In his role as CEO of Sainsbury’s, Mike Coupe is responsible for 24m customer transactions per week, a workforce of 161,000 people and group sales of £26bn. He assumed the leadership role in July 2014, just as new discount operators triggered a period of profound change in the supermarket sector.
Our evening with Mike focussed on how companies can work with their customers to build more sustainable businesses. We discussed how a lack of consumer “pull” for social and environmental initiatives should be balanced against rising expectations from society, and how tomorrow’s business case for sustainability will be made.
Sainsbury’s has an interesting story on the customer. When it went through our “Going Naked” process in 2012, 200 experts identified the biggest gap in Sainsbury’s sustainability programme as “engaging its customers”. Mike discussed Sainsbury’s initiatives since then, including its “Value of Values” campaign and its attempt to overturn an Advertising Standards Authority decision.
Mike shared fresh insights from Sainsbury’s latest market research. Through a speech, an interview with Axel Threlfall and audience Q&A, we covered issues such as;
Why a gap exists between the citizen & the consumer on sustainability issues
The changing consumer – how values differ in-store and online
From marketing to mattering – what to communicate, and when
How to weight reputational risk against consumer pull
The role that data can play in shaping demand patterns
Companies that rely heavily on customers for their sustainability business case will make little progress. Do you agree with that statement? Are they also harming their value? We ask the table to draw up a framework of the different forces, with examples, that form today’s business case for sustainability. The ability to hire, reputational risk, the cost of capital, the ability to innovate, etc.
It is well known that people who are interested in social and environmental issues often fail to factor them into purchasing decisions. What are the steps that business can take to connect the citizen and consumer? Point of sale information, certification, choice editing, shaming and rewarding – what works and when? Which companies does the table admire?
• People don’t do what they say they do - Nectar card data proves this!
• Consumers make quick decisions and can’t absorb lots of messaging
• Consumers expect businesses to have ‘done’ sustainability
• Pre-competitive agenda: not enough dialogue between organisations to find where the key collaborative ‘show-stoppers’ are but how to get the customer pressure for that work?
• No consistent basis on which people can make purchasing decisions and no underlying understanding of labels e.g. Fairtrade (even though it is so successful)
• Many people have a mis-placed perceptions about brands and what best practice is
• Values & interests change fast with what is in the news, popular culture etc.
• These are really complex issues – the more we know, the more our idea of best practice changes. How do you take customers with you on this journey?
• How to change behaviour beyond where there is a financial win-win?
Which companies are admired?
• Elon Musk admired for making sustainable goods sexy, fun & engaging
• Aston Martin pitch sustainability even to petrol heads
• Remember that people don’t buy the features of the product or the technical detail, they buy the end feeling. Ultimately need to make the better product so that consumers associate the feel good factor with it.
• Term the pitch in terms of those aspects important to the consumer at specific points in decision making e.g. point of sale
• Can’t preach or use too many messages. Carefully choose when & how to tell stories
• Actively message on issues about which consumers are already primed e.g. food waste but have to do all the other important things to prepare for the issues of tomorrow
[Note some debate over business’ role in championing new issues]
• Combine the ‘package’ of relevant criteria for decision making, not just sustainability on its own e.g. Birds Eye packaged sustainability messaging together with health
• Use the channels where customers look for information e.g. social media for new mums.
• Products have to meet the necessary hygiene factors; sustainability can add the feel good factor, creating an association with emotional enjoyment of the product
• Consumers don’t want to change their buying habits but want to know that the company has done the work. Need to slowly build brand perception around sustainability (no quick wins as consumers are cynical about CSR)
• Have to be careful when to communicate sustainability as though it is an ‘additional’ characteristic of a product rather than part of the brand’s standard offering.
• Don’t use language that is disengaging for people e.g. ton of carbon
• Do some things quietly in the background first then provide messaging to show thought process & take consumers on your journey.
• Pictures are effective for communicating complex messages
• Shaming people may play a role (e.g. t-shirt vending machine with shocking video)
• More effective to reward people for their actions & to inform them of their good decisions
• Use peer comparisons to appeal to need for keeping up with the Joneses
Changing customer attitudes and behaviours towards environmental issues is challenging, but success stories are emerging. Coca-Cola Enterprises used an ideation process to co-create recycling solutions, M&S’s “Beach Clean-ups” have engaged customers on marine issues and Anglian Water’s "Love Every Drop" has changed water use. Can the table identify the principles of what works?
• Keep it simple: Lots of behaviour change techniques are “no brainers” but are still not implemented. The issue of the “environment” seems abstract to most people – even climate change is perceived as being outside of the control of most consumers. It is better to talk about specific individual activities such as recycling, saving water. To overcome the sustainability “fatigue” one can use simple directional language, such as “Wash at 30 degrees”; remove the Best Before from product packaging; or write advice on cans of tinned tomatoes, which may otherwise go to waste once opened, advice on freezing the rest of the can instead of throwing it away.
• Deliver a bigger value proposition: Enable customers to feel like ‘savvy shoppers’, such as saving money but also doing something for the environment. For example, Birds Eye’s value based proposition to buy frozen and generate environmental value by “doing absolutely nothing”. Another example is gym advertising that doesn’t feature the equipment which people normally find unpleasant but focuses on the act of enjoyment instead.
• Make it personal: The closer the message is to the characteristics of the recipient, the more likely it is to be taken up (“75% of people do that” vs. “75% of people like you do that”). For example, the Borough of Milton Keynes’ recycling scheme, which is linked to benefits at the community level, is more successful in encouraging recycling than if the truck fleet had an impersonal banner “We recycle 40% of waste – help us to get up to 50%”. Another example is communication about the norm – when electricity consumers are ranked to other households of similar status, this encourages them to understand and reduce their consumption if they are above the norm. If they are below the norm, some form of gamification/competition may work.
• Communicate to generate understanding of issues: Most people simply don’t understand waste can be of value, or how wastewater is connected to the environment once it’s flushed away. It may be useful to rely on a respected messenger to do it on your behalf. A good example is will.i.am’s Ekocycle collaboration with the Coca Cola Company to produce clothes and accessories from post-consumer waste, which shows that ‘Waste is only Waste if you Waste it’, whilst the brand positioning (Harrods!) makes for a highly desirable product. Anglian Water on the other hand, renamed the “dirty” part of the business, wastewater – to water “recycling” to evoke the connection with the environment.
• Feedback: For example through apps (for example, phone app Move) to show progress, or through preferential treatment of suppliers (for example, longer term contracts for improved sustainability performance)
This table will explore why the majority of citizens consider it important that we tackle climate change, but when they become consumers, employees and investors they don’t make it a priority. How can sustainability experts overcome this inertia through language, transparency, finding the right moment, incentives and more?
• How to push values, without pushing values?
• People are more environmentally conscious at home than in the work place, as there is less of a feeling of direct responsibility.
• How do you get the message right, and importantly, deliver the message at the right time?
• Everyone already ‘cares’, how do you make it easy for them to act?
• Translating a value into an action is difficult.
• If there is no monetary or business incentive, how do you engage everyone?
• A company like Sainsbury’s have many messages, how do you cut them down and find the key messages or core values?
• Changing people’s minds one on one may be effective, but how can we influence the masses.
• Incentivising innovation from the supply chain is vital instead of just from the top down.
• Highlight values, by cutting away scientific or technical language.
• Align appropriate language with companies, customers and those in sustainability separately.
• Find your ‘thought leaders or movie stars’ for guerrilla tactics on behaviour change.
• Talking with supply chains about alternatives or better quality solutions, so that the options becomes limited and the choice to do good is made easy.
• Constant bombardment of advice can lead to at least some sinking in.
• No need for sustainable bulletins, instead constant mentioning of sustainability in everyday business.
• Car sharing to festivals in a safe manner, cuts down on CO2 along with a cut in costs for festival goers.
• Volunteering and community engagement rather than smoking will get you promoted and others following good practice (according to Walmart).
• ‘Latitude festival’ cups cost £2, consequently no cups were thrown away and many reused.
• Catering company implemented a ‘super hero’ at schools to teach kids. This brought the supply chain and the consumer together with the hero, to look at better ways things could be done.
• Coffee cups with sleeves that when brought back five times and stamped earns you a free coffee – transferable incentive.
Sainsbury’s has just undertaken detailed market research on what sustainability issues their customers care about, and what would cause them to change their buying patterns. The results, which will be shared with the table, illustrate the complexity of engaging customers on these issues. How would the table draw up an engagement strategy for an organisation such as Sainsbury’s?
I. Key questions
• Do the findings of the research ring true? And how, if at all, will consumer responses change as the economy improves?
• How much weight should Sainsbury’s (or any company) give to consumer insights when setting strategic goals?
• Value-driven context. Overall, the research was well received. It was assumed the research is set in the context of value being the top priority for consumers, which is useful in light of other sustainability-oriented research that typically does not factor in this reality.
• Consumer trade-offs. Consumers often make trade-offs in their purchasing decisions. The framing of questions allowed for these preferences to be demonstrated. Consumers had to choose between sustainability options or rate their importance relative to other trade-offs. This reflects real life situations.
• Consumer motivation. The research focused on what motivates the consumer, which is critical for any engagement strategy. Further, how to deliver or not advertise certain strategies is just as important as choosing which strategies to back.
• Food waste. The importance of food waste minimisation was not surprising and is very much in line with difficult economic times. The fact that the survey showed that it was cost, and not sustainability, driving this priority for consumers was especially useful.
• Food traceability. Analysis of the data in ‘Closer to Customers research’ presented interesting insights. The priority of environmental impact coming in at 2% (p. 9) was surprisingly low. In light of industry transgressions over recent years, food traceability was also surprisingly low (fourth place) on the list of priorities (p. 6). How volatile are these views? Will this change in 12 months’ time?
• Future priorities. With the increasing cost of food products the priority of food waste is unlikely to return to the low priority it once was during pre-recession times.
• Consumer surveys. Consumers often do not know what they want. Frequently, answers to surveys do not translate to real-life purchasing decisions.
• Packaging: saint or sinner? There is often a correlation between food waste and packaging. Can we solve food waste through different packaging or make certain other trade-offs? Or are many packaging initiatives in danger of just moving problems to somewhere else in the product lifecycle? E.g. changing a package design to create less waste, but then none of it can be recycled.
• Strategic spin. Is it appropriate to have a trade-off between consumer expectations / priorities and what the brand actually does?
• Research pre-amble. Readers would benefit from further background details about the research. For example, provide the demographics of the participant, state whether participants were aware that this is a Sainsbury’s led piece of research, and so on.
• Research depth. Publishing the detail behind the research would be especially useful, rather than just the high-level results or headlines.
• Research glossary. It would also be useful to understand what is meant by certain terms or questions. E.g. what does welfare mean? Of British origin? Should other questions be asked? For example, rather than asking about a British preference ask about a preference for a sustainable option (whether that is British or not).
• Question framing. Could the survey improve by asking certain questions differently? For example, ‘what would the consumer do at point of purchase if’ rather than asking the question without setting the scenario. Framing may be a useful tool to get to what consumers actually do, versus what they think would do.
• Survey structure. How spontaneous were the responses in the survey? Was the survey too structured or could the questions have been leading?
• Importance of leadership. Company leaders must be engaged and show they are listening and innovating. For example, at KFC the core products are unlikely to change drastically, despite changing sustainability trends. However, the brand needs to demonstrate it is innovating by providing lighter and healthier menu options. In this way, consumers are satisfied that the brand is evolving irrespective of the popularity of the healthy options.
• Data analytics. Consumer surveys are not always the best mechanism to identify what consumers actually want. It may be more useful to look at what consumers are actually doing (e.g. are they shopping healthier, buying composters, etc…).
• Communication. Just ask consumers what they understand of their products (e.g. many people didn’t realise Coke Zero means zero sugar and zero calories).
• Action without words. What should be done with customer insights? Sometimes it can be best to just take the action rather than advertise (e.g. Dr Pepper removing 30% of sugar without telling consumers).
• Sustainability trends. Trends in sustainability are often driven by media and public perceptions, which then often drives business decisions. This might not necessarily be for reputational reasons, but rather employees and customers are interested in trying out these trends (e.g. offsetting).
• Role of media. Food waste has long been a hot topic in social media and traditional media (e.g. BBC’s billion dollar chicken shop documentary). Whether participating in a trend or just reflecting on it, this and the media’s influence should play a part in any customer engagement strategy.
• 3D research. Whilst research surveys and reports can be useful, if sustainability is ever going to capture the BHAG or make substantial progress it may thrive best in the real world and not in questionnaires. Create a one-off pop up Sainsbury’s that tests and trials new and radical change (e.g. zero packaging, 100% bio-regional, etc.) and see how consumers react. Steve Jobs created global customer demand with his technology BHAG. We need to do the same with our sustainability BHAGs.
Table 5 (b)
More can be done to communicate what Sainbury’s is doing along its sustainability supply chain and on a store to store basis
o How are they using renewable energies in store? (solar panels on the roof, recycled air from freezers
o How are they communicating the use of these technologies (signs or employees on the floor communicate these and talk to customers)
2. Packaging & Display
There are a number of things that can be ‘packaged’ better to sell and encourage more sustainable habits
o Can shelf space be prioritised for more sustainable suppliers
o Can a seasonal aisle exist where seasonal fruit and veg are stocked, changed and promoted. Encouraging sustainable seasonal habits. Supported by relevant recipes
o Seasonal calendar and/or monthly calendar with seasonal recipe ideas also fitting in with calendar events (Pumpkins in October, British summer & Strawberries). Recipe ideas also including what to do with leftovers, (reducing waste)
o How do they store perishables (information on the packaging)
o Campaigns can be seasonal, health related or associated with celebrities. But produce is backed by a story – these stories should be as widely engaging as possible (i.e the story of the pig farming rules out certain religious groups who don’t eat pork)
o Healthier promotions vs. deals on confectionary and crisps. Mix and match deals vs. Buy one get one free
Could be better rewards system in place to encourage sustainable purchasing
o How British is your basket? (What percentage of your basket contents is local). Variations of this (how green, how healthy)
o A (percentage) breakdown of your basket (30% organic, 30% sugar)
o Along side cloth/bottle banks – can a compost/food waste bank exist at larger stores (in partnership with the council). Trade in nectar points for compost
As companies increasingly treat society as a stakeholder, they need to understand the value of their activities to society. Organisations such as The Crown Estate, BSkyB and Skanska are developing methodologies that measure their economic, social and environmental contributions. Should more companies be doing this, and how could this measurement become widely adopted?
Influences and drivers:
• Driven by a transient market and technology – high degree of innovation powered by technology and increased collaboration, as well as democratising consumer voice
• Changing market due to competitors and expectations of customers
• Ultimately social value is ‘paid for’ by the consumers. Customers pay for peace of mind; they are willing to pay more to ‘know’ their money is not paying just for a product, but for feeling like they contribute towards social impact.
Correlation between partner/employee happiness and customer happiness:
• This is something most already know
• Do you only need figures to tell you something new, as opposed to confirming what you knew before?
• The challenge is putting an economic value on social benefit
• Is the intended audience convinced by feeling or fact?
Move from ‘product’ to ‘solution’
• Education – from supplier of books and exams, to provider of education
• Examples of car companies delivering a journey instead of making a car
• Not to ‘produce and flog’ but to provide a solution – a closed loop where the customer is no longer tied to a product, but has bought in to a certain way of doing things
Shift in outcomes:
• One example of movement - focus initially on health, then moved towards environment
• Health and environment had an effect on each other – measuring health outcomes was much easier than measuring environmental outcomes
• How do we mitigate for changes in outcomes?
• All data makes its way to the board. Therefore, you need to be able to count and measure intangibles; and prove that customer satisfaction and sustainability are linked
• Refer to this page: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2508281 ‘From the stockholder to stakeholder’, Oxford University Smith School of Enterprise and the Environment
• There is a competitive business case for a focus on environment; this is what the markets want
• Company has been around for X amount of years – how can you not want to be around for the next X amount of years?
• Ultimately if you are not leading and setting an example, you are in a race to the bottom
• Value of measurement needs to be tied to value of business
• Question around whether measurement or values should drive design – or whether the two work together
Data and learning
• Some findings expected – customers value ethical products
• Some surprising – for example impact on environment by large numbers of people is much lower than the impact by a small number of organisations
• Working with governments that are ‘beginners’ when it comes to measuring social value and impact is a challenge
• Some only care about gross numbers, rather than value per customer – do not understand why numbers go up but revenue goes down
• Measuring intangibles
• Focus is now on economic social and environmental ‘givings’ as well as ‘takings’
• The role of business has changed from producers to problem solvers
• Half see a business as a brand to buy into, other half see it as a commodity in itself (as well as a producer of commodities)
• The expectations have become more sophisticated with the ‘Apple’ generation – customers demand high quality in content, delivery and sourcing
• Ignoring values results in damage to brand
• Internal dialogue between parts of the organisation needs to be consistent to deliver social value – we cannot have one set of values being endorsed by Legal and another by Finance
• Customers see sustainability as an issue for the organisation and not themselves
• There can be a disconnect between what customers say they want in terms of sustainability and buying practices
• Customers may not offer to pay extra of their own accord, but are happy to accept higher prices presented to them by the organisation
• Customers and the political landscape demand that companies have ultimate responsibility – as it should be
• CSR is central to any organisation
• If you measure it, you own it – ‘if you’re not measuring it you’re not managing it’
The discussion formed around three main themes:
• Robust collection of customer data
• The idea of ‘responsibility’ falls on the company or organisation
• Measuring value to society also requires solid internal and external communications
Many companies are redefining their purpose as being beyond selling products or creating shareholder value. Google is “organising the world’s information” and IKEA is “creating a better life for many”. Under what circumstances do key stakeholders – customers, employees and investors – care about these statements, and to what extent should they be the domain of the sustainability team?
Attendees briefly consider these examples of purpose statements:
- Google - organising the world’s information
- IKEA - creating a better life for many
- Kingfisher - Better Homes, Better Lives. To help and inspire millions of people to improve their homes.
- Saint-Gobain, world leader in sustainable habitat
- First Group - to provide solutions for an increasingly congested world... keeping people moving and communities prospering.
Attendees identified circumstances which may lead stakeholders to care about the purpose statement of an organisation:
- Sincerity– the more genuine a statement the likelier it is to resonate -,
- Detail– customers need to understand it affects them -,
- Evidence of concrete action – actions speak louder than words-,
- Relationship with the organisation: (a) employees may be more likely to care about the purpose of an organisation as they will likely be affected by it directly, (b) potential recruits may be interested in joining organisations based on their purpose (and purpose therefore becomes a way of attracting talent), (c) an organisation undergoing a purpose-setting exercise may bring its employees closer together in the process.
The following challenges were identified:
- How best to engage investors (Reference was made to B-Corps)
- The purpose of an organisation may form over time and/or may not bring about immediate changes (i.e. it may not be of immediate interest to investors);
- Some companies operate in sectors which are not seen as “doing good” – Can they actually have a positive purpose?-,
- How to make a business case for setting/developing the purpose,
- The duty of an organisation lies elsewhere (profit) – however, there appears to be a strong case supporting profit as a result of sustainable business-,
- How to embed the purpose in an organisation – Is there a disconnect between purpose and operations?-,
- How to measure the success of a purpose statement,
- Customers want to buy – Do they actually care about the purpose of an organisation?-
- Purpose may seem patronising,
- How can a company ensure its purpose benefits all stakeholders, e.g. supply chain workers,
- Whose responsibility is it?
Attendees discussed whether purpose-setting falls within the remit of the sustainability team. Attendees pointed out that the answer to this question largely depends on the size and sector of a company. However, attendees agreed that the subject matter affects the business in its entirety and would therefore go beyond the remit of the sustainability team. Behavioural changes should come from the top and sustainability should become everyone’s concern. A collaborative effort involving sustainability professionals is required for an efficient move towards sustainable business.
Putting a chip in everything holds great promise for how society can dramatically improve resource efficiency. Does the table agree with this statement? How should companies factor the IoT into their product development plans in a way that can help consumers to live more sustainable lives? What are examples that are leading the way, and what obstacles need to be overcome?
Putting a chip in everything holds great promise for how society can dramatically improve resource efficiency. Does the table agree with this statement? How should companies factor the IoT into their product development plans in a way that can help consumers to live more sustainable lives? What are examples that are leading the way, and what obstacles need to be overcome?
• Is the internet of things an enabler of efficiencies? Currently BMS is a very closed platform and the vendor sees it as a competitive advantage but the internet of things should open this up.
• We have the technology but the construction industry is still too far behind for its true value to be realised.
• We must not forget that as the amount of data grows, so too does the number of servers required to store that data. Estimates are that we will need an additional 10-12 million servers within the next 10 years. So, there is a balance to be sought – between the efficiencies that can be gained through big data and the energy required to power the servers. However, data centres are being made leaner and more energy efficient with targets to reduce energy usage by 50% by 2025 e.g. centres in Texas being powered by the sun.
• In its truer sense – the internet of things is about machines talking to machines and we’ve not even started to appreciate its scope. However, again – there is a caveat that machines constantly talking to each other will increase the amount of energy they use.
• Are the greater returns within industrial applications? Is there enough ROI in a domestic environment to make it worthwhile? It is certainly easier to achieve efficiencies within an industrial setting. However, domestic energy usage is so huge that the internet of things does make sense – and we can engage consumers, as Smart Meters and apps such as Hive are demonstrating. Consumers are getting more used to quantifiable data with devices such as Fitbits and this entry level technology is paving the way for people becoming used to analysing data and changing their behaviour accordingly.
• Ulimately there is a cost to collecting data, so we need to be sure that there isn’t a propensity to just collect alot of data – and then work out what to do with it later. Conversely, do we always need to over-spec to futureproof? Or will there always be the scope to upgrade assets accordingly when a new need arises.
A number of companies are turning to “deep partnerships” with NGO’s to make real progress on issues that are important to their stakeholders. GSK with Save the Children and Telefonica O2 with UK Youth are successful examples. Is this an arrangement that will play an increasing role in sustainability strategies? Why do they work? How useful are they for engaging customers?
What works in terms of partnerships?
The point was raised that a partnership can only work providing there is a key and mutual benefit for the partnership to exist. As long as both parties’ goals are channelled in a similar direction with an over-riding ‘Win-Win’ outcome, a partnership can prolong, prosper and be successful.
David Merefield raised the point that Sainsbury’s partnership with the imperial college was based on a thorough communication and feedback channel, especially when utilising their services to produce statistical analyses and research projects on behalf of the retailer. Having a clear, transparent relationship prevented any adversity and ensured a successful outcome for both parties involved.
Chris Brett Followed with the factor revolving around Olam’s investment programme based in the Ivory Coast, 10% of all investment programmes ‘on the ground’ go into monitoring and teaching those concerned members of the farming communities. There is also data obtainment and management that is utilised in the development of these new farming sites, developing the communities and being aware of the commodities in-place, means that Olam can be more strategic on the investments they make, having a more successful outcome and subsequently attract more corporate investment into the programmes. This strong investment return model and it’s success has attracted investment from the Gates foundation. However from a business perspective helps secure the sustainable agri-supply chain.
Eva Cahill promotes the importance and success of co-operating NGO’s through their interaction with the UK Power Networks (UPN), having built working relationships between different corresponding NGO’s in order to enhance their effectivity and prevent the regurgitation of similar data when collaborative interests or audiences come into play. Particularly touching on Age Concerns growing network with other NGO’s when approaching the UPN’s vulnerable customers. Further, Eva raised the point that for ever £1 invested by UPN, they witness a £1.50 return. Is this similar across the board?
Chris Brett, Olam’s return isn’t as ‘Black and White’ due to the conflicts of an agricultural model and the varying factors that come into play to get a direct return on said investment. Furthermore, it is a long term investment with an eventual bounty of return.
The Samaritans and National Rail have this aforementioned synergy, where they share a synonymous aim, for the obvious ethical purposes, but also there is a cost/incident trade off that both parties aim for. The amount of money saved by the national rail preventing ‘incidents’ far outweighs their investment in continuing there partnership with the Samaritans. It is emphasised that having such a clear and transparent relationship leaves no room for misdirection and henceforth they have recently just extended the contractual nature of their partnership by another 5 years.
This Sits with Martyn’s ideal that in order to prolong a partnership in the first place is to make sure that there is a common ground.
Do partnerships have a role for the future?
General consensus around this point could be outlined from three key points.
The nature of these partnerships can be given longevity if treated and managed correctly.
The utilisation of prominent NGO’s by large corporates, softens their ethical approach and broadens/collaborates the audience affected.
The collaboration of two very different parties with ordinarily different aims; strengthens the movements ‘voice’, authenticates it by association (GSK/SaveTheChildren And NationalRail/Samaritans) and conjoins both audiences and subsequently the overall reaction.
When a real cost of nature is factored into a $3.50 breakfast cereal, the cost rises to $4.05. A block of cheese rises from $3.00 to $3.19. The methodology behind this analysis will be explained, and the table will discuss who this information is important to and why. Does the customer care? What does it tell an investor? Is the real value for the management team?
The table discussion was kicked off by a short introduction to the concept of natural capital valuation, the monetisation of environmental impacts (e.g. putting a price on a tonne of carbon emissions). It was emphasised that for many retailers that already quantify and report their resource use and impacts, understanding the real cost of their products and services (across the entire supply chain) is the next step to integrate environmental credentials into risk assessment and decision making. As a delegate pointed out, understanding the impact of 5tCO2e emissions can be abstract to some. The example of the carbon footprints on Walkers crisps was brought up and the influence on consumer behaviour was questioned. Putting a price on environmental impacts can enable better communication of environmental impacts.
The question was raised, where the cost is placed. Will retailers bear the additional cost and accept lower margins on their products or will the additional cost be passed on to the consumer? Or should the cost be passed on upstream to suppliers? The table seemed to agree that retailers with large margins should be able to absorb additional cost.
While retailers may be able to absorb additional cost, a loss of margin would be a tough sell internally and to investors. The concept of standardisation was picked up– because if every company would consider the “real cost” of a product, then those considerations would get factored into financial models too. Standardising the methodology would allow for a fair comparison. As one delegate pointed out, no company wants to have the most expensive product according to the “real cost”, and hence without standardisation companies may not dare to be the first crunching their margins or increasing retail prices. Standardisation may also close the trust gap, as one delegate explained. Consumers increasingly expect retailers to consider the environmental and social impacts of their products, however often they may not trust the retailer’s credentials. Natural capital valuation hence needs to become an aspect of competitiveness – what is the cost of not being environmentally responsible? Another delegate would like to see a regulatory change, which was perceived to be a strong push for organisations to take action.
The discussion also touched upon a retailer’s responsibility to guide its consumers on important environmental impacts. Hence, it is important that a retailer understands the impacts of its products and does not rely on consumers to point to potential hotspots. In the key note, waste was mentioned as an issue that consumers care about but the table discussed that a company can also help educate its customers about other areas of importance. Demand could be changed through pricing but also through advertising. One delegate suggested to do one study on one product – what are the impacts of a “traditional” product and a “better” alternative, and to advertise the benefits strongly to raise awareness.
At the end of the discussion, everyone was asked where they see the benefit/barriers of considering the “real cost”.
Three main themes stood out:
1. For companies the value of monetising environmental impacts lies in better informed risk assessments and decision making
2. Consumers may require more tangible definitions and examples to gain a better understanding of what the “real cost” are. More transparency is required by companies to allow consumers to factor the environmental impacts into their decision making.
3. A systemic change is required to create equal conditions.
Despite some barriers, the value of the monetisation of environmental impacts was obvious and the table seemed to agree: In the future we will measure companies and products using the real cost of nature.
Advertising is often portrayed as a mindless beneficiary of hyper consumption. Does the table feel that this is a valid portrayal of the advertising industry? Is advertising at risk of suffering an erosion of trust like the banking industry? Dig deep – could the advertising industry ever play a significant role in a shift towards a sustainable society?
Questions of Interest:
• Is there a contradiction between advertising and sustainability?
• How do we encourage people to think and consume responsibly?
• Is sustainability an under researched area within advertising?
• How can we harness advertising for sustainability? What conversation needs to happen between advertising with their clients & within the industry?
• How do we shift the consumer story to one of citizenship?
• How can a business connect with their customers about their sustainability initiatives?
• Does it matter if the discussion or message is about sustainability if the end behaviour encouraged by advertising is more sustainable?
• Is it the fault of the advertisers or the audience when the audience is less engaged with complex stories about sustainability?
Examples of Advertising
• Food company promoting health and also becoming a cooperative
• Coffee company (Kenco) releasing their coffee vs gangs campaign which helped people out of violence. Increased sales as customers also respond to emotional benefits not just practical
• Frozen food company (Birdseye) sold their sustainably sourced fish product using a health message about omega-3
• Companies will take ethical decisions not to advertise with certain bodies (e.g. Fifa) in the aftermath of a scandal
• Corporates are now lobbying for sustainable regulations, this is not seen to be true of advertising yet
• Customers will respond to emotional benefits portrayed in an advert which is aligned with social values, perhaps more over the ‘tough sell’ practical benefits of CSR initiatives
• Sustainability in the messaging will only work in a competitive market where it is one of few differentiators. Others, such as price, may trump sustainability on advertising messaging
• Transparency is driving the markets to a place where sustainability is now a true competitive advantage, whereas pre-frinancial-crisis it was more pre-competitive
• Regulations restricting unsustainable products from advertising may be introduced, like with smoking advertising, in the future
• Sustainability is a complex story, today’s era of hyper consumption and minimum attention to adverts, it can be a tough ask for advertisers to consider using it to sell goods or build brands. The table is divided on whether advertising has contributed to the hyper consumption and creation of false needs or merely a catalyst resulting from a wider social issue.
• Advertising can only be as good as the business model of its client
• The responsibility relies with the advertisers and not with advertising itself, which can be a tool for good or for wrong. The advertisers must decide what is the best way to sell a sustainable product and the messaging may be different from sustainability (e.g. Birdseye Omega-3)
The outcome for COP21 will be determined in part by the actions and advocacy of the business community. As we enter the crucial negotiating stages, this table will draw up a list of practical steps that individuals and organisations can take to support the best outcome – demonstrating the low carbon business case, supporting cross sector partnerships, open advocacy and more.
“Politicians need to hear businesses are advocating. This will drive the arguments. Businesses should find a way to engage all stakeholders. “
“There should be a business energy challenge, with all companies doing something. Change on a local level. The challenge is to bring in the smaller businesses not yet talking about it. How do we involve them? With limited resources they have other focuses, often with no internal advocate in leadership.
We need to find a way to give them a bigger voice and make their opinions heard. Help SMEs know they can be innovative. “
“Politicians are in control of the voice of businesses. We need pan-politics; with 4-year cycles there is little incentive to talk about this bigger discussion. How can we get these issues to cross the electoral systems?”
“Global crashes and economic disasters detract from the focus on climate change. “
“Businesses need to lobby government for change. They need a framework to stick to it.”
“We need to be careful with how carbon is measured; carbon pricing was abused and un-thought-out. If carbon tax/trade is allowed then we need to stress test the system properly.”
“The oil/gas industry seems to be split between US/EU.
EU came out last week advocating carbon pricing and policy, and a switch from coal to gas. US will not talk about this. Seem to be clearer on what they are advocating now and what their approach is. You can see orgs coming together and forming coalitions among themselves, previously the where lead by ipieca.”
“Retail are interested in tier 1 & 2 supply chain and how they can get change at this level. Maybe influenced by CDP.”
What are your organisations currently doing and are you aligning with other companies?
“Team members are attending workshops and networking events, trying to see if they can build mutual missions through these networks. At the moment they are looking at joint campaigns they can run in-line with city level targets.
Then looking at showcasing the campaigns that are doing really well, and brining in some of the other businesses not currently involved. Unless you make sustainability part of someone’s day job, there is not going to be a strong voice. They need to see the focus as something valuable to their customers and therefore their business in the longer term.”
“Green bonds have recovered over the last 18m. Businesses treat these issues as board level discussions now; agendas are set…this is a step forward”
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