Brands: Being Better and the Bottom Line
Most brands these days are keen to highlight the good work they do locally or around the world. But very few companies are likely, or even able, to do anything that positively affects the bottom line. So, how can doing public good align with doing business good? Sarah Morgan reports.
For some companies, “doing good”—whether in the community or the world at large—is baked into their DNA. Sometimes the need to do public good stems from a company’s founding principles or even marks the entire reason the company exists. But others, founded as businesses to (ultimately) make money, must consciously work at integrating corporate social responsibility (CSR) into their structure.
Tata Group (India), a multinational conglomerate operating in more than 100 countries in a vast array of sectors, including automotive, communications, and energy, is a prime example of the first type.
Founded by philanthropist Jamshetji Tata in 1868, Tata was built on five core values: integrity, understanding, excellence, unity, and responsibility. More than 150 years later, the company continues to incorporate those values and the voluntarism that has been in place since the company’s inception.
In 2019 alone, Tata’s CSR initiatives positively impacted the lives of more than 11 million people worldwide, with an expenditure of more than US $157 million (INR 1,095 crore). Also, Tata employees clock more than one million volunteering hours annually, with more than 40 percent done through the company’s group volunteering program, Tata Engage.
Going beyond CSR, Tata Group adopted a structured approach and framework to drive sustainability, encompassing environmental, social, and governance (ESG) aspects. Founded in 2014, the Tata Sustainability Group works with Tata companies to embed sustainability in their business practices to achieve global sustainability leadership.
That Tata Group is based in India has additional significance. In 2014, India became the first country in the world to integrate corporate giving into law, requiring businesses with annual revenues of more than US $131 million (10 billion rupees) to contribute two percent of their net profit to charity.
Manjula Sriram, deputy general manager, Sustainability and Communications, at Tata Sustainability Group (India), said that even before India’s regulation on philanthropy, Tata Group companies were already deeply invested in community building, in many cases spending more than the now-mandated requirement.
“At the same time, there was cognizance within the group that while it is necessary to plough profits back into the community, it is also imperative to examine how the profits are made in the first place,” she said. “What are the environmental and social impacts of our operations and what are we doing to minimize harm and create value for all stakeholders over the long term?” Meanwhile, across the world, sits another company that’s more than a century old: H-D U.S.A., LLC (US), the owner of the HARLEY-DAVIDSON motorcycle brand.
While the brand may not have been founded by a philanthropist, but rather by four biking-obsessed men in 1903, the company is committed to its CSR aims.
In late 2020, Harley-Davidson formed the Inclusive Stakeholder Management (ISM) team, a new department focused on sustainability from an environmental perspective, as well as diversity, inclusion, and profit.
“When people are spending their dollars, they want to know where brands stand because their money is furthering that brand and furthering the planet.”
Adraea Brown, H-D U.S.A., LLC (US)
“We have a responsibility to do our part in the world. If you think about the sustainability aspect, we build motorcycles and that uses a lot of natural resources. While our newer products use less of those materials and we are venturing into the electric space, we need to consider our environmental impact,” said Adraea Brown, assistant general counsel at H-D U.S.A., LLC (US).
Currently, the company is developing a path to net zero environmental impact and has created a dedicated division focused exclusively on leading the future of electric motorcycles.
On the people front, Ms. Brown admits that while Harley-Davidson may not widely publicize its efforts, the company is trying to make an impact both internally and externally.
“The ISM team has certainly helped to bring more focus. While our diversity and inclusion drive was present before the ISM team, it’s now become incredibly important and we are showing how inclusive we currently are -—and are striving to be,” she said. According to Ms. Brown, efforts intensified following the historic protests surrounding the killing of George Floyd, a Black man, in the U.S. in May 2020.
She added: “We are not perfect; we certainly have a lot of work to do, but we are trying to put in the work and effort. We’re always thinking what can we be doing better?”
The motorcycle company has been based in the same spot in Milwaukee, Wisconsin (US), since it was founded, and, consequently, many of its CSR initiatives are close to home. Through the Harley-Davidson Foundation, formed in 1993, the company has been supporting a local farm which produces crops for free distribution to food pantries, and it is part of the Near West Side Partners, a group of local companies focused on making the area a great place to live, work, play, and stay.
“These are maybe not the things that many people think of when talking about CSR. but we’re working within our local community and thinking about where we can have the biggest impact,” noted Ms. Brown.
A slightly younger company and one based in Switzerland that has engaged in numerous CSR activities since its inception is Fenix
Outdoor International AG. It specializes in outdoor equipment and owns multiple brands, including Fjällräven (perhaps most widely known for its colorful backpacks).
Aiko Bode, chief sustainability officer at Fenix Outdoor (Germany), explained that the strong wish of the founding family of Fjällräven was that it be a leader in sustainability and CSR. “It has been always a mix of philanthropic and ‘good neighborhood or citizenship’ work as well as ‘homework’ in all our operations,” he said.
Fenix Outdoor’s activities include supporting local community sports, cleaning nature reserves or beaches, and installing beehives on the roof tops of its city stores.
“A key benefit of engaging in CSR is the enhancement to brand value.”
Marc Lieberstein, Kilpatrick Townsend & Stockton LLP (US)
Increasingly though, the company is shifting toward international endeavors with global visibility, such as its annual Fjällräven Classic, a several-day hike through multiple countries. And its Fjällräven Arctic Fox Initiative supports the research on the Fjällräven brand’s iconic animal, as well as activities worldwide that help protect nature.
“Beyond that, and this is where we think CSR goes much further, we have incorporated sustainability thinking into our business models—from protecting nature and reducing our own environmental footprint to engaging with our supply chain partners and the societies they operate in to activating our own employees to spend time to simply do some good,” Mr. Bode said.
Purpose and Profit
While the efforts undertaken by Tata, Harley-Davidson, and Fenix Outdoor are noble, the initiatives are also doing “business good.” In the current climate, CSR initiatives and an ESG focus are helping to build brand recognition and maintain reputation. Harley-Davidson ranked as the fifth most reputable brand in the world, according to the 2021 Global RepTrak 100 by the Reputation Institute (US). Tata, meanwhile, is India’s most valuable brand, with a brand value of US $23.9 billion, according to Global 500 2022, a report by Brand Finance (UK). And, this year, Fjällräven was named by Swedish consumers as the country’s most sustainable brand in the clothes and fashion brands industry, according to the Sustainable Brand Index 2022.’
“A key benefit of engaging in CSR is the enhancement to brand value,” said Marc Lieberstein, partner at Kilpatrick Townsend & Stockton LLP (US).
By engaging in CSR, “you have this ability to expand your brand’s awareness to demographics that you’ve never targeted before,” he opined. “Millennial and Gen Z consumers want the brands they buy from to meaningfully engage and commit to CSR. If not, they’re not going to buy from that brand.”
INTA’s 2019 attitudinal study, Gen Z Insights: Brands and Counterfeit Products, puts this in perspective: 85 percent of Gen Zers believe that brands should aim to do good in the world.
For those companies with strong CSR initiatives, the benefits are many. According to the 2020 Zeno Strength of Purpose Study, which involved evaluating 75 brands and surveying more than 8,000 consumers over the age of 18 and across eight markets, consumers are four to six times more likely to “buy from, trust, champion, and defend companies with a strong purpose over those with a weaker one.”
As Ms. Brown put it: “In this age of technology, consumers always know what’s going on. Your values must be aligned. When people are spending their dollars, they want to know where brands stand because their money is furthering the brand and furthering the planet.”
“It’s vital to develop a strong communication plan around your sustainability agenda—not only for your employees, but for other stakeholders too.”
Manjula Sriram, Tata Sustainability Group (India)
Citing The Global Sustainability Study 2021 by Simon-Kucher & Partners (UK), Heidi Schoeneck, co-founder and chief creative officer of Grounded World (US), a boutique marketing agency and certified B Corporation, noted that on average, more than one third of the population aged 18 and over is willing to pay more for sustainable products or services, and those willing to pay more would accept a 25 percent premium on average.
“This supports why purposeful brands tend to significantly outperform those that are not—by 175 percent,” she said, declaring, “The good news is doing good is also good for business.”
Both Mr. Lieberstein and Ms. Schoeneck believe that working with nonprofits is crucial. In Ms. Schoeneck’s view, brands need to look at how nonprofits can be the “fulfilment engine for their brand purpose.”
In agreement, Mr. Lieberstein added: “When brands engage in these kinds of public good, it raises the profile of both the brand and the nonprofit. For the brand, it is more than likely to increase sales and goodwill. The marketplace goodwill that comes from doing public good is almost immeasurable.”
Lessons Learned
However, engaging in CSR is not always smooth sailing. A company’s lack of both conviction and preparation can cause the CSR ship to sink—quickly.
“With 88 percent of consumers wanting brands to help them live a more sustainable lifestyle, it is imperative that the brands intrinsically connect themselves to the cause and not just write a check at the end of the year. Otherwise, they run the risk of their efforts being seen as inauthentic,” warned Ms. Schoeneck.
Ms. Brown agreed that CSR can be a double-edged sword.
“When brands are doing public good, people can begin to understand what your brand is and what it stands for. Positive interactions as a brand can be great for telling your brand story. It can also lead to bottom-line dollars to put back into the company and then into public good,” Ms. Brown said.
”However,” she continued, “CSR can be detrimental when it is done to be performative and is something that the brand isn’t truly living. Staying true to oneself and just doing that work, along with showing it publicly, can be a very good thing.”
Added Mr. Bode: “CSR and sustainability are not for the marketing department. They are intended to form part of the strategic corporate agenda and business development, and they need to address the material issues a company faces and the needs of the communities or neighborhoods one is operating in.”
To ward off potential problems, it is also critical to have a clear understanding of a company’s inner workings and anticipate changes down the line.
As an example, Mr. Lieberstein cited companies that change their manufacturing and supply chain procedures, and suddenly represent that their supply chain does not include anyone who employs slave labor.
“It is imperative that the brands intrinsically connect themselves to the cause and not just write a check at the end of the year. Otherwise, they run the risk of their efforts being seen as inauthentic.”
Heidi Schoeneck, Grounded World (US)
“Now, you have got to make sure, up and down your supply chain, right down to the person farming the fields, that they are not using slave labor. You need to audit your partners who are helping you do your CSR and make sure they’re owning up to what you’ve represented to the world. You need to make sure you have systems in place to carry out all of that,” he cautioned.
On change anticipation, Mr. Lieberstein cited the example of a clothing company distributing unwanted branded clothing into a poor community. While the move may be good for the planet, as the clothing will not be put in landfill, it may not be good for the local people in the community who are making and selling clothes. Suddenly, the market for their local offerings has shrunk. “Sometimes there’s a failure to anticipate the ramifications of what a brand may do in the actual communities where they’re trying to ‘do good,’” he said. “A lot of thought needs to go into the impact of ‘doing good,’ two or three steps down the road, before you start moving down that road.”
The Why and The Way
While there may be missteps to avoid, companies can also follow the steps on a path well-traveled by CSR leaders. Ms. Sriram lauded a three-pronged approach: focus on material ESG issues, set clear metrics and goals for these issues, and have a comprehensive sustainability communication plan in place.
“There are around 40 to 45 ESG issues out there to pick and choose from, but that’s not really a business approach. When you are developing a sustainability agenda, you need to understand the materiality. Out of the plethora of ESG issues that require action, decide which ones have a direct impact on the business of the company and where the company can have a very strong impact,” she said.
Ms. Sriram recommended that brands develop clear goals and embed them in the key performance indicators of the employees for implementing them.
Further, she said “It is vital to develop a strong communication plan around your sustainability agenda—not only for your employees, but for other stakeholders too. How will you integrate your ESG purpose into your brand? Which framework will you adopt to disclose your ESG performance? How will you build awareness and capability on ESG across the multiple levels in your organization?”
But, going back to basics, Ms. Brown concluded: “Make sure that everything is rooted in your company’s ethos. Once the company is clear on that, you can then start to build a program around it. There’s no rea-son to do anything simply to do it, or because it sounds good—it won’t last and it’s not doing anybody any favors. Ensure that what you are doing is genuine and true to the company.”
Video courtesy of Envato Elements / lufi_morgan
Monday, May 2, 2022
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