Fruitful

Creating competitive advantage through sustainability

I just published a post on my business blog outlining the five steps to creating competitive advantage through sustainability. Go take a peek and let me know what you think. 

Proving values-based business is the most fruitful

I was recently interviewed for Gennefer Snowfield's Philanthropy In 5 series at TriplePundit.com on the subject of values-based business and aligning philanthropy with strategy. You can read my responses on my business blog. 

If you own brand reputation, you need to be @ SB09

I'm looking forward to attending Sustainable Brands '09 on May 31 in Monterrey CA. This conference sits at the intersection of brands and ethical business, an area that is essential for marketers but can dominated by CSR departments in many companies. If building a values-based brand reputation is on your to-do list, I hope to see you there. Here's the current attendee list; pretty impressive.

Don't cut CSR spending; reallocate to build your brand

As consumer expectations rise and trust in corporations decline, the need for ethical business practices is greater than ever. Yet in a recession, companies seeking to cut costs will likely postpone important CSR initiatives or cut spending in favor of core business initiatives.

But it doesn’t have to be either-or. Companies that consider social and environmental initiatives as potential innovation platforms and brand builders — not expenses — will come out ahead...

For prioritization frameworks and retail industry example, continue reading on my business blog.

Five strategies for building your ethical brand

There's been a lot of discussion about elevating corporate responsibility to become a strategic driver of your business. Most companies would like to benefit from their ethical efforts in the form of increased customer attraction and loyalty, yet few have figured out how to do it successfully. When marketing and PR are relied on, it can often backfire in accusations of greenwashing. The secret is to apply brand strategy principles to build your ethical reputation.

Continue reading on my business blog.

Strategic CSR in Hospitality

Just wrote a new post on Building the Ethical Reputation: Strategic CSR in Hospitality on my business blog... it includes an Opportunity Audit comparing initiatives for Fairmont Hotels, Marriott and IHG and mapping how well they support the brand strategy. Come visit and contribute your thoughts. 

Top 10 reasons to align business strategy with social impact

As I've been talking with people about Fruitful's mission to advance "conscious capitalism," it's become clear that social impact is often perceived as a nice-to-have rather than a critical component to business strategy. Here are 10 reasons why you may want to help your company rethink that notion.

1. You're looking for profitable growth. According to Ethisphere, the world's most ethical companies have seen a growth rate twice that of the S&P 500. And A.T. Kearney recently reported that sustainable companies are outperforming their rivals during the downturn. 
2. You need to reduce operating costs. For example, Sun Microsystem's new datacenter in Broomfield CO saves over $1,000,000 in electrical costs and reduces Sun's corporate carbon footprint by 6%. Wal-Mart set a goal to reduce packaging in the supply chain by 5 percent by 2013. Reaching that goal would prevent 660,000 tons of carbon dioxide from entering the atmosphere and save the company more than $3.4 billion.
3. Your industry is contributing to social problems. Tobacco and lung cancer, fast food and obesity, oil and war, autos and global warming... it's tough when your entire category carries negative associations. Forward-thinking players in these categories should be thinking about how to disrupt their own businesses before someone else does. Examples include BP's investments in alternative energy, McDonald's healthy menu and the Toyota Prius. There's definitely still room for improvement, but hey, progress is progress.
4. Your brand or business is capable of being part of a social solution. GE was already in the business of solving energy and water issues, so it wasn't a stretch to create the Ecomagination commitment to become a leader in sustainable energy. Nike's brand is all about unleashing potential through sport, which is an umbrella that easily covers social issues like childhood inactivity.  
5. You're lagging behind committed competitors. In today's transparent world, you don't want to show up at the bottom of an industry review on CSR practices. To be on enlightened consumers' consideration sets, you really need to be in the top 2 or 3. Case in point: ClimateCounts pocket guide shows consumers how to "vote with their wallet" by presenting the best and worst companies across a range of industries in supporting climate change. 
6. You''re in danger of (or in the middle of) a PR nightmare. Nike got on the CSR bandwagon after being accused of child labor violations.  Unilever and Starbucks were more proactive, identifying social and environmental challenges in coffee and tea plantations and transforming potential liabilities into triple bottom-line advantage. Lately the financial industry has taken a big trust hit; look for more alignment with and promotion of ethical business practices here.
7. You're looking for differentiation in a highly competitive industry. Whole Foods disrupted the grocery market. Clorox' GreenWorks is a visibly different option in an overwhelming mass of cleaning products. UK retailer Marks & Spencer's Behind the Label initiative strengthened their brand and boosted profits by 28% in one year. One article notes that "by challenging consumers to 'Look behind the label' M&S has increased pressure on its competitors to demonstrate their own efforts."
8. You want a unified, passionate workforce. GE found that its Ecomagination initiative had a positive and unintended side effect; employees became more energized and broke down silo barriers to help contribute to the cause. According to Kellie McElhaney in Just Good Business, "GE's CSR program turned out to be one of the highest-impact internal unification strategies that the company has ever implemented." 
9. You need to boost customer loyalty. It costs more to gain a new customer than keep an existing customer, so loyalty is one of the easier ways to grow revenue. Loyal customers also serve as a volunteer army of word-of-mouth advocates. Goldman Sachs referenced studies that show consumers identify "being socially responsible" as the most likely factor influencing brand loyalty at 35%, compared with lower price (20%), easily available products (20%), product prestige (3%), company shares your values (14%) and quality (6%).
10. It's the right thing to do. You spend most of your life sitting behind a desk; why not make that time worthwhile?

CEOs not seeing CSR as driver of long-term success

In reading PWC's 12th Annual Global CEO Study, I found the chart on "drivers of long-term success" during the downturn to be insightful on how CEOs view corporate social responsibility.

Specifically, while 63% rate brand strength and reputation as critical to success, CSR falls to the bottom of the pack with only 20% perceiving it as critical.

These findings suggest that business leaders are not seeing CSR as a strategic way to strengthen their brand and reputation. Interesting.

As I talk to people about Fruitful's mission to align business strategy with social impact, most people immediately think of philanthropy. Few see social impact as a strategic growth platform integral to the brand and business. I believe that will change given consumers' lack of trust in "business as usual" and the increase of businesses that perceive no conflict between the desires of shareholders and society at large.

GE is a great example of a company that has so tightly aligned CSR with their brand that it's hard to tease the two apart. "Ecomagination is a business initiative to help meet customer demand for more energy-efficient products and to drive reliable growth for GE; growth that delivers for investors long-term."

Eventually, the 80% of business will follow the 20% of leaders like Immelt who value the business-critical role of CSR (or as I've redefined it, corporate social opportunity.) As Immelt once said, We’re not in the business of hobbies. We're in the business of making things that are economically justifiable."

Are you relegating social impact to philanthropy or feel-good programs? Then it's time to shift your thinking about social impact from hobby to win-win competitive advantage. Yes, you may have to cut some pet projects to reallocate CSR resources to better support and align with your brand and business goals. You'll find that it will pay off.

Corporate social opportunity

NYT had a great article a couple days ago called Solving A Social Problem Without Going the Non-Profit Route.

What to call these innovative businesspeople is the subject of some debate. The terms “social entrepreneur” and “social businesses” are generally used to characterize people and businesses that bring entrepreneurship to ventures that have a social mission. Yet there are those who would limit the social entrepreneur label only to those without any profit motive. A separate, but related, category are companies referred to as “socially responsible.” These are generally companies whose core business does not necessarily have a social mission, but who display socially responsible characteristics, like environmental sensitivity.

I'm using the term Corporate Social Opportunity to refer to businesses with a desire to do well by doing good. CSR, or corporate social responsibility, only goes so far... it often refers to what a business should stop doing (stop wasting resources, stop turning a blind eye to unfair labor practices, etc.) but it doesn't truly address the opportunity at the intersection of profit and social good.

The NYT article focuses primarily on start-ups, but plenty of established companies fall squarely in this realm. Whole Foods is a good example, and even Walmart, which is already making an impact in packaging, detergent and consumer electronics industries to be more sustainable.

In the downturn, green companies outperform

A new study by global management consulting firm A.T. Kearney indicates that firms with "true commitment to sustainability" outperform industry peers in the financial markets. The study, called Green Winners: The Performance of Sustainability-Focused Companies During the Financial Crisis, found that in 16 of 18 industries, sustainability-focused companies outperformed their peers by 15% in a six-month period.  The performance differential translated to an average of $650 million in market cap per company.

The big takeaway for me is seeing that the companies prospering now were the companies who embarked on this journey ten years ago, well before it became a media-worthy item. Now these companies have pulled ahead of the pack in terms of competitive advantage and are building momentum.

The report cited as an example a global consumer packaged goods company that "views sustainability as not just a philanthropic endeavor but a fundamental part of its business strategy." It began its sustainability efforts more than 10 years ago and has incorporated sustainability practices in every link of the value chain.

Despite increasing production volume by 76 percent since 1998, and over the same period reduced greenhouse gas emissions by 16 percent, water consumption by 28 percent and energy use by 3 percent, according to the report. In 2007, improvements in energy efficiency led to a $30 million savings. Over a 16-year period, the company saved more than $500 million by optimizing packaging volume.

And it's not just about savings.

IBM has generated $500 million in new contract signings in 2 quarters from their Big Green initiative. Clorox is projecting $40 million in first-year sales from its GreenWorks line.General Electric vowed to improve the energy efficiency of its operations by 4% a year and double its revenues from relatively clean products to $20 billion by 2010.

This is a trend that is not going away. If your business hasn't committed to baking in sustainability (and/or a social-good outcome that's more directly related to your business) into your business strategy, the mounting data on both consumer expectations and competitive advantage suggest that you will be left behind.

do the right thing

I just received a pointer to www.dotherightthing.com, a community-driven site that collects news stories about companies and assigns a social-good rating based on the collective news-story ratings by readers. Check it out and see how your company rates.

Virgin's socially good businesses

Virgin offers a great case study of a company that's seeking ways to align inputs and outputs with social good to create both competitive and societal advantage. They're making an active effort to not only run more sustainable businesses, but also to integrate social good into the customer experience and raise awareness and social engagement among their customers.

Inputs (behind-the-scenes business operations)

• Virgin Atlantic's sustainability manifesto outlines 29 steps to making their business as sustainable as possible.

Outputs (customer-facing products, services and touchpoints):

• Virgin HealthMiles is a first-of-a-kind health incentives program that empowers Americans to take greater control of their health and fitness. In a pilot deployment in 2006, 40% of members who had previously been categorized as inactive moved up to the active category. Additionally, 21% of members saw a reduction in hypertension over a period of six months.

Inputs as Outputs (turning sustainability into competitive advantage)

• Virgin Trains is actively marketed as the more sustainable travel option compared to cars and planes. They also launched Europe's first 20% biodiesel train.

They're also leveraging the power of community, actively engaging customers in socially good actions like:

• VirginUnite, Virgin's non-for-profit entrepreneurial foundation. In addition to being a social entrepreneur incubator and a consultancy to Virgin businesses to be a force for social good, it's also a facilitator to help everyday people start their own fundraisers.
• Virgin Mobile's RE*Generation, a pro-social initiative to build awareness about the issues surrounding at-risk youth and teen homelessness. Musicians donate ringtone royalties on selected tracks, and Virgin Mobile donates 100% of net profits from the same selected tracks. Virgin Mobile customers can also contribute to The RE*Generation by sending a text message to deduct $1 from their balance as a contribution or making a cash donation via credit card at VirginUnite. Their blank2clothe initiative, in partnership with American Eagle Outfitters, donates clothing to homeless youth for every 5 videos that customers upload. 

I'm compiling a list of companies who have baked social good into their brands, and will be writing about them on this blog. If you have other examples (Whole Foods, Ethos water, Timberland, Zipcar come to mind) I'd love to hear about them.

Does being ethical pay?

I just ran across an article in WSJ that answered the question,"How much are consumers are willing to pay for ethically produced goods?" These statistics are only among coffee drinkers (cotton t-shirt buyers had a much narrower range of price elasticity) but it's a good data point that the "conscious consumer" is no longer a niche market segment.

A recent study called Rethinking Corporate Responsibility by Fleishman-Hillard and the National Consumers League gives even more evidence. 52% of consumers seek out the CSR record of specific companies, and 82% say that social responsibility is influential in purchase decisions.

I think most companies understand this and are making efforts to improve their business practices. Some are leading the way and others are lagging, but for the most part I'm optimistic that progress is being made.

What about you... optimistic or pessimistic about businesses' abilities to meet both shareholder and consumer expectations?

Innovation that profits everyone

(Via JustMeans) Sun Microsystems recently completed the largest data center consolidation project in the company's history. It will save 11,000 metric tons of annual carbon dioxide emissions, and save the company more than $1 million in electricity costs. It will reduce Sun's carbon footprint in the US by six percent. But they're not stopping there.

Following this major announcement, Sun has also launched new data center efficiency services to help customers retrofit and build more efficient data centers as part of its data center Strategy, Design and Build-Out Services based on the same data center design methodologies and best practices Sun used in building its own data centers.

This is a great example of a company aligning its core capabilities with a social-good initiative to achieve triple-bottom line results.

Launching my new company

After almost two years at Prophet, I am reconnecting with my entrepreneurial spirit to start up a new social-good consulting firm called Fruitful. The focus is on aligning business strategy with social good to achieve triple-bottom-line results. I'm really excited about it... I've been wanting to use my skills to help make the world a better place and I think this will be a great vehicle through which to do so.

I'm a "glass is half full" kind of person, and I believe this is the perfect time to start a business like this. Here's why:

• Change equals opportunity. We're seeing a convergence of market forces that indicate that the era of “business as usual” is coming to an end (more on this in my next post.) Game-changing opportunities are being created for businesses to be powerful and profitable catalysts for good. Yet the recession is causing wide-spread, knee-jerk reactions to cut or eliminate spending. Businesses will either be seen as a leader or a me-too in their respective categories when times improve.
• Perception is reality. There’s a lot of skepticism towards companies jumping on the social-good bandwagon. Accusations of greenwashing abound. Socially good business is not about PR programs or legal checklists. The only way to succeed is by embedding social good initiatives throughout your entire organization in a way that supports and extends your brand and business strategy. It’s about walking your talk.
• There's a smart way to prune. Many larger businesses have numerous philanthropic efforts that don’t align with their brands or support their business strategies. This is a good time to eliminate scattershot programs in favor of a strategic, focused approach that can effect greater change and drive future growth. And hey, maybe even be profitable. 

I'll be writing a lot more about socially good business here on this blog until I get my new website (with an integrated blog) up and running. So stay tuned...