So, Sustainable Futures 09 - our commitment to helping companies move towards a more engaging version of CR - is in full swing.
And this week, we were presenting some of the findings at the World Retail Congress, in Barcelona.
From our research, retailers are in pretty good shape when it comes to consumer perception around sustainability, and how this perception is impacting on brand value. But the real joined-up approach is still missing. As mentioned in my speech, sustainability is a tricky fellow to get fully embedded within the business in a coherent and consistent way, for a very obvious reason. Sustainability, because of its broad applicability, is inherently ‘horizontal’. But most things business - capital, power, knowledge - flow vertically (and in silos). This structure helps keep firewalls, politics and uncertainty rampant and often helps senior levels of management keep the troubles from their doors. Ironically, this obsession with the vertical is stopping many businesses making the most of sustainability: a level of activity that is holistic, consistent and transversal, showing consumers it’s real and here to stay.
To try and get this across, I mentioned that maybe we should look at sustainability as the new IT. IT was once annexed to the basement, full of terrifying jargon and staffed by people you’d think twice before putting in front of a client or customer. Now think about who looks after your efforts in sustainability. Any similarities? IT’s truly blossomed and become a key C-suite driver - because it stopped being about the jargon and became about the benefits it could deliver: new markets, new consumers, new business models. Tackled in the right way, sustainability could be the same. Which should be good news for retailers, as they truly led the charge on recognising what IT could do when embedded intelligently across the whole organisation.
I have copied the speech I made to the conference below, which also includes some headline figures from our research. There’s also a photo from the panel, although by the looks of it, whilst Lucy Neville-Rolfe from Tesco, David Shriver from Carrefour, Andrew Jennings from Woolworth SA and Sean Ford from Oracle continued to debate the merits of sustainability for retailers, I suddenly remembered I’d left the iron on in my hotel room…
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World Retail Congress, May 6th.
Opening Session, with Oracle.
The title of this session is Making Sustainability Good Business. We at Havas Media are committed to this objective, which is why we have spent the last 18 months working on our research-backed Sustainable Futures project. In a nutshell, Sustainable Futures is about helping forward-thinking companies lead and benefit from sustainability, by understanding how they can ensure sustainability efforts convert into durable, sustainable brand value.
We have no doubt - like probably many of you here - that the sustainability debate has moved front and centre for most organisations. We’ve seen catastrophic failure in some sectors that confirms the destructive effects of unsustainable business practices. Ever the optimists, we’d say that the banking crisis has had one major positive effect - it has made painfully apparent that the habit to externalise of costs, the inability to distinguish between risk and uncertainty, and the engrained reluctance to think longer-term, does not, ultimately, make good business sense.
As such, when we talk about sustainability we are talking essentially about a firm’s ability to survive and thrive in the future. Of course, this ability to thrive is dependent on recognising the full gamut of financial, social and environmental influences and impacts of the firm. And it is key to stress, that we see sustainability not as something that can be annexed to a specific department or to a particular product. It needs to be seen as something more fundamental - elemental to the business. And this is not easy. Due to its applicability to all functions and processes, sustainability is inherently horizontal in nature. But business - based functional specialisms, power and capital, inherently flow vertically. So to make sustainability fundamental to the business requires challenges many status quos. But this process of embedding a strategic imperative across the organisation has happened before.
For sustainability to make good business, there’s a strong argument that we need to view it as the new IT. Once a niche, tech-heavy function annexed to the basement and populated with jargon and people you’d think twice about putting in front of your customers, IT is now a universal horizontal business driver and represented at the highest levels of the business. It is focused on what it enables, facilitating better, deeper and more timely products and services, and is instrumental in all the benefits these developments deliver.
Approached in the right way, and with the right mindset, sustainability has the potential to do the same - we believe sustainability - with a number of caveats attached - can be good business. And we’re pretty certain consumers think the same.
If we agree there are three distinct stakeholders in this equation, this sustainability troika - government, business and the consumer/civil society - then we believe the latter - the consumer/civil society absolutely has the power to transform economies and markets into more sustainable processes.
Consumers - as a part of civil society - represent the most compelling long-term business case for becoming a sustainable business.
The assumption there of course, is that consumers care about this. But do they? Especially at the moment, in the midst of financial uncertainty and what most agree is a very different, more fundamental recession?
Working with GlobeScan, we spoke to more than 22,000 consumers, across 10 markets during December 08 and January 09 - so our timing - by luck rather than judgement - was perfect to answer this question.
And the answer these consumers gave us is very clear. Consumers are still extremely concerned about a host of issues that are attributable to unsustainable practices. More than one consumer in three is ‘extremely concerned’ about environmental pollution, water shortages, poverty and inequality, the depletion of natural resources, and of course climate change.
Despite the current financial mayhem and the subsequent personal impacts, consumers are not losing sight of these longer-term issues. Rather than dismissing sustainability in the face of economic uncertainty, it appears consumers are recognising that much of this uncertainty has been caused by a lack of sustainability.
Consumers are extremely familiar with the term sustainability: nearly 90% of consumers recognise the term and can offer a definition that stretches beyond the environmental issues today.
Beyond familiarity with the term, consumers are also embracing sustainability. Significant majorities see sustainability as positive: for more than 70% of consumers, it represents the future, balance, integrity, health and opportunity.
But where does business fit in?
Well, right in the middle, is the answer consumers give us.
When asked if business should be active in finding solutions to the environmental and social challenges facing us all, 80% agreed unreservedly.
A similar proportion respects companies that are being socially and environmentally responsible. And nearly 2/3rds of consumers believe they can actually change the behaviour of your company to be more responsible. It cannot be said that sustainability remains a fringe interest for an ethically-minded minority of consumers.
This represents a colossal opportunity for business, the spoils of which are clear. Even in this environment, 48% claim to be ready to pay a premium for goods and services they consider to be responsibly produced.
But there is an authenticity caveat here. Two-thirds strongly believes any activity is purely an image-led initiative. So maybe here we are catching a glimpse as to why the ‘green premium’ argument is still so unproven: it is not a case of consumers being fickle, but rather businesses being inconsistent and insincere.
Consumers are becoming increasingly active around what they perceive to be responsible business. More than two thirds will go out and find out more about you company; a similar number tell us they frequently punish companies that they consider to be irresponsible. 80% tell us they frequently reward those they consider to be responsible.
So consumers now reward more than they punish. We believe the importance of this shift cannot be underestimated. Because if consumers are now looking to endorse more than to boycott, companies can enter into a radically different dialogue with their consumers - dialogue that moves away from the defensive and risk-oriented, towards the optimistic and engaging. We could also see this new dialogue initiated by completely different companies - if it is now becoming far more about responsibility rather than culpability, any forward-thinking business can engage.
But finding the consumer with whom you are going to open up this dialogue, is not easy. Not because there are so few of them - we have already seen high levels of engagement - but because their beliefs and expectations are so diverse, and not in any way divisible by traditional demographics.
Sustainable Futures 09 has discovered 5 types of consumer in this current climate. Critics, Devotees, Hostages, Sceptics and the Disengaged. Without going into too much detail, these consumer types have been defined by their activity around sustainability and their enthusiasm around sustainability. By enthusiasm, we mean a willingness to learn more and engage further. I’d like to mention a few words about three of these groups as I think they are very important to retailers.
Devotees, as the name suggests, are already on board. They predominantly believe what you tell them and look to reward you for those efforts. They are active and enthusiastic. Devotees are slightly more visible amongst female, higher educated consumers. Devotees also represent more than one consumer in five.
The same proportion of consumers - just over 20% - are Disengaged. This group shows low levels of enthusiasm - so no desire to learn more or engage further with the debate. But they are very active - very prone to reward or punish. So there’s one consumer in five actively factoring in beliefs about environmental and social issues around your brand, but with almost zero interest in actually learning about those issues. The Disengaged are more visible amongst younger consumers. Disengaged consumers are also the largest segment in the US.
In between these groups, are what we call Hostages. Consumers who feel trapped by the issues and unable to act. Extremely concerned, but unsure what they can do, Hostages are extremely active in terms of factoring these issues into their purchase decisions, but again, are unable to move forward and build coherent arguments upon which to base those decisions, due to confusion and fear.
In other words, only one in five consumers actively engaged in this issue are refining their knowledge and understanding. Twice as many consumers are similarly active, yet unable or unwilling to engage further. Again, the role of business to educate and engage consumers - to unleash that latent sustainability - is clear - as are the rewards for doing so.
The good news is that consumers perceive the retail sector to be working relatively hard in this area. When looking at impact and effort to reduce impact - across both the social and environmental spheres, retailers are perceived to be low impact and high effort. In fact, in many markets, the only sector considered to be working harder to ameliorate their impact on society and the environment, is the food sector.
I should mention that some of the retailers we explored include: Walmart, Tesco, Asda, Carrefour, Kmart, Marks & Spencer, Auchan, Intermarché and here in Spain, El Corte Ingles.
Understanding what consumers think about a sector - or indeed a brand - is only half the story. We also wanted to understand how sustainability - or rather a perception of a performance around sustainability - impacts on the brand value for the company. As consumers become more and more aware of the issues relating to the sustainability debate - as consumers move towards being Devotees, we believe it will be those companies that not only excel in sustainable practices, but excel in embedding sustainable practices as part of their brand promise, that will thrive in a sustainable future.
This has also allowed us to create what we call the Sustainable Futures Quotient. We believe this metric is pretty important, since it captures not only performance, but contribution to brand value. So a high SFQ represents a strong positioning to take advantage of this mass-transition and make sustainability good business.
Of the 60-or so brands within the project, a food company currently has the highest SFQ at the all-market level - Walmart has the 5th highest SFQ. Here in Spain, El Corte Ingles has the 3rd highest. In the UK, the first 3 positions in the 20 brands analysed for SFQs are all retailers - M&S, Tesco and Asda.
So it seems many retailers already see sustainability as a route to good business.
As we would expect to see, a number of sustainability attributes that we assign to the marketplace - so responsible marketing, fair prices, the sale of healthy products and good customer service - are found to be very important to retailer brands. And in most cases, the performance is perceived to be strong. In other words, those parts of the sustainability debate are important to consumers, their perception is of good performance, and there is a positive impact on brand value.
However, looking at a collection of attributes that represent the environment, we see weaker performances. Despite significant efforts from certain retailers to lead on sustainable store design, operations and suppliers, for example, these and many others are not registering with consumers - and are damaging brand value. Remember, this is consumer perception, so there is either an issue with actual performance, or education and awareness.
We also see perceived ‘failures’ in the workplace - employee pay, career opportunities - not just for direct employees, but also those of their suppliers. So the boundaries of influence for the retailers is clearly being challenged by consumers.
So despite being at the front of the pack in terms of the 8 sectors we looked at, there is still a lot to do - and a lot of opportunity being wasted.
Already regarded as proactive in this area, the willingness from consumers to endorse and reward, should act as a colossal incentive for you to continue to move forward and differentiate around sustainability. Awareness and education - which must involve sectoral collaborations and partnerships between retailers and manufacturers - are essential if the consumer element of our sustainability troika is to fuel change. Retailers can lead this process and reap the benefits. Frequency of purchase, price points and deep existing consumer loyalty, allows for retailers to offer consumers the most accessible step-up to more sustainable consumption, quickly cementing behaviour change, and potentially locking in longer-term consumer loyalty.
To return to the earlier parallel, your sector saw the potential and embedded IT, making it a core capability and an strategic enabler to transform your business. You focused on the benefits it could deliver - new markets, new consumers - a new way of doing business. You were clearly right. Approached with a similar mindset, the same opportunity now exists with sustainability - to make an holistic, embedded and strategic approach to sustainability not just good business, but the only business. Thank you.
