The world’s largest corporations are all over the theme of sustainability these days. Business as usual is no longer sufficient. Profits must come with principles.
Companies are increasingly convinced that it’s in their vested interest to take care of the environment and invest in society – and through its Best Global Green Brands report, brand-management specialists Interbrand profiles the real and perceived sustainability credentials of some of the world’s biggest corporations.
The Earth’s resources are not infinite. Profligacy today very likely means scarcity tomorrow. Take Coca-Cola, for example, which came 19th on the Best Global Green Brands list this year. The global drinks brand is looking to double in size by 2020. Yet 40% of the markets in which it operates suffer water scarcity. If you have no water, you have no Coke. Coke zero.
A sustainable approach to business has other persuasive arguments to commend it. The savings generated from cutting waste and reducing expensive inputs – such as energy and raw materials, for example – show up directly on the bottom line. Employees, meanwhile, want to work for companies they believe in. Investors, too, are beginning to treat a company’s good sustainability record as a proxy for good management more generally.
Brands should be all over sustainability
Survey after survey shows that consumers care about the planet and they expect their favourite brands to care as well. Yet brand managers are strangely ambivalent about the whole thing. “Eco” doesn’t sell, they say.
But are the big brands missing a trick? Could a reputation for sustainability be an asset that brand managers ought to be capitalising on? If so, how do you go about building a sustainable brand? These questions and others were the subject of a recent seminar hosted by the Guardian in association with Interbrand. The debate, the Value of Sustainability to Brands, heard from Interbrand’s global chief executive Jez Frampton, Guy Battle, partner at Deloitte; and Jake Backus, customer sustainability director with Coca-Cola Europe.
Framing the discussion was Interbrand’s 2013 Best Global Green Brands report, which investigates the environmental performance of the world’s largest brands and compares this with consumer’s perceptions of their green credentials. Performance and perception are each given a score: the higher these are, and the smaller the difference between them, the better the brand’s rank.
Now in its third year, the list is topped by three car companies: Toyota, Ford and Honda. Nissan and VW also make it into the top 10. The electronics industry fares well, too, with brands such as Panasonic, Dell and HP among the best-ranked brands.
The study is designed to show the gap between performance and perception, explained Interbrand’s Frampton. The ideal is parity. If a brand’s real sustainability performance is higher than its perceived performance, it’s missing a trick. “You have an opportunity to communicate with your market to try and bring yourself up to the level that you’re actually performing at,” he said.
Panasonic provides a case in point. Under president Kazuhiro Tsuga, the Japanese electronic giant is setting the mark for green innovation in its sector. In November last year, for example, Panasonic unveiled a range of Eco Navi products, complete with China’s highest level of environmental product certification. It has yet to win the hearts and minds of consumers, though. That means lower customer loyalty, less market penetration and, ultimately, fewer sales.
Meanwhile, if the pendulum swings the other way and a brand’s perception outstrips its performance, trouble beckons. “If you have a negative gap, people think you are better than you really are,” noted Frampton. In our social-media age, it doesn’t require a brand expert to point out that such imbalances often end in tears.
A negative gap can be caused by one of two main factors. First and most obvious is green washing. Consumers have wised up since the early, unregulated days of eco-labelling, but attempts to fob off products as greener than they really are still happens. The second factor is the so-called ‘halo effect’. The automotive sector presents a good example. While the leading players have certainly been busy increasing fuel efficiency and the like, their promotion of electric vehicles – still a tiny proportion of their product portfolios – disproportionately influences consumer opinion.
What are the issues in play?
The survey results generated a number of immediate issues. For starters, Deloitte’s Battle admitted the performance results are based on environmental criteria alone. Social issues would maybe follow in the future, he said. Given the dominance of fuel-burning car manufacturers in the ranking, WWF’s Nicky Day pushed him on how “transformational” the top green brands really are. The study picks out the best in class, he responded, while conceding that the class as a whole might have work to do.
That led to a discussion on “incrementalism”. Even the greenest brands are edging forward at a snail’s pace, Battle said. The performance scores of the top brands inched up a mere 3.2% on last year. “It’s kind of pathetic”, he confessed, suggesting that their slow progress reflected the “deep-rooted inertia and systemic problems” endemic to many large corporations.
However, little doubt remains as to the benefits that brands could accrue if they were to fully embrace sustainability. Coca-Cola’s Backus cited internal research that shows consumers who know about his company’s sustainability strategy “will, over time, spend more and be more loyal” than those who don’t know. “Of all of the levers that we have to build trust, environment turns out to be one of the best,” he added.