Share the change, share the value

The capitalist system is under siege. In recent years business increasingly has been viewed as a major cause of social, environmental, and economic problems. Companies are widely perceived to be prospering at the expense of the broader community.

Even worse, the more business has begun to embrace corporate responsibility, the more it has been blamed for society’s failures. The legitimacy of business has fallen to levels not seen in recent history. This diminished trust in business leads political leaders to set policies that undermine competitiveness and sap economic growth. Business is caught in a vicious circle.

A big part of the problem lies with companies themselves, which remain trapped in an outdated approach to value creation that has emerged over the past few decades. They continue to view value creation narrowly, optimizing short-term financial performance in a bubble while missing the most important customer needs and ignoring the broader influences that determine their longer-term success.
How else could companies overlook the well-being of their customers, the depletion of natural resources vital to their businesses, the viability of key suppliers, or the economic distress of the communities in which they produce and sell? How else could companies think that simply shifting activities to locations with ever lower wages was a sustainable “solution” to competitive challenges?

Government and civil society have often exacerbated the problem by attempting to address social weaknesses at the expense of business. The presumed trade-offs between economic efficiency and social progress have been institutionalized in decades of policy choices.

Companies must take the lead in bringing business and society back together. The recognition is there among sophisticated business and thought leaders, and promising elements of a new model are emerging. Yet we still lack an overall framework for guiding these efforts, and most companies remain stuck in a “social responsibility” mind-set in which societal issues are at the periphery, not the core.

The solution lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress.

Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do but at the center.
We believe that it can give rise to the next major transformation of business thinking. And something is already happening (www.watchfyi.tv).

Are consumers buying sustainability? (part II)

In my previous post I spoke about why the consumer social agenda is so important. But what I'm now following up is the main concept that drives people's behaviour. It's ETHICS.

And due to the importance of such a value and its place in the "consumer mindset", an ignorance of ethical behaviour can be catastrophic for a company and its brand. Take Nike for example: in the 1990s news emerged that the sports equipment manufacturer was using child labour in the developing world to produce a range of footballs. A public campaign exploded – and this was before the days of widespread Internet use, viral communications and social networking – that caused the discerning public to boycott Nike goods and the activist public to demonstrate outside its retail outlets. Sales for Nike goods dropped away, and the share price tumbled, elucidating uncomfortable questions from the sports company’s institutional investors.

It still took time for Nike’s reputation, and share price to recover.

And today the relevance of such social and environmental issues is as strong as never before. Are consumers buying sustainability?

Yes, and in increasing numbers. Consumers are buying it, both notionally andat the tills. Mainstream awareness and concern exists and behaviours are changing. Consumers want to act and buy more sustainably, but are restricted by three key barriers – high price; confusion and lack of trust; and availability of alternatives.
What’s the result then? People are changing lifestyle and behaviours.



Today’s consumers know, and care more about what they buy, how it is made, what it is made from, how far it travels and how it is packaged. The way consumers gather and share information has also changed; they are empowered and linked as never before by the internet. Information can spread globally in an instant. The consequences of being found to be operating unethically, or in an environmentally unfriendly manner, as said in my previous post, can be damaging and long-term.


Some might argue the hype will exceed the reality in the short term. However, rather as the internet is revolutionizing retail, sustainability is an issue which will change the world.
Retail and consumer goods companies need to prepare now.







(written with John Foster)

Why consumers’ social agenda is so important

Each year the world’s biggest corporations spend billions of dollars on trying to improve their public image.

They do this through a number of different channels which include traditional public relations, corporate communications and elements of advertising and marketing. A more recent discipline in the creation of a positive public image has been CSR, or corporate social responsibility reporting. CSR reporting is becoming more and more significant as corporations are increasingly trying to portray themselves as responsible global citizens and at a micro level part of the communities in which they operate.

A whole new CSR industry has sprung up and CSR executives are increasingly becoming involved in varied aspects of internal communications, human resources, public relations, advertising, corporate governance, marketing and corporate communications across all facets of a firm’s operations and in the geographic regions where it does business.
CSR has arisen for a number of reasons.
In some industries there are regulatory reasons why a company has to report its CSR activities, such as in the extractive industries, nuclear industry, chemicals and pharmaceuticals. In others, a corporation has to update its customers on its CSR activity because of the nature of its business, such as registered charities and NGOs.

But in many cases companies used to do CSR reporting as it makes good business sense. But things ar changing now.
This is it: as the developed world has become increasingly consumerist and most of the necessities of life – food, water, heating and shelter – have become a given ‘right’ in these societies, consumers now make lifestyle choices about their purchases, not just necessity purchases.
Other factors become important in the purchase mechanism:

• Health: the rise of highly priced organic foods –> before the mid-twentieth century, almost all foods were organic and almost all of the people in the world grew it themselves out of necessity;

• Service: what is the difference between one high street bank and another? They all offer often the same products, all with very similar rates and features. But now banks compete for custom on ‘service’, hence the millions of dollars they are spending in advertising to create a human, friendly, local face and prove they are not cold financial institutions, but caring, considerate, supportive partners; and

• Status: which explains why Nike or Adidas can get away with selling fundamentally the same shoe as a non-name brand for three times the price. In many cases the Nike and non-brand shoe have been assembled in the same factory in the developing world with the same materials.

• Reputation: this is an increasingly important feature, which is currently conditioning the purchasing behaviour of consumers. Thanks to social networks, their voices can be heard and shared at an incredible pace, impacting directly on a brand and thus making people protagonists of their "living space".


(to be continued)
(written together with John Foster)