “business as citizens” is prominent among millennials, Barraket says they are not the only segment switched on to the issue. “Data on business investors suggests that the number of Gen X and even baby boomers increasingly demanding responsible business practices – as both customers and shareholders – is growing.”
Peta Granger, director of cosmetics retailer Lush Australia and New Zealand, would agree.
“Across a range of demographics, the public is realising they get to choose the kind of world they want to live in every time they open their wallets. People are tapping into brands that are authentically meaningful and, more important than age or gender, are aligning with values that resonate with their own.
“Customers are well informed and are looking for brands that reflect their own personal values. They’re even digging deeper than just the ethics of how something is produced and are taking a stronger look at how businesses behave with the communities they interact with.”
Lush was founded by animal and environmental activists who have always used the business to affect the social and political change they want to see in the world.
But, says Granger, “The exact impact this kind of campaigning has on customers can be tough to measure, but we do know that the more campaigning we do, the higher our engagement levels are, and we tend to attract more ethically driven customers and staff members.
“At a really high level, we’ve found that if you have staff who care about environmental issues, animal and human rights, they really care about people, which transfers into really good customer service, because staff genuinely care about getting it right for the person in front of them.
“The more that staff feel their work has meaning, the more effort they put in, which makes customers trust them more, which unsurprisingly leads to great sales. We’ve certainly lost customers along the way, who literally tell us to get our politics out of their bathrooms, which is okay, because the value of the customer we do attract is tenfold.
“People don’t want to buy something – they want to belong to something. So businesses have to strive to create communities around themselves that people want to be a part of. Transparent supply chains, any efforts to reduce environmental impact and gentle forms of activism all build up a sense of community and create brand advocates who are far more powerful than traditional advertising and sales techniques.”
So what about the companies that chose not to embrace changing consumer sentiment and buying habits?
Carol Gstalder, Nielsen’s senior VP for reputation and public relations, says large global consumer-goods brands that ignore sustainability increase reputational and business risk. “This may give competitors of all sizes the opportunity to build trust with the predominantly young, socially conscious consumer looking for products that align with their values.”
She believes consumer brands that have not embraced sustainability are at risk on many fronts. “Social responsibility is a critical part of proactive reputation management, and companies with strong reputations outperform others when it comes to attracting top talent, investors, community partners and, importantly, consumers.”
For his part, Bersoff says the natural inclination of many brands, especially those that lack an activist pedigree or market leaders focused on protecting market share, might be to ask themselves “Why rock the boat?”. He says the simple answer is that silence is no longer a conservative, low-risk prerogative.
He says that 47 per cent of consumers in Edelman’s survey say it is impossible for brands to avoid taking a stand on important social issues these days because their customers affected by an issue will demand that they do.
Also, 65 per cent of self-identified belief-driven buyers say they had stopped buying a brand solely because it was silent on a controversial societal or political issue they believed it had an obligation to publicly address.
“That said, brands are not expected to weigh in on every issue,” says Bersoff. “And more importantly, consumers draw a distinction between taking a stand on important societal issues and partisan politics. Brands should not become aligned with political parties or specific candidates.
“Instead, they need to step up and fill the gaps left by other social institutions, including political parties, that have largely failed to make people feel empowered, protected and optimistic.”
Zilla Efrat is a Sydney-based freelance journalist who has been writing on business and finance for almost 30 years.
This article appeared in the latest issue of Inside FMCG. Subscribe today and get our premium print publication delivered to your door.