Defining Green Brand Leadership

Marketing_green_jpegOriginally posted Oct. 29th, 2007
by David Wigder, Marketing Green

“We will not be measured by our aspirations.  We will be measured by our actions”                   

– Wal-Mart CEO Lee Scott in making sustainability part of his core strategy.

Great brands today
understand that return on investment (ROI) using hard dollars is not
sufficient to assess the overall impact of environmental initiatives. Today,
social norms regarding the environment are changing and consumers are
increasingly holding brands accountable for what they do (and don’t do)
rather than just what they say. As a result, more and
more companies are making investment decisions that incorporate brand
impact and brand risk into their equations.
 

Wikipedia defines brand as the “embodiment of all information connected to [a] product and serves to create associations and expectations around it.” Though
intangible, a brand may generate significant value for a company based
on its ability to create differentiated experiences for consumers – and
enable the company to generate and sustain future cash flows as a
result.
 

One way to view a brand is
that it can enable companies to charge a premium for what may
ordinarily be perceived as a commodity product. Take for example Coke Cola, the #1 brand based on the 2007 BusinessWeek/Interbrand survey.  According to the Brand Finance 250
annual report, Coke has the highest brand value – over $43 billion or
nearly 40% of its total $110 billion enterprise value – in a highly
competitive beverage market.
 

While taste is indeed an
important differentiator, Coke is able to charge a premium for its
products – and generate significant brand value – primarily due to the
strong brand loyalty of its customers.
 

Increasingly, leading brand
companies are recognizing that environmental issues have the potential
to impact brand value – positively or negatively – and are taking
action. Coke clearly understands this and is aggressively
responding with bold initiatives that are intent on shoring up its
green credentials.
 

For example, consumers today are less willing to accept that a plastic bottle will take 1,000 years to decompose in a landfill. By
proactively redesigning its bottle to reduce material use and pledging
to recycle 100% of bottles sold in the US, Coke is clearly taking action to stay ahead of consumer brand expectations – and by doing so, defending (or perhaps enhancing) its brand value.

Does reduced material use lower production costs for Coke? Absolutely. Does committing to recycling 100% of its bottles help attract new customers? Not necessarily. Regardless,
recycling bottles impacts its brand value – and ability to continue to
sustain future cash flows – by strengthening connections with existing
customers and mitigating potential risk to its corporate reputation as
a result of negative PR.

Today, many leading brands
like Coke are responding to consumer concerns about the environment by
making investments that strengthen or shore up brand value. Marketing
Green believes that there are five actions that define green brand
leaders. These five actions need to be considered by companies looking
to green their brands:
 

Be accountable. Companies
should acknowledge that environmental issues such as climate change are
real and that, despite good intentions, they are part of the problem
(and can be part of the solution). At this point, businesses are likely
to alienate few consumers with such a statement and can begin to
attract the growing group of consumers looking for green brand
leadership.
   

Additionally,
businesses should audit their own operations and the lifecycle of their
products – including sourcing, use and disposal – to determine their
environmental impact and track these metrics over time. Indeed accountability,
now considered one of the top pillars of successful marketing
communications, cannot be underestimated when it comes to the
environmental space.

Consumers are
becoming increasingly savvy and increasingly demanding when it comes to
the environment.  Companies should not be shy in setting high goals for
themselves when it comes to the environment; if there’s any time to
admit the future needs to be different than the past, it’s now.
 

Be transparent. More and more, leading brands are providing public disclosures of their environmental and social impact. Today, in fact, 43 of the top 100 brands – including 12 of the top 15 – make public disclosures based on sustainability guidelines set by the Global Reporting Initiative. 

This reporting framework – first proposed by Boston-based non-profit CERES, endorsed by the United Nations Environmental Programme
and supported by a consortium of leading brands including Alcan, BP,
Ford, GM, Microsoft, RBC Financial and Shell – has become the de facto standard
for environmental and social reporting globally.  Currently, more than
1,250 companies in over 60 countries are making disclosures using this
framework.
 

Another
way that companies are demonstrating transparency is through
partnerships with non-governmental organizations (NGOs) such as the National Resource Defense Council and Environmental Defense (ED). NGOs provide credibility for a company because consumers view them as industry watch dogs.
 

Certainly,
one of the best partnership examples is the one forged between Wal-Mart
and ED to make Wal-Mart’s operations and supply chain more sustainable. In effect, Wal-Mart – not ranked in the BusinessWeek/Interbrand survey
because it operates internationally under different brand names – has
turned to a respected NGO to endorse its environmental efforts.

This partnership hold such promise that ED announced last year that it was adding a staff position in Bentonville, AR in order to coordinate ongoing work with the retail giant.

Be credible. Today, consumers are skeptical; too many companies have tried to green wash hollow environmental efforts. As such, companies must work hard to build credibility and earn consumer trust over time.  

One way
for a company to do so is to first green its internal operations,
followed by its products and services, and then its marketing
communications. This way, companies ensure that they take
responsibility for their own actions before encouraging consumers to do
so with their products or through their messaging.
 

But this is not the only way to gain credibility with consumers. Companies like Toyota (# 6 ranked brand) started by greening its products (eg, hybrids) first. The risk for a company, however, is that over time its own product enthusiasts are likely to challenge how the product is made. In
the case of Toyota, hybrid owners are now pressuring it to green its
operations and manufacturing facilities and Toyota is taking action,
according to Marjorie Schussel, National Manager of Corporate Communications, at the recent Green Conference sponsored by Ad Age.
 

In contrast, Dell (#31 ranked brand, in contrast to #3 IBM and Dell archrival #12 ranked HP) started with its marketing communications first, declaring that it was going to be the greenest IT company on earth. In
doing so, it essentially admitted that its operations and products were
not green yet but that it had every intention to make them green over
time. To help facilitate this transformation, Dell created a site called IdeaStorm to solicit input from its customers on ways by which it could go green.
 

Be an enabler. Leading brands should recognize that consumer expectations have changed. It
is not enough for a company to green its products; consumers expect the
products that they purchase to help reduce the environmental impact in
their own lives too.
 

Recent research by Umbria, a marketing intelligence company, supports this. Averill
Doering, a consumer research analyst with Umbria, made the following
observation: “[Consumers] see the [environmental] problem. They want to
do something about it. And, they want the companies they buy from to help them do it.”
 

Such
consumer expectations raise the bar and imply that consumers may hold
companies responsible for the environmental impact of the products that
they buy – across the entire lifecycle. Consumers may increasingly care not just about product sourcing, but about its use and disposal too. The
emergence of eco-labels may serve to reinforce these consumer
expectations as they will provide consumers with the necessary
information to make greener choices by comparison shopping.
 

Leading brands only need to witness the growth in hybrid sales
– 49% during the first seven months of 2007 over the same period in
2006 – to recognize that consumers are actively seeking products that
enable them to be greener. Today, every major automobile
company is following suit and is accelerating development and
commercialization of greener automobiles.
 

Be visionary. Visionaries are willing to make bold decisions that redefine their strategy or reshape industry dynamics. Today, there are many emerging green visionaries. Among them is Wal-Mart. 

In June
of 2004, a pivotal meeting took place between CEO Lee Scott, Rob
Walton, Board member and son of the late founder, and Peter Seligmann,
Co-founder and CEO of Conservation International. Walton
and Seligmann were friends and had often discussed the potential impact
that Wal-Mart could have as the largest global retailer if it were to
change the way it did business.
 

The pitch to Scott: Wal-Mart had long been criticized for its labor practices, employee health benefits and environmental record. Given
its buying power as the world’s largest retailer, Wal-Mart was in a
unique position to affect change in the retail space and do so in a way
that would greatly reduce its impact on the environment while saving
money, growing revenue and positively impacting its brand image.
 

Over time, Scott has essentially turned this pitch into Wal-Mart’s modus operandi. Not only did Scott set ambitious goals regarding sustainability
– 100% renewable energy, zero waste, products that sustain our
resources and environment – but he has made it a central component of
his strategy and brand positioning.
 

Wal-Mart first demonstrated the demand for more sustainable products when it began selling organic cotton yoga outfits through Sam’s Club: 190K sold in less than 10 weeks. This year, Wal-Mart challenged itself to sell 100MM compact fluorescent light bulbs (CFLs) and has already surpassed that goal. To
do so, it combined its marketing muscle to heavily advertise the CFLs
in its stores, and purchasing clout to be able to drive down the cost
substantially over just one year ago.
 

Moreover, Wal-Mart is intent on making its suppliers more sustainable. Earlier
this year, Wal-Mart launched Sustainability 360º, a program intended to
enlist its employees, suppliers, customers and local communities to
help reduce environmental impact. This month Scott hosted a Sustainability Summit to connect Wal-Mart suppliers with vendors that could help them become more sustainable.
 

Finally, Wal-Mart has expanded its brand positioning to include not just its long time low cost promise, but also “affordable, sustainable products that help [customers] live better every day.” “Save Money. Live Better” is now the Wal-Mart tag line.   

Increasingly, companies recognize that environmental issues can impact brand value. In response, leading brands are increasingly incorporating brand metrics into their evaluation criteria for green investments; they are also taking action to green their operations, products and marketing communications.  

Smart brand
marketers should think twice about simply focusing on near-term green
revenue and cost savings opportunities; the path for sustaining growth
needs to also start with greening the brand.

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