Sustainability- the new business orientation Neil Richardson

1. Sustainability- the new business orientation Neil Richardson

2. Business as usual Macro-environment Profit Marketing Strategy Disciplines

3. Criticisms of the impact of commercial enterprises on society “The business of business is business” “a corporation’s only moral responsibility is to promote the financial well being of its stockholders”. (Milton Friedman)…………………boo, hiss They: • Create false wants and materialism • Produce too few social goods • Create cultural pollution • Have generated too much political power (nasty, little businesses……..boo, hiss)

4. Criticisms of the impact of commercial enterprises on society • It is a common assumption that marketing is about selling more whilst sustainability is about consuming less – therefore the two are diametrically opposed • But marketing’s core role should be to align what the business produces to what the market wants – ensuring all investment of money people and resources is adding value for customers

5. How marketers may be caught unaware? Emergent Strategy 1 PEOPLE impact Realised Strategy 3 Realised Strategy 1 Intended Marketing Strategy (PROFIT) Realised Strategy 2 Emergent Strategy 2 PLANET impact Emergent Strategy 4 Change in consumer values Emergent Strategy 3 Macro-environment impact Where do we go from here?

6. Planned Implementation will help adapted from Richardson (2010))

7. Sustainability….It’s nothing new • The UK Co-operative movement can trace its principles and practices back to the Rochdale Pioneers in the 1840s (Birchall,1994). • Amongst their guiding principles were education, training, information and concern for the community through sustainable development (Davies & Burt, 2007). • Co-operatives have cultural, industrial and historical origins which Hess (2004) considered important and led to the creation of three forms of embeddedness:- ‘societal’, ‘network’ (the composition and structure of the network relationships) and ‘territorial’ (the relationships in “place” with local firms, consumers and regulations)

8. Triple Bottom Line • In 1997 the Harvard Business Review published Beyond Greening by Hart (1997) which brought the issue of sustainable development to the wider business community (Starkey & Welford, 2001). • The following year the term ‘Triple-Bottom-Line’ (TBL) was first defined (Elkington,1998) in which the traditional economic focus was replaced with the new foci of social, environmental and economic responsibility. • The Hart and Elkington texts are considered to be two “of the most important recent contributions on the subject of business and sustainable development” (Starkey & Welford, 2001, pxxix) • This approach, often paraphrased as ‘People-Profit-Planet’ has gained credence featuring increasingly in academic, consultancy and practitioner texts (CRR, 2007).

9. Area of overlap between disciplines (Source: Author) Sustainable Business Development Societal Marketing Marketing Area of Interest Well actually I’d like to say Sustainable Marketing (SM) “Sustainable Marketing involves principled marketing predicated on the tenets of the Triple Bottom Line. Hence marketing decisions should be ethical and guided by sustainable business practices which ultimately are the only way to resolve the tensions between consumers’ wants and long term interests, companies’ requirements, society’s long run interests and the need for environmental balance”.

10. Libertarian Pure Sustainability Sustainability Continuum “The business of business is business” “a corporation’s only moral responsibility is to promote the financial well being of its stockholders”. (Milton Friedman ) Some stakeholders argue that organisations should prioritise the well-being of their stakeholders and the broader environment before considering profit We need to be able to position ourselves within our markets in order to make effective decisions it is safe to assume that we (knowingly or otherwise) are located on the continuum and need to be aware of their position

11. Positioning on the Sustainability Continuum Customer’s perception Marketer’s perception Libertarian Pure Sustainability

12. Barrier to adoption #1Green-washing • Companies exploited environmental friendliness……body shop • Bad publicity……..tuna + dolphins • Resistance to change • Consumer education…..consumers may be imperfectly educated (BPP, 2009, p216)

13. Barrier to adoption #2:Shareholder sustainability versus ‘Sustainability’ Tensions within Friedman’s diktat: • Companies don’t exist in a vacuum • principals want ‘sustainable’ dividends to underpin share value effectively reducing the funds which could be invested ‘Sustainably’ • Shareholder value may come at the expense of customer value and satisfaction. Hence satisfying all of the stakeholders may not be conducive to maximising shareholder wealth.

14. Barrier to adoption #3‘Sustainability’Ownership Sustainable • for whom • in what way • for how long • at what cost • by whom

15. Social responsibility “The obligations and accountability to society of individuals and organizations above and beyond their primary functions and interests” (CIM, 2008, p)…………………Big Society ???anyone buying it???? “…involves accepting that the organisation is part of society and as such, will be accountable to that society for the consequences of the actions which it takes”. (BPP, 2008, p15) 3 concepts of social responsibility: • Profit responsibility • Stakeholder responsibility • Societal responsibility (ibid)

16. Barriers to Sustainable Marketing #4 • Costs • Technical and organisational • Conflicts between objectives • International implications • Lack of visibility • Timescale • Lack of certainty about the nature of the problem • Concerns regarding proposed remedies • Tokenism • Moral fatigue (adapted from BPP, 2009, p217)

17. Developing the policies requires a managerial orientation ie rethinking • The balance between efficiency and effectiveness • Attitudes to/and relationships with customers • The balance between our needs and wants • Redefining customer satisfaction • Refocusing onto the long term objective, rather than shorter or medium term • Rethinking the value chain • New corporate culture ( adapted from BPP, 2009, pp217-218)

18. Sustainable Marketing Sustainable marketing evaluates the marketing plan in terms of 4 Ss Satisfaction of customer needs Safety of products & production for consumers, workers, society & the environment Social acceptability of a product, its production & the other activities of the company Sustainability of the products, their production and the other activities of the company …..the role of competitors?? (adapted from BPP, 2009, pp218)

19. Consumers’ values, risk, enjoyment, power, involvement Community’s inclusion, involvement, access. People Planet Networks, CSR adoption, voluntarism Profit Macro-environment Retail Marketing Strategy Broader Environment- recycling, energy, raw material, water, waste, packaging, GM foods, chemicals. Disciplines CSR- ethical operations, sourcing, health education, fair trade, worker welfare, social inclusion. Servicescape- attributes, hierarchies, service, store as brand, PR. A Framework for SRM

20. SummaryBenefits of a Sustainable Marketing orientation £ Sales Profit Market- share Client Customer Satisfaction Loyalty Retention Word-of-mouth Staff Supplier Job Satisfaction Relations Rewards Time Gosnay & Richardson (2008, p10)

21. Benefits of a Sustainable Marketing orientation Kelly Services Survey statistics (interviewed around 100,000 people in 34 countries around the world) – 2009 survey• 88 percent of respondents are more likely to want to work for a company that is considered ethically and socially responsible. • 56 percent say that in deciding where to work, an organization’s reputation for ethical conduct is ‘very important.’ • 26 percent would be prepared to accept a lesser role or a lower salary to work for a firm with a strong environmental and community conscience.A total of 48 percent of baby boomers would be prepared to take a pay cut or a demotion in order to work with a socially conscientious employer, followed by Gen X at 28 percent and Gen Y at 24 percent.http://www.easyir.com/easyir/kellyservices/KGWI_Global_Social_Responsibility_final10-26-09.pdf

22. Benefits of a Sustainable Marketing orientation Sirota survey 2007http://www.sirota.com/pdfs/Corporate_Social_Responsibility_June_2007.pdf Respondents outlined these benefits of an effective and comprehensive CSR program:• Good for the bottom line (87% of respondents)• Generates a greater sense of employee pride and results in greater employee engagement (85%)• Enhances customer loyalty (84%)• Attracts new customers (80%)• Minimize the costs and consequences of regulatory activist  pressures (65%)

23. Benefits of a Sustainable Marketing orientation Companies with strong ethical commitments have historically outperformed the average: an index of the World’s Most Ethical Companies showed that these organisations outperformed the Standard & Poor 500 and FTSE 100 every year from 2005 to 2010. http://ethisphere.com/wme2010/ Supplied by Institute of Business Ethics

24. Benefits of a Sustainable Marketing orientation 2009 IBE Attitudes of the British Public to Business Ethics Survey:52% of the British public thought that UK business behaved very/fairly ethically, a small increase from 2008 (51%). There was a slight rise of 2% (to 31%) in the number of respondents thinking that business is behaving more ethically than ten years ago http://www.ibe.org.uk/publications/Briefing_13.pdfEdelman Trust Barometer:67% of the UK population trust business less than they did at the same time last year. When asked whether we trust business to do what is right the figure is the same in 2009 as it is in 2008 – 45%.  Full report is here: http://www.edelman.com/trust/2009/docs/Trust_Book_Final_2.pdf The  Ipsos MORI trust in professions survey:In 2009 business leaders were amongst the least trustworthy (25%) just above journalists (22%), government ministers (16%), and politicians generally (13%). This was a significant fall from 2008 – minus five percentage points.http://www.ipsos-mori.com/DownloadPublication/1305_sri-trust-in-professions-2009.pdf

25. Benefits of a Sustainable Marketing orientation According to research carried out by the Co-Op, 30% of consumers say they always make an effort to buy products and services from businesses that behave responsibly. While this number has fallen from 36% in research conducted in 2006, there is an increase, from 19% to 25%, in the numbers of people willing to pay a little extra if they know that the business behaves responsibly. 73% rate treatment of staff and suppliers as the most significant determining factor for what makes a responsible business, with other significant markers being honesty and transparency (69%) and senior management behaving with integrity (69%). http://www.co-operative.coop/upload/27969812/Ethical%20Consumerism%20Report.pdf Edelman’s Trust Barometer 2009 says that 77% of respondents refused to buy products or services from a distrusted company, while 91% chose to buy from trusted companies (more info can be found in the IBE surveys briefing http://www.ibe.org.uk/publications/Briefing_16.pdf) 56% of people are still willing to pay a premium for products that meet higher ethical standards, and 53% would choose to work for a company that was ethically and environmentally responsible given the choice (source: report from seewhatyouarebuyinginto.com 2009).

26. SummaryBenefits of a Sustainable Marketing orientation £ Sales Profit Market- share Client Customer Satisfaction Loyalty Retention Word-of-mouth Staff Supplier Job Satisfaction Relations Rewards Time Gosnay & Richardson (2008, p10)