BW Communities

Analysis: Mixing It Right

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[Economist Milton Friedman wrote in 1970 that a corporation's sole moral responsibility was to increase shareholder's profits. But that paradigm is changing fast. In today's transparent world, a corporation's moral responsibility is delivering total shareholder value, which is more than just delivering profits of today and tomorrow. Companies must also deliver to their shareholders the rewards of affiliation with an entity that values good reputation, ethical code of conduct, builds human potential and acts responsibly towards its stakeholders. Research has shown that companies, which cherish sustainability and act with broader perspective, deliver better returns. Closer home, Tata is a great example where equity, built by sustained CSR and nation-building, has helped the group immensely with consumer and investor support.Coming to the Bx story, it seems to be a case of shotgun approach to brand building and CSR. With the influence of corporates, they do need to adopt the principle of Triple P bottom line — profits, planet and people. But they must address them distinctively. Within Triple P, a corporation's first (but not sole) objective is to deliver profit in the right way. If that fails, all other ulterior goals are unachievable as the corporation is not sustainable. Bx was presumably doing well by delivering on its core proposition of unsurpassed freshness in its coffee experience. But then Bx seems to have been seduced by powerful insights in evolving societal and consumer expectations from corporations. Reportedly, 40 per cent US consumers patronise products from companies with strong moral and political values. Increasingly, investor community and specialist funds are taking CSR into consideration.While responding to such societal expectations is correct, it should be done in a meaningful and an integrated way, not in a throw-away fashion as Bx seems to be doing. Bx product brand's core promise of product freshness has been crudely linked to ‘doing good' by Bx, risking its product brand image and Bx corporate image. The sugar sachet story can possibly be explained by a scenario like this: "You get the freshest coffee because we don't use coffee after seven days — a great reason for superior freshness, claims the marketer justifiably. Then a CSR-biased corporate honcho says, "The public would think that we are wasting unused coffee and tarnish us as not green. Not ok." So, they work out a clever idea of doing good by donating unused stuff to charity, imagining coffee to be a great human necessity! Some people call this greenwash. First, the audiences of product brand and CSR are often different, although they might be some convergence. Products are distinctly for users and company must remain focused on delivering value in their experience. CSR is normally for stakeholders. So, the company must be equally sharp in delivering value to CSR target audience, which should be a relevant payoff. It may have little to do with the company's product or service offers. If it is naturally linked with company's activities, it could be a win-win situation. In fact, linkage is desirable because it makes CSR sustainable. But where there is force fit, the failure could happen. The Bx marketer is trying to create a halo effect of good cause and runs the risk of triviality and subsequent rejection by both audiences. Reading the sugar message might give several loyal customers angst about the company's naivety or false sense of doing good. My suggestion to marketers is do not play with consumer's emotions or exploit the sensibilities of a plain coffee drinking customer! Surely the company could do something more meaningful. Also, my advice would be to avoid mixing unrelated issues in targeted marketing communications as it runs the risk of diffused messaging or even dissonance. There are great win-win examples such as Cadbury's support of cocoa farmers and claiming fair-trade endorsement. If not, just support a good cause through cash, material or organisation resource.What I like in the Bx story is their declaration of CSR intent. One of the risks in CSR is its being volatile with profits. However, if you openly declare commitment to a cause, it will reap long-term benefits for the company. I would like to close with a recent case of changing expectations of society. With Iraq now open for oil exploration by foreign investors, a Chinese Oil company was surprised when local population objected to extracting crude from ‘their land' without them benefiting. Although perfectly legitimate, this new MNC may not have realised that paradigm of ownership is shifting from legal ownership to sustained mutual benefits and value sharing with the society. In a world of $100 per barrel, it is not difficult to understand the anguish and reaction of an impoverished society feeling exploited by a foreign company. The tension between legal and moral correctness can often be resolved by sharing the prosperity with the society where companies generate wealth for their shareholders. Naveen Kshatriya is vice-president Asia & Pacific, and regional head of BP Castrol Lubricants, based in Singapore. <script type="text/javascript"> var intro = jQuery.trim(jQuery('#commenth4').text()) var page = jQuery.trim(jQuery('#storyPage').text()) if (page.indexOf(intro) < 0) { jQuery('#commenth4').attr('style', 'display:block;') } </script> (This story was published in Businessworld Issue Dated 05-10-2009)