By Chris Grannell, Consulting Director, Ellis Foster McVeigh.
Last year several leading organisations pulled out of the US Chamber of Commerce in a high-profile stoush about policy towards emissions trading legislation.
This wasn’t a disagreement about the priorities of a particular methodology or about the vicissitudes of legislative detail: it was a fundamental dispute on basic policy. Emissions trading legislation will cost companies money, therefore (the Chamber of Commerce argued), commercial businesses should be against it.
So why did Apple, Nike and others oppose the stance of their former Chamber? It’s an example of something we’re seeing with increasing frequency. In Europe, firms like Unilever, Vodafone and Tesco have joined the UK Corporate Leaders Group on Climate Change (CLG) which, amongst other things, lobbies for more legislation in this area.
The CLG claims the actions of its members have “‘emboldened’ senior politicians to make decisions on climate policy that go much further than they would have done otherwise”. What’s going on?
In Asia Pacific, developer Lend Lease recently caused a few raised eyebrows when it mooted lending its name to legislation proposed by the Australian Greens to lobby for an emissions trading scheme for the commercial real estate sector.
Meanwhile Chinese mobile telephony giant Huawei has nailed its flag firmly to the mast by joining the Global e-Sustainability Initiative. It’s the only Asian manufacturer to join the GeSI, which is a partner of the UN Environment Program.
A visitor from another world – let us call him Milton from planet Friedman – might be tempted to ask why companies would volunteer to be subject to additional regulation. And Milton’s inquiry can’t be dismissed as a foolish one.
It’s true that a company might argue for more legislation just because it’s socially good to do so, but it turns out that there’s lot more to the story than that. Milton would be relived to hear that there’s a commercially-grounded argument for being green – and even to advocate for tougher legislation – provided the company pursuing it is already in a leadership position.
Smart organisations realise that sustainability can be a source of competitive advantage. Commitment to sustainability can deliver commercial benefits such as reputation, cost reduction (less waste, more efficiency) and revenue growth (new customers, higher premiums, new markets).
Added to these is a curious category of advantage: something that occurs when a leading firm gets ahead of the game by stealing a march on competitors and leaving them wheezing and gasping to catch up.
This type of advantage – ex ante advantage – can be enhanced further when organisations persuade the market to move faster in a sustainability direction, thus leaving poorly-prepared competitors further behind. Leading firms like Unilever, BP, Toyota, Huawei and Lend Lease have all tried this. And it works.
Innovation guru Geoffery Moore has argued that addressing the major issues of our time is – and always has been – fertile ground for commercial opportunities. The coming decade will witness to enormous social, political and demographic strain around issues like decarbonisation, emissions reduction, resources management and fuel diversity.
Marketers take note: this is about developing and managing a response to these external (market) pressures – in other words, what marketing is supposed to be about.
Marketing has for many years been the bogyman of sustainability. As supply has outstripped demand, conventional thinking has been that marketing’s role is to encourage consumers to buy more products, thus raising quantity demanded to match capacity. Added to this are criticisms of greenwashing, which have painted the marketing-sustainability overlap into a corner dominated by PR.
It’s time to move beyond these narrow conceptions. Sustainability and market-based thinking (not just from the marketing department) should be joined at the hip. There are two reasons for this:
First, the apparent need to reduce humanity’s impact on the planet requires behaviour change, and the ability to influence human behaviour is a particular competence of marketing. Within a social framework, market-based thinking will help educate and persuade consumers of the need to alter their behaviour.
It can help shift consumption from Hummers to Health Spas. For companies that seek to provide new types of products and services, marketing will – by guiding perceptions – turn strategy into equity and attractive theory into attractive products.
Second, but no less important, is the role that marketing processes and frameworks can play in understanding markets rather than merely seeking to influence them. Sensitivity to markets can help firms refine and present green products in the best possible way, giving them the best possible chance of success.
Marketing can help firms identify and respond to hitherto unmet customer demands for green, so that a growing need for green products is satisfied.
Even if your organisation is green not because of commercial opportunity but because of some inner conviction – something our visitor from planet Friedman might dislike – market-based thinking is critical.
Regardless of your motivations, throwing a green claim at the market and expecting it to stick is the modern-day equivalent of the “build it and they will come” mindset that we saw with many hi-tech products in the 90s and early 00s.
At the broadest level, there are three market-based strategies to sustainability: respond to the market, change the market, or camouflage the product. Pursuing any of these three options – and deciding which is the best approach – depends a marriage of market-based information and a firm’s capabilities.
Where is your market along the adoption curve? How mature is the market? How do target customers relate to sustainability? What kind of trade-offs are they willing to endure? What, for them, is worth paying more for? And where do you – can you – fit?
Leading organisations in all sectors have the potential to create enduring competitive advantage by embracing sustainability. Market-based strategy is essential in doing so.
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