Brand Success Through Sustainability – Fact or Fiction?
Can brands benefit from their sustainability efforts? In the words of Professor Oliver Koll of the Universität Innsbruck School of Management and IMark Strategy & Research, ‘Do people care? Do people inform themselves about these kinds of activities?’
At a recent British Brands Group meeting, Prof. Koll reviewed a number of studies on how the public perceives sustainability, how brands are implementing and making people aware of their sustainability initiatives, and what seems to be working and not working.
If done well, sustainability initiatives can help brands to succeed, and he gave some practical suggestions for what can be done to implement these initiatives well within a company.
Social responsibility and shareholder returns?
Ever since issues of corporate and social responsibility (‘CSR’) began to be considered, there has been talk of a ‘trade-off’ between doing good and making a profit. Studies started looking at this question about 25 years ago, and by and large have found that there are commercial benefits to brands’ socially responsible activities. One of the earlier studies (M. Pava and J. Krausz 1996) looked at hundreds of companies and what they were doing in the way of CSR, finding a positive correlation (if not necessarily a causation) between material investments in CSR and better financial performance.
More recent research has expanded on and refined this idea further. A 2016 paper (M. Khan, G. Serafeim & A. Yoon) looked at a large number of companies and their sustainability investments, finding that sustainability investments that are material—that are necessary for the business and go directly to the core of the organisation’s activities—indeed enhance shareholder value. And immaterial investments at least don’t hurt them. The overwhelming evidence of this research is that sustainability investments pay off when one looks at shareholder value as the relevant outcome.
A range of responses by consumers
Further research has looked at the conditions under which consumers might change their purchasing behaviour as a result of a brand’s CSR or sustainability efforts, and has shown that consumers’ reactions are not automatic but are nuanced, depending on such things as timing, local community, positioning, product type, and visibility. For example:
- People may have a short memory. “Most papers at the outset agreed that if you do bad, consumers are going to be mad, they are going to stop buying from you and they will be talking negatively,” explained Prof. Koll. Poor CSR behaviour and publicity do indeed have a negative impact on corporate product evaluation (Brown & Dacin, 1997), but these effects may not last very long. There have been studies, for example, showing that after BP’s oil spill in the Gulf of Mexico, BP experienced downturns in sales for several weeks but recovered fairly quickly.
- Activities relevant to consumers’ own communities can have a greater impact. Sustainability activities toward community, customers, corporate governance, employees, and suppliers, all enhance brand equity (Torres 2012), but companies that do something focussed on the local communities in which they do business benefit even more from sustainability efforts.
- Physical-product brands get better results from sustainability efforts. Consumers can more clearly demonstrate they are buying conscientiously in the case of physical products consumed or displayed in public and tend to buy sustainable products more often where such social responsibility can be seen.
- Sustainability affects different product categories differently. ‘Organic milk’ gets better take-up than ‘organic chocolate’ (a ‘virtue food’ versus a ‘vice food’) (Van Doorn & Verhoef 2011). People are more likely to buy organic baby shampoo, which they perceive as ‘more gentle’, than they are to buy sustainable hand sanitisers, which they perceive as ‘not as strong’ (Luchs et al. 2010).
- Perceived reasons for a brand’s sustainability efforts can give different results. ‘If you strive to make a product more sustainable and you communicate that this is why you’ve changed the product, people react less positively than if you communicate this as a side effect’ to other improvements to the product. Budweiser gets better take-up of its new aluminium beer ‘bottle’ if it promotes it as giving a better taste to the beer, and incidentally is also better for the environment.
- Consumers do not necessarily see a brand’s sustainability efforts. Although consumers may feel strongly that, for example, climate change and the environment are important issues, and even take action themselves to reduce their own purchases of water and beverages in plastic bottles, only 12% can identify any manufacturer that is working to reducing plastics (Who Cares, Who Does? 2019). More than half of polled consumers believe manufacturers should bear the responsibility to take action, so if a brand does something and can get that message out, people should react in a positive way.
What can brands do to promote sustainability?
Corporate transformations can be difficult, particularly when it comes to sustainability initiatives. A recent Bain Research study has shown that only 12% of all corporate transformations achieve or exceed their aims. For sustainability initiatives, however, this figure is just 2%. ‘Only one out of 50 companies say their sustainability efforts worked out as planned,’ says Prof. Koll. ‘49 out of 50 say they did not reach the goals they had.’
So how can sustainability initiatives be done better? A brand should start with its strategic and operational homework. What are the issues the company wants to tackle? How is it going to tackle them? How is it going to measure whether it is successful? And only once the company is sure that it has achieved positive sustainability outcomes should it start communicating and using this success in its branding.
“Brand success through sustainability is a fact if you do it right and if you’re serious about it and not just talking about it,” says Prof. Koll. “Make sure this is the path for your organisation and that it is supported by the various stakeholders that matter.”
You can view Professor Koll’s presentation about brands and sustainability to British Brands Group members here.