September 8, 2010

TRENDS

BRAND/REPUTATION MANAGEMENT/DEVELOPMENT
Research indicates that with corporate transparency, social responsibility and sustainability practices come undisputed gains in corporate brand and reputation. As early as 2001, a study by SustainAbility concluded that almost every indicator of business commitment to sustainable development (e.g., community engagement, environmentally-conscious process and products and the application of ethics, values and principles in business conduct) was positively correlated with brand value and reputation.^I Consumers are wary however, of companies that practice “greenwashing,” or that tout one set of responsible (e.g., “eco-friendly”) practices while the company’s other behaviors (e.g., labor practices) are less than responsible.

SHAREHOLDER PRESSURE
There is increased awareness both nationally and globally that corporate behavior affects social, political and natural environments. Corporate shareholders are also increasing their demand that the companies they invest in use responsible business practices.^II According to the Investor Responsibility Resource Center (IRRC), from 1973 through 2004 over 15,000 shareholder resolutions were filed at US firms concerning various social responsibility and governance subjects, one-fourth of which were filed between 2001-2004.^III Shareholder resolutions around social responsibility increased focus on environmental stewardship, sustainability reporting, climate change and labor practices.

REPORTING MANDATES
While the US hasn’t adopted formal reporting mandates for social and environmental performance indicators as some European nations have, reporting of responsible practices is increasingly requested down the supply chain, through shareholder resolutions, and by an increasingly aware and conscientious public. Undergoing of social and environmental audits and filing sustainability reports is becoming increasingly relevant to the attraction and retention of staff, as well as to competitive advantage and customer loyalty.

COMPETITIVE LANDSCAPE
The competitive landscape holds key advantages for companies that are socially and environmentally responsible: studies indicate that between 77 percent and percent of consumers are already more likely to buy from a company that is committed to the triple bottom line (“People, Planet and Profit”). Furthermore, the World Business Council on Sustainable Development (WBCSD) notes that Corporate Social Responsibility (CSR) and sustainability are “critical to the long-run success of business” because “companies cannot operate effectively in societies and economies which fail to protect and support production and consumption of their products and services.”iv Because a business relies on access to raw materials, safe working conditions, thriving consumer markets and safe mechanisms for waste disposal, its future success depends on its ability and willingness to foster sustainable economic, social and environmental development.
Customer Loyalty

A recent McKinsey Quarterly study showed that 89 percent of consumers believe that corporate financial obligations to shareholders must be balanced by contributions to the broader public good.^V This majority opinion puts businesses in a position to leverage the communication of their responsible practices in order to gain customer loyalty. Those consumers who already know and care about these issues comprise an increasing percentage of the market, and seek brands that they know embody positive social and environmental values. In addition, a growing number of companies are screening suppliers and partners for environmental and social performance, so business-to-business sales are also becoming increasingly dependent on responsible practices.^VI

STRATEGIC PLANNING:  ANTICIPATING META-TRENDS
Environmental issues like climate change and fresh water access are representative of meta-trends that will have long-term impact on organizational planning in terms of shifting business risks and opportunities. A company’s typical strategic planning process to prioritize key initiatives and determine the most successful methods of execution for high-return results must anticipate environmental and social meta-trends and incorporate their impacts into business strategy in order to remain as competitive as possible. Effects of these meta-trends could include, but are not limited to, changes in regulatory environments and stakeholder demands.

ATTRACTION/RETENTION OF WORKFORCE
As human and intellectual capital increasingly replace the need for physical capital, and as recent graduates at all academic levels seek employment that is good for society and the environment, corporate responsibility and sustainability practices will become vital to lasting competitive advantage. Consider the following: A SustainAbility study found that “a positive reputation specifically in the areas of environment and human rights will increase a company’s ability to attract and retain staff, while a negative reputation in these fields and a lack of ethics and integrity will decrease it.”^VII Meanwhile, Fortune Magazine notes that “the single most reliable predictor of overall excellence in a company is its ability to attract and retain talented employees.” Finally, a study by Students for Responsible Business found that 82.7 percent of respondents chose an offer from a more socially responsible company if the salaries offered were equal, while over 50 percent were also willing to take a lower salary to work for a company with a good sustainable development reputation.
Increased Community Asks

A SustainAbility study included as a central conclusion that society is showing increased scrutiny of and concern for corporate practices related to sustainable development.^VIII Individuals seek not only positive direct impacts but also a proactive use of the broader influence that businesses have on the market and public policy environment. The trend is often intensified within the community in which the company is located, as local citizens want the business to have a positive impact on the local environment, economy and employees.
Negative Press/Lobbyist Pressures

Many businesses adopt and publicize socially and environmentally responsible practices in order to avoid the threat of negative press or lobbyist pressures. Companies such as Nike and Wal-Mart, who were once berated as social and environmental antagonists, now embrace corporate responsibility and sustainability practices and reporting in an effort to renew their public image. Furthermore, a Weber Shandwick survey of 8,000 consumers in 2001 indicates that 80 percent of high-education/high-income people in the US have considered switching brands when a company was negatively portrayed in the media with respect to social responsibility issues.^IX

CLASS-ACTION LAWSUITS
Many businesses seek corporate responsibility consulting because they are facing litigation for one or more environmental, social or corporate governance (ESG) issues. Other companies want to make sure they have legal standards under their belts to avoid such litigation. Assessment and subsequent reporting of a company’s responsible practices can help prevent litigation or assist in crisis management in the aftermath of a lawsuit.

 

1. SustainAbility. “Buried Treasure: Uncovering the Business Case for Corporate Sustainability.” 2001. p 24-5.
2. SustainAbility. “A Responsible Investment? An Overview of the Socially Responsible Investment Community.” 2000. p 30-1.
3. Voorhes, Meg. “The Rising Tide of Shareholder Activism.” Investor Responsibility Research Center. Sep. 2005.
4. WBCSD. “Driving Success: Marketing Sustainable Development." Oct. 2005. p 10.
5. Bonini, Sheila, Kerrin McKillop, and Lenny Mendonca. “The Trust Gap Between Consumers and Corporations.” McKinsey Quarterly. 2007.
6. SustainAbility. “Buried Treasure: Uncovering the Business Case for Corporate Sustainability.” 2001. p 22-3.
7. SustainAbility. “Buried Treasure: Uncovering the Business Case for Corporate Sustainability.” 2001. p 26-7.
8. SustainAbility. “Coming in from the Cold: Public Affairs and Corporate Responsibility.” 2007. p 1.
9. WBCSD. “Driving Success: Marketing Sustainable Development." Oct 2005. p 4.