By: David Aaker
Marketing News, Nonprofit
It’s not enough to have a value statement, brands must advance a cause that will resonate with employees, customers and investors Milton Friedman famously said that the “social responsibility of business is to increase profits.” To many observers that is the accepted paradigm.
With few exceptions, most businesses throughout the world take a different view. Just look at the missions and value statements in annual reports. In most cases, firms have a social or environmental purpose alongside their mission of creating and marketing a functional offering and increasing sales and profits.
Walmart, for example, has an offering-driven purpose to “Save people money so they can live better.” The firm also has a second purpose: “to use Walmart’s strengths to support and improve the social and environmental systems to increase economic opportunity, enhance sustainability and strengthen local communities.” Toward that end, Walmart has dozens of programs that aim to make its operation run on renewable energy, influence suppliers to make products and packaging more sustainable and encourage 2.6 million associates to directly help communities.
Why have higher-purpose objectives and programs gotten so much traction? There are five reasons.
1. Employees need a higher purpose.
They need a reason to come to work besides increasing sales and profits and getting a paycheck. They want to respect and admire their firm and have meaning in their lives. A higher purpose can address these needs and represent an energizing common goal that leads to more productive and committed employees.
Many millennials, in particular, are looking for meaning in their working world as well as their personal life. They are interested in working for an organization that will leave society and the environment better off because of its policies and programs. It is not hard to imagine that by 2020, when millennials become 51% of the workforce, a higher purpose will become an even greater imperative.
2. Customers want to have a relationship with brands that share the values reflected in an organizational higher purpose.
Even if that group is relatively small, it can still mean the difference between struggling and financial success. In addition, a small committed group can have an effect well beyond its numbers by reaching out to others to tell the organizational story and reaffirm the value proposition. Further, those customers who voice support for a brand’s higher purpose but do not change their short-term buying choices may still be influenced in the long run, especially when new products are introduced or the brand runs into a negative public relations issue.
A higher purpose is increasingly important to customers because it can provide self-expressive benefits. Sharing a higher purpose with a brand or organization is a way to affirm a person’s values and passions. Driving a Prius, with its unique design, affirms a desire to combat global warming. Avoiding brands or organizations seen as contrary to a personal self-image is part of the same motivation. Being connected with exploitive off-shore manufacturing is often a brand issue to a meaningful segment.
The challenge is to get credit for social or environmental programs. That involves having meaningful programs that connect and inspire but also getting communication breakthroughs that make the programs come alive for the target segment. This is not easy because of the tendency to view such programs as self-serving, without substance and with claims too similar to other firms.
3. There can be a tangible positive effect on profits from a higher-purpose program.
One profit kick can come from energy savings. Walmart decided to undertake its ambitious environmental program around 2005, which affected the stores, products carried and logistics. One early finding was a surprise: the “do-gooder” energy programs actually saved money.
Expanding markets present another opportunity. Unilever points out that increasing the health and economic status from developing nations creates meaningful markets for their products.
Businesses have enormous advantages over government-led solutions with insights in local conditions, assets and their ability to manage programs and implement quickly.
Social and environmental programs can create energy and visibility not otherwise achievable to brands. Consider the Always #LikeAGirl video where the image of running or throwing like a girl was shown to be very unlike the self-image of 11-year-old girls. The video, designed to help the self-esteem of those making the transition into womanhood, got more than 80 million views. No product advertising campaign could do that.
Higher-purpose programs can reduce the risk of catastrophic damage to the environmental, social and economic framework in which we live. Objectively, such an achievement should be a plus for long-term business profitability.
4. The stock market rewards social and environmental programs.
According to the Global Sustainability Investment Alliance’s 2016 review, $8.7 trillion was invested in the U.S. at the beginning of 2016 with sustainability and social impact criteria involved, up 33% from only two years prior. That number represents 22% of all investment assets in professional management in the U.S. It is not clear whether there is a need to turn against the stock market to have a social or environmental higher purpose.
5. Social and environmental programs are right from a moral and ethical perspective.
Salesforce’s Marc Benioff says, “All businesses can and should help make the world a better place.” Unilever’s CEO Paul Polman notes that, because of the limits of capitalism, we have partly created an unsustainable set of problems, which include global warming, resource depletion and an increasing gap between the rich and poor. The Unilever business model calls on the firm to be an active contributor in finding solutions and makes the needs of citizens and communities carry the same weight as the demands of shareholders.
The ethical rationale usually comes from getting close to problems. If you see devastation caused by global warming, children dying or receiving inadequate education, and your firm can do something about it within your business model, why would you not act?
In the face of this logic and firm behavior, we saw the specter of Brazilian private equity group 3G Capital, which owns Kraft Heinz—whose strategy was summarized by Fortune as “buy, squeeze, repeat”—rebuffed in its effort to buy Unilever.
Unilever is a shining light with its embrace of a social and environmental purpose for all its brands. Its vision was launched in 2010 under the umbrella USLP (Unilever Sustainable Living Plan). The firm has specific environmental goals, such as cutting its environmental footprint in half, getting people access to safe water, increasing the use of renewable energy and stopping all hazardous waste going to landfills. Social programs abound at Unilever. Consider the Dove programs to raise the self-esteem of girls and women and Lifebuoy’s program to get 1 billion people to change their hand-washing habits to reduce infant deaths throughout the world, which they are half way toward realizing.
What would 3G’s strategy do to Unilever?