A little less conversation and a little more action, please!
Financial stakeholders are eager to redirect their investments into sustainability-related ventures, and since 2018 the momentum of this capital migration has been accelerating at full speed. As of the end of 2020, the UN-backed Principles for Responsible Investment (PRI) reported Assets Under Management of more than $103.4 trillion and 3,300 corporate signatories. This is a signal of the growth of the responsible investment.
We are observing a constant increase in regulations and investor consciousness about societal, environmental, and governance (ESG) matters, and the urgency of climate change. Indeed, climate change is on the top of the list. There is also a lot of urgencies demanded by regulators and capital markets to bend the temperature curve to 1.5°C (above pre-industrial level temperatures) and plan a more sustainable and livable future for the planet.
How can regulators and capital markets define sustainability?
What are the right measurement criteria for sustainability?
What is the taxonomy for sustainability?
These questions are still unanswered.
However, the important point that I want to make here is that world has started moving in somewhat the right direction. We are observing leaps of innovation in the renewable space with the scalability of batteries, electrolyzing hydrogen, and progress on methane. Every change counts.
The IPCC latest report on Climate Change: the risk of Climate Crisis
I totally get it that we are 10 years late for these changes to achieve the desired IPCC (International Panel on Climate Change) climate scenario of 1.5°C. The 1.5°C target relies on negative carbon emissions that are enhanced uptake. The enhanced uptake here refers to the greenhouse effect based on human activities that are adding to the warming of the atmosphere, this includes gases that increase the atmosphere’s retention of the heat energy of the sun. You can explore an IPCC interactive version as well.
First, this assumes some combination of increased land and ocean uptake, when science suggests that overall uptake, especially on land, is decreasing. Increasing overall land uptake by more than baseline assumptions in models is challenging, with background sinks (A carbon sink is anything that absorbs more carbon from the atmosphere than it releases – for example, plants, the ocean, and soil. In contrast, a carbon source is anything that releases more carbon into the atmosphere than it absorbs – for example, the burning of fossil fuels or volcanic eruptions.) declining and some even changing to sources.
Second, “net-zero” and 1.5°C assume some form of industrial sequestration, for example, BioEnergy with carbon capture storage. However, these are new, expensive and unproven technologies.
We still have hope that we can still reach under 2.0°C with the power of regulations, innovations, and capital markets. However, we do not have 10 more years to solve this puzzle of defining the sustainability taxonomy.
What we have now is a power of choice. Financial markets process complex information each and every day. The impact of climate change is no exception. The concerns of squaring out the taxonomy should not stop innovation. Instead, we should empower the innovators to build diverse workable solutions throughout the regions and sectors. We are out of time in a climate emergency and code red is upon us. We cannot wait for the perfect solution.
What we need is a series of imperfect solutions that can make our planetary future perfect for us all. The real focus should be on avoiding the climate pitfall. This can be done with real live performance rather than commitments and promises.
Tackling Climate Crisis: some simple suggestions
– We do not need any more false promises from investors and companies. We need understatements and overperformance. Keep the targets real and achievable. We cannot afford any missed emission targets in accountable global emissions So keep the targets real.
– Frame future plans rather than goals. We need more action-based plans. Keep the future closer to today 10 -50 years is too long. We need quarterly and yearly quantified, measurable standards to monitor climate progress.
– We need to crack the climate puzzle from both a macro-level, top-down validation approach and from a micro-level bottom-up approach. The bottom-up approach has self-reported data on emissions reductions, both expected and achieved, which is more important than just carbon accounting. The carbon trajectory is more important than just the carbon footprint.
– We need more power and clarity on scope, reach, and measuring progress towards climate targets. This may vary across sectors, regions, and investment strategies.
Let us get to terms with this, but let us not forget that it is crucial for companies and investors to achieve their definition of sustainability. Show what you can promise and promise what you can show. It is high time that we changed our approach. We need more action and reality and less conversation and theory to drive sustainability!
Transcript for ESG to ESDG: Why Add a “D” and why ESDG Matters for Sustainable Brands
Hello, everyone. I’m Edmund Bradford. And in this video, we’re going to be talking about the hot and tricky subject of ESG.
And to help me with that, we have Yelena Novikova, who is a G20 young global changer and an independent expert on ESG and sustainability.
So thank you very much, Yelena, and welcome.
Thanks for having me. It’s a pleasure, Edmund.
Now, one thing that you told me about, which I thought was very interesting, is that you and some of your colleagues, I’ve actually changed ESG and you’ve added D into it. So you are often referred to it as ESDG. Do you want to explain what that D is all about on ESDG?
D is for digital. And I would say that we didn’t change the ESG. We just gave more importance and attention to the very important D factors that were always there but were becoming more apparent because of the work that we started doing on Public Value Principles for which this ESDG term is kind of very central front and center would say.
It started right during the time when we were all globally. Pretty much all the countries went into lockdown.
And as we know, even right now, one in four Americans are working from home, 16% of companies globally are fully remote, and 62% of people are reporting that they still work from home at least some of the time.
And it’s now when many countries are already getting vaccines. So right at the time when we studied this work, it was even more apparent digital kind of took over our life.
And even before that, laymen would think about digital factors because
they are given data to digital platforms like Facebook or even like regular
sites that ask you to give permission for cookies, for example. But as we went into the pandemic, it kind of became more apparent that it’s much more a nuanced topic of companies, our digital data, and us and how we communicate through digital means.
For example, one example I would give is productivity software because a lot of companies started to install productivity software on laptops for working from home employees. And no one actually knows how much data a certain software might receive.
There is a known kind of concept of mission creep the developers are talking about. So right now, for example, this software is used for productivity software strictly. But no one is to say if the company may be less responsible and they might use it for extracting more data about the place and stuff like that.
So it’s a big topic right now where some companies want to use this productivity software, others maybe don’t want to use this productivity software. And then there are other companies that say we might use it, but we will have a strict mandate what we are using this for.
We have passed the tipping point of interest in sustainability
Sustainability and other good behavior metrics now need to be reported
That means your strategic accounts will no longer be satisfied with bland statements of intent from your company
Sustainable SAM will be a key differentiator soon
Background to Sustainable SAM
I was interviewing the Head of Sustainability at a global hospitality company recently when she told me an incredible fact: “In the past 12 months, for the first time, more investor funds have gone into proven sustainable companies than into non-sustainable companies.” So, if you are working in a company that has not proved itself sustainable to investors, you are in the wrong half of where the investor money is going.
If you want to see an example of this transition, consider Blackrock, one of the world’s largest investors with $8.68trillion in assets under management at the end of December 2020. In his 2021 letter to CEOs, Blackrock’s CEO, Larry Fink, talked about the fact that the pandemic had, accelerated the tectonic shift to sustainable investing with a near doubling of its investments in this area compared to 2019.
Why is this?
Investors recognize that climate change is investment risk. They understand that companies serious about dealing with climate change are a better bet than companies that do not. Moreover, there is increasing evidence that companies like Pepsi and Unilever provide better returns on top of the sustainability agenda. So, it is not because investors have suddenly become environmentalists but because sustainability makes hard business sense.
The rise of the Greta Thunberg generation is also focusing minds. It is estimated that “about $68trillion of wealth will change hands in the next twenty-five years as the baby boomers die” (Reimagining Capitalism by Rebecca Henderson, page 147)
Finally, the dramatic increase around the world in Government intervention in sustainability is also a key factor. For example, the UK Government has committed itself to legally binding targets in its 2008 Climate Change Act. It will showcase its efforts at the COP26 UN Climate Change Conference in Glasgow, Scotland this November. In December 2020, the European Union agreed on a EUR 1.82trillion Green Deal to support a green recovery. In February 2021, U.S. President Joe Biden announced a $2trillion Green New Deal.
These combined forces from investors, customers, and governments have created a perfect storm of sustainability change heading our way.
Understanding what we are talking about
Before we consider how sustainability affects the demands from your strategic accounts, it is worth considering what we are talking about. The world of sustainability is a large and complex area with many different views and measurement systems.
In addition to this, many experts like Professor Steve Kempster, co-author of “Good Dividends: Responsible Leadership of Business Purpose,” claim that you cannot become a sustainable company without having Purposeful Leadership at the top.
That leadership will have to strike the right balance between short-term profits and long-term sustainable growth.
Therefore, we have created a 6P Model that we find helpful in explaining sustainability to our clients (see below). Sustainability is not just about being “greener.” It is a comprehensive approach aimed at challenging companies to grow in a good way that enhances the planet and delivers broader prosperity, happier employees, and more sustainable profits. We call this Good Growth, and our view is that the best firms should aspire to be a Good Growth Company.
The 6P Good Growth Model
The rise of sustainability in your strategic accounts
As I write this, I am aware of several initiatives underway to assess suppliers’ sustainability better. The United Nations is sponsoring an initiative to develop a common supplier framework in the health industry. Procurement functions in different companies are looking at how to apply ESG metrics to their key suppliers. The UK’s Chartered Institute of Purchasing & Supply encourages its members to conduct ethical and sustainable procurement. Individual companies, like Unilever, have warned their suppliers that supplying a sustainability plan will no longer be enough. As part of the tendering process, suppliers need to demonstrate real commitments to hard targets, which will be tracked.
This is happening because their investors and their customers are asking the leadership teams of your strategic accounts about what real actions they are taking to improve their supply chain. Indeed, if they are reporting on broader measures of greenhouse gas emissions, they will need to know the emissions of their suppliers to complete the report.
Broader measures could be ‘Scope 2’ reporting of greenhouse gas emissions from energy purchased; and ‘Scope 3’ reporting of greenhouse gas emissions from the whole upstream and downstream value chain.
These reports will be scrutinized for signs of progress or regress, with significant ramifications on customer demand, brand valuation, and the share price.
How these changes will affect how they buy from you
Strategic accounts will be looking for the following items from their key suppliers:
If it has not happened already, expect to see more of these issues written into RFPs. You should also expect the minimum (order qualifying) criteria to rise as well. Vague answers to specific questions like, “When will your organization achieve Scope 1 Net Zero GHG emissions?” will not be acceptable. Suppliers that do not pass the minimum tests will not make it to the final selection.
Your Response: Developing Sustainable SAM
These emerging trends mean that sustainability needs to migrate from something on your radar to an integral part of your business and your account development process.
You will need to have:
Well-thought-out plans, with specific targets and timescales, for how you will improve the sustainability of your whole organization and your supply chain in the future. This should include innovative ideas to collaborate with the account to reduce the environmental impact of your joint relationship. This may include the redesign of products, services, and account support to reduce carbon emissions. These organization-wide (enterprise-level) plans should be integrated with individual account plans.
Evidence that there is a real commitment from the top to deliver these plans. This should include details about who has responsibility for sustainability in the company, who that person reports to, and how the account manager reports to them. Ideally, this should be a full-time position reporting directly to the CEO, whom the account manager can call for expert guidance and support.
A detailed set of metrics that you will use to measure progress. These metrics should be defined, explained, and justified (e.g., based on independently approved measurement standards like The Sustainability Accounting Standards Board) and applied at an account level.
Robust procedures and systems are in place to track progress using the metrics. Ideally, this should collaborate with an independent auditor (e.g., one of the big four accounting firms). The auditor must be able to inspect individual account relationships upon request.
To get all this done, sustainability needs to be coded into your SAM blueprint. The dirtiest accounts need to be de-prioritized in your strategic account selection process. The goals, objectives, and strategies for individual accounts need to be re-appraised. The account plans need to be revised. The IT systems need to be re-engineered to gather new data. The account managers need to be trained in sustainability. The account review system needs to be re-wired with different auditors. And more. This will not be easy, but those that succeed in achieving Sustainable SAM will gain a big advantage over those that flounder.
Let’s look at water, surely a commodity if ever there was one. Corporate buyers in the hospitality industry are susceptible to the unit cost of buying water. High volumes and bulk discounts have been the norm for decades. However, a small British firm called Life Water is growing nicely without being forced to cut costs. It packages its water in an innovative can that is 100% recyclable and contains zero plastic, unlike some of its competitors’ single-use plastic water bottles. In addition, it also acts to improve access to clean water. For every unit sold, it contributes to clean water projects around the world. It was voted Best Sustainable Beverage Brand in 2019, and a corporate buyer I was interviewing was very impressed with them. He is responsible for an annual spend of around £1billion and is moving more spend their way.
So, with a focus on sustainability, the actual cost of the product is less important than the value of the relationship to the buyer. From the supplier’s point of view, that means more revenue from the account. For both sides of the relationship, it means a better long-term collaborative partnership.
Indeed, if you already have good collaborative relationships with the accounts, then you can leverage them in new ways to discuss how you can collectively improve the sustainability of your whole supply chain and the entire industry. There is broad recognition that the only way to reduce global warming is to take broad collaborative action. Therefore, Good Strategic Account Management has a crucial role in driving real cross-enterprise sustainable change.
Is achieving Sustainable SAM an easy path? No. Is it a risky path? Yes.
However, the risk of not changing is even greater. Investors are encouraging change because they see the journey to sustainability as reducing the financial risks of climate change.
As a strategic account manager, account director, or program leader, you need to learn about this subject. You need to become competent in it. That does not mean you need to go off and do a master’s in sustainability. You do not need to be the expert in the room. It would help if you were confident in conversations about this subject. Those conversations will become more frequent and more important over the next few years.
The good news is that you should also already be a good change agent. You will be well-used to using all forms of legitimate and illegitimate power to influence others to move business relationships in the right direction. It would help if you now upgraded to change leadership. If you have not already done so, read Leading Change by John P Kotter and practice the art. You will then be well-equipped to make a real difference.
As someone already working across functional, organizational, and geographic boundaries, let’s be frank about this, you can make a significant difference.
Help to change the future and enjoy helping to save the world.
Marketer and sustainability are often synonyms of greenwashing. This is because people usually think of marketing just from the communication point of view, leaving behind the marketing strategy.
In this interview, we will focus on explaining what a marketer can do about reaching the company’s sustainability goals.
Specifically, we will look at how:
Marketers can implement sustainability if they help to forge a strong sense of purpose in the company.
Consumers are positively responding to brands with a strong environmental sustainable purpose.
Not all Companies can achieve all ESG goals overnight, so it is important to clearly communicate the steps towards those goals even if they are years away.
Transcript of: How can a marketer help implement sustainability?
[00:00:07 –> 00:01:21]Edmund: Well, Hello, everyone. Welcome to Video four in a short series of videos about sustainability and marketing. I’m Edmund Branford. I’m a director of the Good Growth Academy. And I’m delighted to have with me again, Stephen Mangham, who’s a branding expert and is perfect for this little video because he’s also a master at Masters of Scale International. And in this video, we’re going to be talking about how we scale up, how do we get sustainability as an initiative that is implemented and going in our organization, or maybe going faster in our organization? So, Stephen, if I’m a Chief Marketing Officer in an organization of any size, shall say, What of the kind of advice would you give to me if I say I’ve given some earache from my customers about the fact that we need to be more sustainable; otherwise we risk being deselecting? Or maybe my consumers are slowly defecting to other, more purposeful brands. What can I do about it? Who do I need to talk to? And what are the kind of things that I need to be saying? Everything moving my company.
[00:01:22 –> 00:02:41]Stephen: You need to start with a clear strategy articulated in a compelling way to your staff, to your team. There are lots of companies when they define a powerful sense of purpose or a strong mission that can galvanize their employees. So, for example, I once heard that at Disney, they define their mission like that. They were there to make magic for kids of all ages, which is, I think, is a great reason to get up in the morning to go to work. It’s a galvanizing mission. Famously, at NASA, NASA’s single-minded mission was to put a man on the moon in the Sixties. And everybody at NASA, from the janitor right up to the director, saw it as their job to put a man on the moon, which is an inspiring mission. So I think if you can define that purpose in a way that is attractive and inspiring and communicate that strongly to your team, I think that could go a long way to not just getting them on your side, but getting them really excited about it.
[00:02:42 –> 00:03:19]Edmund: By the way, I think the good news here, Stephen, is there’s more and more research now on how for example, consumers respond to purpose-driven brands. I saw some excellent research from Ernst and Young a few months ago talking about it as a global study. They were saying something like about 40% of consumers would like to move more spend to purpose-driven brands. So there’s more and more evidence when markets are making this case to the leadership team. There’s more and more evidence that they can be using, I think, to support it.
[00:03:21 –> 00:03:46]Stephen: Absolutely. I mean, if you look at the there’s plenty of studies, actually. But for example, the one that springs to mind for me is the Good Purpose Study by Edelman; they’ve done that over a number, and now they started that in 2008, I believe. And there was already evidence back in 2012 that there were significant moves towards those trends you just mentioned.
[00:03:46 –> 00:04:32]Edmund: So persuading the board, Let’s see, to reexamine the mission or purpose and to think about their purses being more especially viable that’s a key area to look at, Let’s say, for example, there’s a good presentation is being put down, and the board now I’ll give you some priority in our organization. I’ll give you some resources to get this thing going. What’s kind of like the next steps he’s got approval if you like to proceed, how can Chief Marketing Officer, or where does he go from there in terms of getting a thing going?
[00:04:33 –> 00:05:11]Stephen: Well, I think it’s essential to have a plan, very tangible results, a different plan, which is what are we going to stand for. So that’s the defining the brand and articulating what we stand for, our objectives in terms of targets, as a result of how we’re going to be representing the brand to our consumers and what our action plan is to get there to achieve those targets. So that’s the first place to start from.
[00:05:11 –> 00:05:58]Edmund: A concrete plan to do that. And I think my experience, it doesn’t be not necessarily talking about changing the world overnight. Are we? For example, the plan can say, well, we’re going to test this out in a unit or geography or a product line on one of our brands, and we’re going to make some progress over the next 12 months on this issue. And all the lessons that we learned would be like a pilot exercise be all lessons that we learned. We’re then going to feed that into later stages in our rollout. So they don’t need to try and change the world, if you like, overnight. There’s a lot of work involved in this, and they can start playing around with some ideas and on a smaller scale.
[00:05:59 –> 00:06:45]Stephen: Yes. I mean, first of all, it’s important to listen to the consumers. So whether that be a pilot or other form of testing or whatever it may be, but listen to the consumer number one and learn from their response number two, except that this is going to be an evolution, perhaps not a revolution, and that there are things that you can do in the short term that will be if you like, quick wins. But there may be other things that will be trickier to achieve and require more thought, more time, and won’t happen as fast. And that’s okay. It’s not about achieving perfection immediately. It’s about taking steps in the right direction and sticking with it.
[00:06:46 –> 00:07:17]Edmund: And one of our good friends, Dr. Pooja Khosla, at Entelligent. She always says, actually, don’t worry too much about where your metrics are today. Think about the Delta. The rate of change and make sure that you’ve got a good rate of change as you go through this process. Because of the nature of the beast, it’s not something that you can expect to change overnight. It’s going to be a long journey. And even the measurement of success is going to be over many, many years.
[00:07:17 –> 00:08:02]Stephen: Absolutely. And then there are going to be aspects of changes that you would want to make that may not be simple to achieve. There may be real thorny issues in the brand and the business that can’t be solved overnight or may not have a solution today. So you solve what you can, and you work to a solution on the things you don’t yet have a solution for. And I think as long as you’re being seen in all sincerity to take the right steps and to do what you can and be open about what you’re going to try and do next, I think your people will respond well to that.
[00:08:03 –> 00:08:23]Edmund: Thank you so much, Steven. Although I feel like I could talk to you for about half an hour, we really want these to be little short bite-size exercises. Thank you so much for sharing your experience and wisdom with our audience. And I very much look forward to seeing you again for some more videos in the future.
[00:08:23 –> 00:08:25]Stephen: Thank you. Nice to be here.
Abstract: Can the CMO become a Sustainability Leader?
EdmundBradford says they are delighted to be joined by Stephen Mangham, a branding expert at Master of Scale international. Edmund says they will get down to more of the human level and talk about the person at the center of this, the Chief Marketing Officer (CMO).
Stephen says the CMO must define the sustainability conversation in terms of the customer and the brand in terms of its inherent usefulness. Stephen says the CMO must have an organizing idea that inspires and guides the brand behavior and the brand action.
Edmund and Stephen discuss the key challenges they will face, including getting educated about the subject.
Stephen says consumers prefer products with a social purpose agenda, and that doing good is good for business. Edmund says the risk of doing nothing is more dangerous than the risk of doing something.
Stephen says brand growth depends on memorability and relevance.
Transcript How can the CMO become a sustainability leader?
[00:00:09 –> 00:01:51]Edmund: I’m Edmund Bradford. I’m a director of the Good Growth Academy and in this series of short videos on marketing and sustainability, I’m delighted as ever, to be joined by Stephen Mangham, who’s a branding expert, much more of a brand expert than I will ever be, and also a Master at Masters of Scale International. Now, in the previous video, we’ve talked about sustainability and how it fits into the broad concept of good growth. We also talked about how it can be a real differentiator in the marketplace. But in this particular one, we’re going to get down to more of the human level and talk about the poor person at the center of this (from my perspective in many ways) which is the Chief Marketing Officer. So I think what’s interesting is that I’ve been in marketing for 25, 30 years or something, and I’m fairly new to sustainability in comparison. And I think what I found interesting is how very little in most companies, marketing seems to be involved in the whole sustainability conversation. They just don’t seem to be at the party. They’re sometimes at the end doing the brochures and the messaging about all the changes that the company is doing. But they seem to be like an add-on at the end rather than central to the whole journey. So, I’d be interested from your perspective, Stephen, how can a CMO, (a chief marketing officer), how can they get involved and how can they start driving and leading some of this change, if they can at all?
[00:01:51 –> 00:04:27]Stephen: Good to be on-again, I think it does start with – if you like – with the Board, the C suite, they need to have defined the sustainability conversation in terms of the customer, and that’s when the CMO can help. So if their sustainability agenda is inherently customer focussed, customer-centric: “What is the purpose of our business, our brand, what is its usefulness?” That has to be a customer-facing conversation. If you start there, then the CMO has a chance of success and the CMO is engaged. What the CMO themselves have to do is, there’s a number of things, but perhaps the three most important things: First of all, I think it’s important that the CMO need to define the brand in terms of the brand’s usefulness or inherent usefulness. So they need to – as I mentioned in an earlier video -they need to put sustainability at the heart of the brand strategy. And to do that, they may need to look up various disruptive approaches where they look to re-frame the business they’re in or their role in it. So, for example, Tesla famously says, they’re not in the car business, they’re in the renewable energy business. They just happen to be…. cars are the particular way which they can make a contribution to that agenda. So number one is they need to re-frame the brand in terms of its inherent usefulness to consumers. What is its social purpose? Secondly, I think it’s important, then that there’s an organizing concept or organizing idea that inspires and guides the brand behavior and the brand action so that the integrated marketing communications is consistent with that. And then I guess the third thing is, is that they should have a plan. They should have a plan that says, “Okay, measurable objectives, and what’s our plan of action to get there?”. So I’d say that that’s what CMOs can do, from their perspective, to drive good growth.
[00:04:27 –> 00:04:59]Edmund: And I think we just pick up maybe one or two of the key challenges that they’re going to face. For me, an obvious one is their understanding of the subject. We don’t expect the CMO’s to be sustainability experts. So what do you think could be the first steps that they take in just getting their heads around the subject, getting educated in this area?Any thoughts on that?
[00:05:07 –> 00:05:40]Stephen: Well, listen and learn. There’s a lot of expertise out there. There’s a lot of informed opinions. I recently read a book (I am not looking to plug it particularly) called Greener Marketing, which is a fantastic place to start in terms of helping someone reassess the role of marketing in promoting the sustainability agenda and creating that good growth.
[00:05:41 –> 00:07:05]Edmund: Excellent. And if we’re doing book plugs, I think the one I really like is Rethinking Capitalism by Rebecca Henderson. It’s not about marketing, but it’s a very good business book. I completely agree, Stephen. I think what we should do as marketers – in a way – is just get educated a little bit about the subject and picking up a good book and getting better and looking for short courses and attending events. I’ll give a little plug for some of them: the Economist runs really good events. There are some really good speakers, like Unilever by the way that we mentioned, who talk at some of these events. So without much of an outlay and without committing yourself to a whole year of a Master’s on sustainability, you can actually get yourself up to speed with some of the key concepts. So there’s definitely an education challenge, I think, but they don’t need to become experts. They just need to know the basics. I would say. The other challenge, I suppose, Stephen, what about, let’s say some of the real challenges where you’ve got maybe a Board that isn’t that receptive to the green agenda. Any thoughts about how marketing or the Chief Marketing Officer (or the marketing official) can use the power of the customer?
[00:07:05 –> 00:07:57]Stephen: I think the answer lies in your question, the power of the customer. If I was a CMO, I’d be showing, as I said in an earlier video, there’s a wealth of evidence out there that consumers prefer products that have an articulated social purpose agenda. So there’s some very strong business arguments to be made to the Board to say, “We can grow our business, we can protect our business by pursuing this agenda.” So it’s not simply a nice to have or some form of do-gooding CSR exercise. It can be very hard-headed. Doing good is good for the business agenda.
[00:07:57 –> 00:08:24]Edmund: Yeah. Absolutely. I think it’s one thing I like about the examples of Rebecca Henderson talked about is that actually what we get to the point of doing is saying, actually, the risk of doing nothing is more dangerous than the risk of doing something. And the status quo, the “do nothing” option is no longer on the table. These changes are happening and we need to respond to them.
[00:08:24 –> 00:08:43]Stephen: Absolutely.I mean, it’s an old saying: if you don’t stand for something, you stand for nothing. And there are plenty of disruptors in business today who will eat your lunch if you take the soft approach and do nothing.
[00:08:43 –> 00:09:11]Edmund: Yeah. So, of course, that’s a whole area, isn’t it, of competitiveness? I mean, we talked about the power of the customer, but the other area the CMO should be very attuned with is the competitor activity, and there’s a danger in any industry I think that the organization that’s the least is left behind in the marketplace. And it suffers accordingly.
[00:09:11 –> 00:09:25]Stephen: I mean, brands grow or don’t on memorability and relevance. And if you’re not memorable because you’ve got nothing particularly strong to save, you’re not relevant. You’re going to wither on the vine.
[00:09:26 –> 00:09:48]Edmund: That’s excellent, Stephen. That’s all we have time for now but in the final little video in this series, we’re going to just pick up on this subject a little bit more and talk about the tricky issue of implementation. So thank you very again, Stephen, for your support on this and I look forward to our next video together.
EdmundBradford and StephenMangham discuss how “sustainability” and “good growth” can be real differentiators for customers and other stakeholders
Stephen explains that consumers are more attracted to brands who have a social purpose. There is far more interest, awareness and expectations from consumers that companies are making a positive difference to the world, or at least mitigating any damage they may be causing. “Sustainability” therefore, must be a strategic imperative.
The timings are shown to help you jump in to the video at the right point if needed.
[00:00:09 –> 00:01:10]Edmund: Hello, everyone. I’m Edmund Branford. I’m a Director of the Good Growth Academy, and I’m delighted to have Steven Mangham with us today, who’s a branding expert and a master at Masters of Scale International. Now, in the previous video, we talked a little bit about sustainability, good growth, and marketing, and just getting our heads around the concept a little bit. Whereas in this video, I think it’d be really nice to talk about how sustainability and good growth can be a real differentiator for customers and perhaps other stakeholders in the marketplace. So, Steven, thank you again for joining us. What are your thoughts on how sustainability can be not just a box-ticking exercise for suppliers when filling in tender documents, etcetera, but more of a real differentiator, either in B2B or B2C?
[00:01:10 –> 00:02:22]Stephen: Well, it’s not new news that consumers are more attracted to brands with an attractive point of view on the world who are promoting a sense of usefulness. I remember when I worked on Coca-Cola Live Positively back in 2010 (so it was a long time ago now,) and there was a lot of day-after recall research evidence that said that the advertising that had the most impact in terms of memorability and persuasiveness were the ads that carried social purpose messages. And there’s a wealth of evidence out there in the last few years that – all other things being equal – consumers would prefer to buy a brand that has an attractive social purpose over one that doesn’t. There’s absolutely a strong consumer reward if you can communicate and articulate a strong set social purpose for your brand.
[00:02:22 –> 00:02:31]Edmund: And do you see that both changing and getting stronger in B2C and B2B situations?
[00:02:36 –> 00:04:06]Stephen: Broadly, yes. Certainly from a B2C point of view, there’s far more interest, awareness and, frankly, expectations from consumers that they expect that companies and brands are doing something positive for the world or at least mitigating any damage they may be causing. And that’s getting stronger and stronger. And of course, with a social media-driven world, there are constant conversations all the time about how well brands perform in this way or not. So you can’t ignore this as a brand today. From a B2B point of view, I think, to be frank, every customer and every stakeholder now has an interest and an expectation when it comes to these matters. For example, if you look at the growth of ESG-driven investors, it’s a common question today in analyst meetings, “What’s your ESG strategy?” If you don’t have one, those investors may think twice about investing in you.
[00:04:07 –> 00:04:39]Edmund: And there are very interesting stats now on ESG investment. I think it’s interesting, isn’t it, that a lot of this change is being driven both from the customer side, as you talked about, but also from the investor side and from the government side as well. And it’s almost like this perfect storm now of a force pushing companies towards more of an ESG compliant future, whether it be B2B, B2C or other situations.
[00:04:39 –> 00:04:42]Stephen: Absolutely. Because of all of these stakeholders.
[00:04:45 –> 00:05:07]Stephen: They are both very aware of the wider expectations of the people they serve. And then as individuals themselves, there’s an awful lot of them are thinking it’s important that we do this anyway. So I think, as you say, it’s something of a perfect storm. You certainly can’t ignore that today.
[00:05:07 –> 00:05:57]Edmund: I think from my perspective, maybe more than the B2B space than the B2C space. I think it used to be an old tick box exercise. I have one client I’ve been working with for over 15 years, and their client is Unilever. And so in the past, Unilever has kind of just said “Tell us what you are doing doing on sustainability” and fill in this space on the form. You’ll get the tick in that bit and then it’s on to the other aspects of the service. But now you can’t do that anymore. It’s about “I want to know what you’re doing. What metrics are you going to be using for measuring the change? When is it all going to happen? I want concrete plans. And by the way, if I’m not happy about it, you’re not a supplier anymore.” So it’s much more of an order qualifier now than just a little bit of icing on the cake.
[00:05:57 –> 00:06:31]Stephen: Absolutely. And also, as we said in the previous interview, it’s not about being looking at sustainability as a useful add-on, or it’s some additional measures that you’re taking. Is it at the heart of everything you’re doing? Is it a central part of your strategy? And I think that’s a major shift. And I think companies like Unilever, for example, I know, are expecting from their suppliers that they want to see that sustainability is a strategic imperative for their suppliers as well as for themselves.
[00:06:32 –> 00:06:49]Edmund: That’s excellent. And, of course, the heart of all this, we have this Chief Marketing Officer trying to get their head around it. Trying to make it all work. And in the next video, we’ll talk a bit more about the marketing function and the Chief Marketing Officer. Steven, again, thanks very much for your time.
[00:06:50 –> 00:06:50]Stephen: My pleasure.
[00:06:50 –> 00:06:53]Edmund: I look forward to our next short video in the series.
The marketing function is often seen as the greenwasher of sustainability. Some would say that the other functions do all the hard work of making real progress and the marketers simply share the stories!
Yet, marketing and sustainability actually have a strong connection. In this interview, we explore the subject of sustainable brands with Stephen Mangham.
The timings are there to help you dive into the video at the right point if needed.
[00:00:05 –> 00:01:02]Edmund: Hello, everyone. I’m Edmund Bradford. I’m a Director of the Good Growth Academy and today we’re going to be talking about sustainability and marketing, which I think is a really interesting area. I’m delighted to have with me Stephen Mangham, who is a branding expert and also a Master at Masters of Scale International. You and I, Steven, have chatted a little bit in the past about branding, sustainability and another concept that we’re kicking around called “good growth.” It’d be really interesting to get your thoughts on what we mean by Good Growth, a good growth brand, and how that is different to other brands that are out there. So any thoughts are very well received!
[00:01:02 –> 00:01:29]Stephen: Okay. Thanks. Well, the purpose of marketing has always been to produce growth. So in today’s world, I’d argue that the role of CMOs is to produce good growth, where sustainability is a strategic imperative at the core of their brand strategy.
[00:01:31 –> 00:01:40]Edmund: When we talk about good growth, do we mean sustainability? Is that something different to sustainability?
[00:01:40 –> 00:02:29]Stephen: We do mean sustainability. But I’d say two things about it. First of all, that it is where sustainability is at the core of the brand strategy. It’s defining the brand in terms of its social purpose rather than being an add-on or an addendum or a part of the brand, it’s core to the brand. Arguably, it goes further than simple damage limitation or mitigation. It’s about the idea of being that good that you put in more than you take out. When you define a brand in terms of its social purpose, ultimately it’s putting more into the ecosystem than it takes out.
[00:02:29 –> 00:03:02]Edmund: That reminds me of something that I saw a couple of weeks ago from Professor Steve Kempster, who’s a Professor at Lancaster University. He was telling me about the fact that we now talk about a regenerative company as being a higher goal. You’re thinking there about being “net good”. Is that a higher goal than just being sustainable?
[00:03:02 –> 00:04:12]Stephen: Yes, I think it is. Net-zero is a very laudable target, don’t get me wrong. But it’s about a different way of looking at your business as your brand. It’s about the idea that it isn’t looking at sustainability in terms of damage limitation or defining it in terms of mitigation or what steps can we take to mitigate the impact we have on our world. It’s looking at it in terms of what is the inherent usefulness of our brand or our business? Where is it actually a promoter of good things in some way? And it’s about looking in terms of the brand as saying, on balance, that it has a strong social purpose that is inherently useful to society in some way. It’s taking all the right steps in terms of its impact on our world, both in positive terms as well as negative terms. But at the end of the day, it’s actually about being net good.
[00:04:13 –> 00:04:24]Edmund: Which companies would you put down as at least attempting to do this in a proper fashion?
[00:04:24 –> 00:05:00]Stephen: There are so many companies that are doing that at the moment, and obviously, there are some companies that were created from scratch with a sense of social purpose. Who Gives a Crap, for example? But actually, there’s also a large number of the larger companies who are taking significant steps. So if you think of Unilever, for example, Alan Jope has famously gone on record as saying that if a brand in their stable of brands doesn’t have a social purpose that they can define, they’ll sell it.
[00:05:01 –> 00:05:04]Edmund: Yes, that’s right.
[00:05:05 –> 00:05:19]Stephen: They’re taking major steps in terms of giving all of their brands a defined social purpose and measuring the impact and the success – or otherwise – of that purpose.
[00:05:20 –> 00:05:38]Edmund: Excellent. And I think when we’re talking about a kind of good growth brand, it’s a brand that can be applied at a company level or could be applied at a product or service level. Do you see that? Or is it only a corporate level where this works?
[00:05:38 –> 00:06:52]Stephen: It can work at a corporate level. Of course, it can. It must because you have to look at the way you do business as an organization. But I guess what we’re talking about here more specifically, is defining your brands in these terms. By doing that, you are looking at your brands. At the end of the day, you define your brand in terms of consumer appeal, and a brand lives or dies. Of course, in terms of how strongly it resonates with customers and how it persuades more consumers to buy it more often. So when you’re looking at sustainable brands as opposed to sustainable companies, you’re defining it in customer-facing terms. How is the brand inherently useful for its customers and defining it in terms of social purpose? How will a brand, as a result, be more relevant to consumers, drive talk-ability, even protect its price elasticity, for example? So with brands, we’re talking about a customer orientated centric conversation.
[00:06:53 –> 00:07:06]Edmund: Excellent. And that, by the way, is a great teeing up for our next video, which is going to be all about differentiation. So many thanks, Steven. And I look forward to another conversation with you shortly.
[00:07:06 –> 00:07:08]Stephen: Thank you very much. Great to talk to you. Ed.
When we speak about economic growth, it is an incomplete concept. I agree that we need economic growth but we also need improvements in the quality of life and living standards. Growth without contributing to improvements in life is incomplete and selfish. It is economic development that has been always preferred over just growth.
The Economic development so far
Since industrialization, there has been more focus on corporate revenues, profits, and returns. There has been a lot of attention towards balance sheet indicators, financial reporting, and achievements by investors that can be measured and scaled by financial bookkeepers. Popular global stock indices such as S&P 500 have experienced annual double-digit returns for the last decade. In the year 2020 itself, there has been triple-digit gains for some individual stocks. Tesla stock has surged 665%, and shares of solar energy company SunPower have risen about 500%.
There is no denial that as far as global corporations are concerned the story of growth is powerful. However, this is an incomplete story when we see its impact from the development point of view.
Further, there have been repeated issues such as corruption, negligence, fraud and lack of accountability from leading global corporations. Issues such as false product claims, unethical accounting, poor working conditions, sexual harassment, trade secret misappropriation, and selling customer data have been identified and questioned. Such issues are detrimental to the quality of social and governance ethics and the value system of life.
Why ESG (Environmental Social Governance) and Sustainability have become so important.
We have to go beyond narrow growth and focus on broader development. This is where there is a direct alignment between the financial factsheet and environmental, social, and governance (ESG) structures that globally raise the quality of life of all stakeholders. Investors, consumers, producers – and especially regulators – should seriously consider ESG factors connected to sustainable development.
“We have to connect the dots between authority, responsibility and accountability.”
In the past, there has been a lot of emphasis on financial growth and authority. This has been very expensive, unjust and detrimental to the environment and some sections of society. Now, with the evolution of better data, knowledge and information on non-financial factors, it is time to raise the standards of responsibility and accountability by adding a mandatory ESG factsheet along with a financial factsheet.
Considering ESG investing looks at “extra-financial” variables (or factors) that measure development and quality.
Environmental factors qualitatively and quantitatively measure a company’s stewardship of the environment by focusing on how companies are impacting the environment by measuring waste and pollution, resource depletion, greenhouse gas emissions and deforestation. These factors also consider how companies will be impacted by both physical and transition climate change risk.
Social factors consider how companies treat people and focus on employee relations and diversity, working conditions, local communities, health and safety, and conflict.
Governance factors check corporate policies and corporate governance structures. This includes tax strategy, executive remuneration, donations and political lobbying, corruption and bribery, board diversity and structure.
The Sustainable Development Goals
At the United Nations Conference on Sustainable Development in Rio de Janeiro in 2012, global leaders defined the path of sustainable development by stabilizing the Sustainable Development Goals (SDGs).
The purpose of this was to produce a set of universal goals that would help combat the urgent environmental, political and economic challenges. These goals are the ideal development destinations that we want to progress towards.
Today I see the G7 countries and major OECD countries like the UK, Canada and New Zealand supporting a move towards mandatory climate-related financial disclosures. The United States SEC (Securities and Exchange Commission) already has broad authority to require climate and other ESG disclosures.
This is only the beginning. With more reporting and stronger mandates from investors and regulators to include ESG considerations, many companies will find that they do not have an option to ignore it. The rise in ESG will both drive us and track us on the path to sustainable development. Development is growth powered by measurable improvements in quality of life.
Sustainability is a rising business issue that needs to be included in your marketing plan
Customers are demanding more transparent sustainability in choosing their provider
We explain why and how including it will help you and your brands to grow
The rise and rise of sustainability
Global investment in sustainable companies (also known as ESG) has risen dramatically over the past seven years. In 2014, less than $20 trillion was held as assets under management. In 2020, this had risen to over $30 trillion.
There are now more funds being invested in sustainable companies than in other companies. This rise in investor interest in sustainability shows no sign of stopping. This is a major driver to work on a sustainable marketing plan.
By 2025, Bloomberg estimates that over $50 trillion will be invested, which is about one-third of forecasted total global assets under management (see ESG assets may hit $53 trillion by 2025, a third of global AUM by Adeline Diab and Gina Martin Adams). The rise of ESG as an accepted measurement system for sustainability has been a key driver in the rise of investor confidence.
At a Government level, there are trillions of dollars being invested in sustainability. For example, in December 2020, the European Union agreed a €1.82 trillion Green Deal to support a green recovery. In February 2021, U.S. President Joe Biden announced a $2 trillion Green New Deal. The UK Government has committed itself to legally binding targets in its 2008 Climate Change Act and will showcase its efforts at the COP26 UN Climate Change Conference in Glasgow, Scotland this November. There is also rare cooperation between Western Governments and China on sustainability.
Consumers are also forcing change. A recent report by GfK has shown how environmental awareness and eco-activism are rising across global consumers. For example, 24% of consumers are now taking prompt measures to cut their plastic waste (see “Eco-activism in FMCG is rising” image below from research done by Growth From Knowledge https://www.gfk.com/). Moreover, the Covid pandemic has driven an increase in environmental awareness as people breathe cleaner air and rediscover nature.
These changes are driving more sustainable practices throughout supply chains. In the B2B area, work is being done by procurement teams on how to measure supply chain sustainability. Unilever is one company driving its supply chain to become more sustainable and amongst many activities has recently announced that it will be asking its suppliers to add their carbon footprint to their invoices. Joint programs are underway in many industries to reduce total waste. For B2C consumers and B2B customers, sustainability is becoming a key need alongside needs like cost and brand experience.
Why sustainability needs to be taken seriously by marketers in their plan
Sustainability is reshaping the marketing landscape.
Changing customer needs
Firstly, it is changing customer needs. Research by GfK (Crisis as Catalyst report, 28 Apr 2021, by Growth From Knowledge ) suggests that consumer needs such as lower waste, preserving nature and more energy efficiency are rising in importance. In the B2B space, customers like Unilever are demanding better marketing plans and more accurate measurements from suppliers about how they will become more sustainable. Failure to produce viable plans and track implementation progress could lead to deselection as a supplier.
Sustainability is changing customer demand
The most obvious example of this is in the Electric Vehicle (EV) market where the IEA expects a 13 fold increase in the number of EVs on the world’s roads by the end of this decade. But this is not just happening in the automotive market. According to a 2020 report by Deloitte (Shifting sands: Are consumers still embracing sustainability?) between 28-45% of consumers have already bought more locally produced goods, or actively chosen sustainable or ethical brands, or stopped purchasing brands because of sustainable or ethical concerns. The change in demand is already happening.
These changes are driving the appearance of new segments, new products/services and new competitors.
So where is sustainability in the marketer’s world? Change is being driven by CEOs, by CFOs, by procurement, the supply chain function and new Chief Sustainability Officers, but rarely by marketing. For the worst companies, marketing is tasked with talking up the meager investment being put into sustainability as a mere tick-box or greenwashing exercise. For the average company, marketing is left with the role of communicating to customers (and other stakeholders) the work being done by others. But for the best companies, like Unilever and Pepsi, marketing plays a key role in re-shaping the sustainable market strategy of the firm and its entire supply chain.
Stephen Mangham, a branding expert and Master at Masters of Scale International, summarizes this well when he says, “The purpose of marketing has always been to produce growth. The role of CMOs today is to produce ‘good growth’ where sustainability is a measurable, customer-driven strategic imperative.”
Why we need sustainable marketing plans
After all your communication efforts over the years, how trusted is your brand on sustainability? Very trusted? Somewhat trusted? How about not trusted at all! Sadly, according to the GfK report, only 25% of consumers trust businesses to tell them the truth. This compares to 64% who trust academics, 34% who trust the media and is only two percentage points above celebrities!
It’s time for marketers to stop being the brand spin doctors and to become the brave sustainability do-ers. Marketers need to help their firm find the best green segments, introduce and grow new greener products and services, change its purpose and reap the rewards from customers, from investors and from available government incentives. The brand will then reflect the true work being done.
The experience of leading companies like Unilever and Pepsi is that being truly sustainable is not a trade-off between profits and planet, it is a mutually inclusive journey that drives stronger growth.
Dr. Pooja Khosla, Vice President of Client Development at Entelligent Smart Climate Investing reinforces this point: “Many businesses are struggling to define the real and measurable impact of their offerings on the environment and society. Marketers can help achieve this and empower sustainability.”
Sustainable thinking needs to be in most areas of the marketing plan: the mission statement, the financial projections, the market overview, the SWOT, the competitor analysis, the objectives, the strategies, the value propositions, the digital marketing tactics, the resources, the actions, the measurement, and the assumptions.
Doing this develops a better growth path for the company to follow. That is better for the customer, the company, the brands, the supply chain, and the planet.
Developing skills in sustainability is better for marketers as well. The demand for people with sustainability skills is skyrocketing. I have personal knowledge of a recent master’s graduate in sustainability who was recruited by an international engineering firm and is now working with the United Nations on developing better measurement standards.
Going green is not just for the eco-warriors. It makes good business sense. Marketers can play a massive role in making this happen. They need to stop being seen as the greenwashers of the past and act more like the leaders of real sustainable change. Marketers need to move from the edge to center-stage in building real sustainable companies built on “good growth brands.” A key tool to do this is a sustainable marketing plan.
Many leaders would like their organization to be more sustainable. However, the path is not easy and one major challenge is dealing with the short-term demands of investors. In this article, Pooja Khosla, VP Client Development at Entelligent answers the following key questions:
What are the key challenges to organizations becoming more sustainable?
What are the answers?
What are the key lessons for anyone wanting to help their organization become greener?
The key lessons lie in three keywords: Education, Engagement, and Momentum.
Some background of Dr. Pooja
Dr. Pooja Khosla is an economist and mathematician with a deep interest in sustainability and the financial effects of climate change. She has nearly 20 years of experience in predictive modeling, microfinance and designing climate impact tools for investors, banks, corporations and other organizations like the United Nations. She has been working with Entelligent since 2016 developing its data science team, its Smart Climate system and its climate risk related products.
Entelligent (www.entelligent.com) is one of the most respected brands in climate risk assessment. It recently announced a partnership with Société Générale to launch an index to score companies in the S&P 500 on their exposure to environmental issues.
What are the key challenges to organizations becoming more sustainable?
I began the conversation by asking her what the key issues are holding back firms from becoming more sustainable, more quickly.
Pooja: “There is certainly a lack of understanding of the issues. For example, some organizations sign up for a Net Zero commitment without understanding what they have signed up for. They do not realize that the scope of the commitment could include their whole value chain from suppliers down to their end consumers.
There is also certainly a problem with greenwashing. It is easy for firms to aim for minimum acceptable performance, like complying with environmental regulations, and then beefing up their messaging to make it appear that they are committed to sustainability.
90% of S&P 500 Index Companies published Sustainability Reports in 2019, however, less than 11% of the organizations were meeting qualified reporting standards.“
What are the answers?
We then turned to her thoughts about the answers to these challenges.
Pooja: “One thing to bear in mind is that 20 companies in the world contribute to one-third of global greenhouse gas (GHG) emissions. That means that whatever improvements we can make in these few companies and their value chains will have a significant impact on global emissions. Of course, most of these companies are in the fossil fuel business and it is not easy to turn them around. However, we have seen a flurry of recent announcements (for example at ExxonMobil) about a much stronger commitment to sustainability which gives me hope that this sector is now turning.
A key to delivering real change is education. Investors are now much more knowledgeable about climate risk and its financial impacts. More investors understand that sustainability can affect valuations in the short term as well as the long term. They have seen the dire effects of sudden extreme weather events on agriculture, hospitality, and transport and the rapid damage that a consumer revolt can do to the brand of a polluting company.
We should note though that the actual levels of pollution or climate exposure in a firm is not the key metric. What is more important than actual levels is the rate of change. A firm that is maintaining its rate of progress towards sustainability can be more attractive to an investor than one where progress is slowing, possibly because all the easy actions have now been done.
We also need more engagement. First of all, we need more engagement from leaders. There is no doubt in my mind that some firms really are committed to becoming sustainable and are sustainability leaders in their sector. I would put firms like Ingersoll Rand and Volkswagen in this category. They are led by visionary leaders who are engaged with the issue and are driving it passionately. They do a better cost-benefit analysis of sustainability options. They also have a better understanding of the three types of climate risk. These are:
Climate transition risk. This is the risk that the organization does not change sufficiently in the desired time period
Climate physical risk. This is the risk to the organization from climate change including rising sea levels, hurricanes, floods etc.
Climate reputational risk. This is the risk to the organization’s brand reputation from its contribution to global warming.
Then there is the next category of firms that are the sustainability followers. They are keen to progress but lack the understanding and engagement of the sector leaders. Finally, there are the sustainability laggards. These are the slowest to change and see sustainability as a business distraction.
More engagement is also needed from investors. Things are moving in the right direction and we have seen great examples of good investor engagement recently, for example, in the latest annual letter to CEOs from Larry Fink at BlackRock where he makes it clear that he is looking to invest more in sustainable companies and less in unsustainable ones.
We also need more engagement from customers. Consumers and businesses need to tell their suppliers what is expected of them and move their spend to the most sustainable suppliers.”
What are the key lessons for anyone wanting to help their organization become greener?
To conclude, I asked her what key messages she would like to offer any green change agents out there.
Pooja: “I would summarize my advice in three simple words: education, engagement and momentum. By momentum, I mean both the direction of travel and the speed of change. It is no good traveling fast in the wrong direction. Nor is it useful to have high aspirations which are unattainable in our lifetime. It is better to keep moving in a good direction. This will build confidence and experience and is itself more sustainable.”
The journey to sustainability is not easy. However, focusing on these three words will help to ensure your efforts are well invested.