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Businesses of the World Unite!

John Fanning

While we can’t be as precise as Virginia Woolf – “In or about December 1912 the world changed” – it is now clear that something similar was afoot in 2016. Most of the subsequent analysis and comment concentrated on the reasons for the sullen mood of the electorate in Western democracies and there was a reasonable level of agreement that although there had been a measure of economic recovery since the Great Recession, it was accompanied by widening inequality, increased insecurity, dizzying disruption and a feeling of bewilderment and dislocation.

Individual lives were becoming more complicated and scrambled than ever before and the growing “precariat” was now accompanied by an “unnecessariat”, the former employed but without the security of a pension and the solidarity of a trades union, the latter sidelined by robots and artificial intelligence. There was much comment on the belief that for the first time for as long as anyone could remember the future was something we could no longer shape to our advantage and instead seemed dark and threatening. The so-called “metropolitan liberal elite” were criticised for their failure to find a vision and a language that could compete with the crude xenophobia and “truthiness” of the extreme right and left. In the midst of all this despair, one oasis of progressive thinking was emerging but went largely unnoticed; which is hardly surprising given that it was coming from the consumer goods sector of the business world.

It is easy to see why this unlikely source of advanced social concern escaped the attention of the commentators, but there are two reasons why consumer goods businesses might be tempted to abandon the accepted free-market fundamentalist imperative of maximising shareholder revenue to pursue a wider social agenda. The first is the fact that they are heavy users of the earth’s resources and therefore more concerned about the environment than other business sectors. Coca Cola is a good example. It’s one of the biggest consumer brands in the world, selling a product that is ninety per cent water. The conservation of the world’s water is an obvious concern and the company has invested heavily to ensure a continuing supply:

We believe that climate change, caused by man-made greenhouse emissions, is the greatest threat to our planet. There is an urgent need for a step-change to achieve not only the significant emission targets we have set but also a low-carbon future. To that point we have to look beyond our own operations and take responsibility for the whole product value chain.

The second reason why consumer goods companies are developing a more active social conscience is that traditionally they have invested more in consumer research than any other business sector. Some of the leading consumer goods companies have been researching populations for over a hundred years. Increasingly they are using sophisticated ethnographic techniques to understand people’s whole lives and not just their attitudes to individual product categories. A former CEO of one of the biggest consumer goods companies in the world, Procter & Gamble, in his book Playing to Win (2012) explains: “we dig deep, we immerse ourselves in people’s lives, we work hard to find the tensions that we can help to resolve”. Access to this depth of research on a regular basis means that these companies have a much better understanding of people’s anxieties and aspirations, their hopes and fears than any government, because political parties only carry out this kind of research on an intermittent basis, mainly on the run-in to an election, and on the evidence of recent elections in the Western world they are not even doing this very successfully.

One of the first books to comment on businesses playing a more active societal role was Who Cares Wins (2012) by David Jones, who was the chief executive of global advertising agency Havas at the time. He wrote:

we will increasingly see business going back to its roots; doing good for society and the community around it – customers will reward those businesses and brands that stand for a purpose beyond profit – to those who hanker for the old world I have a simple message: your model nearly caused the meltdown of the entire global financial and economic system.

Jones based his prediction on surveys carried out by Havas which showed that over three-quarters of sample surveys believed that businesses had as much responsibility as governments to drive social change. A subsequent Havas survey of 50,000 respondents in fourteen countries covering three hundred brands revealed that a majority couldn’t care less if over seventy per cent of these brands ceased to exist. The new consumer militancy, especially among the younger generation, led Jones to predict that business was entering an “Age of Damage” where those not regarded as socially responsible will be penalised. He points out that it is the younger generations who will have to live with the consequences of climate change and the huge debts incurred by previous generations.

Examples of businesses that are taking a more active societal role range from the eminently practical: Dulux’s “Let’s Colour” initiative which involved donating free paint to brighten up deprived inner city areas around the world; Toms, a US shoe company who give a free pair of shoes to less well-off children for every purchase; Bisto’s “empty chair” encouraging people to alleviate loneliness among old people by inviting them to join a family in the neighbourhood for a Sunday meal; to the downright bizarre: Dear Leader, a brand of sunglasses in Copenhagen giving a percentage of their profits to activist groups trying to effect regime change in North Korea. Other businesses regularly cited in this context are UK retailer John Lewis, where fifty per cent of profits are distributed to the staff, who are all shareholders, and Ben & Jerry’s US-based ice-cream brand. The brand has been a vocal champion of a range of progressive causes which benefit from ten per cent of the company profits. It was sold to Unilever in 2004 but on condition that the support for progressive causes was maintained. The eponymous “Ben & Jerry”, now very wealthy men, are still active in left-wing causes; they were both arrested at a demo in Washington in 2016.

Environmental issues attract the most attention from businesses wanting to do good and do well, and Patagonia under its charismatic founder, Yvon Chouinard, is probably the leading campaigner in this respect. Chouinard believes that there is “an existential threat to our climate, our food and water supplies, and to the survival of life on earth in any recognisable form”. It is estimated that the company’s commitment to responsible manufacturing adds twenty to thirty per cent to its costs. It believes that the real elephant in the environmental room is growth and the obsession with continuous growth of both companies and countries. On Black Friday 2011, Patagonia ran a famous ad featuring one of their outdoor jackets under the headline “Don’t Buy this Jacket”. The body-copy went on to explain the environmental impact of manufacturing their products. They have set up a subsidiary, Worn Wear, to encourage consumers to repair their garments, reuse them and recycle them as required.

The latest book on this subject, Brands with a Conscience (2016) by Nicholas Ind and Sandra Horlings, makes its intention clear on the first page: “This is not a book about how to build a brand. This is a book on how to change the world through business.” The authors echo a theme that is becoming more persistent in contemporary sociological and cultural writing: that society is currently undergoing a transformation or metamorphosis and given its critical role in society business cannot stand on the sidelines. They argue for a business renaissance: “a gathering force of a collective intelligence and a renewal of the human spirit that questions the imperative of financial growth in the light of environmental and social degradation”. The authors go on to question the idea that the sole objective of a business should be to maximise shareholder revenue because this ignores the interests and needs of employees, customers and citizens: “companies have to recognise their accountability not only to shareholders but to all audiences and to society as a whole”. A wide range of businesses that are already active in societal issues are covered in the book, including a brief mention of Unilever’s sustainable living plan, launched in 2010, which aims to double sales and halve its environmental impact by 2020.

Many of the most socially active businesses are small and privately owned and therefore have complete freedom of action in formulating strategy, but Unilever is one of the biggest consumer goods companies in the world, with a turnover of $53 billion in 2015, and is publicly owned. It is probably the foremost example of a socially committed business today. Unilever’s Marketing Director set out their strategy in 2016:

We must start thinking of (our) brands as citizens tasked with responsibility to promote, share, create, espouse and help to make the world a better place – we must find a way to build a more sustainable world, to ensure that companies like ours will be able to serve people and improve their lives for the next hundred years.

The emphasis on the long term is repeated by chairman Paul Polson, who, when asked by City analysts if he was worried about a drop in the share price following his abandonment of quarterly earnings because it put too much short-term pressure on managers, replied that he didn’t want those kind of shareholders. He went on:

we may not pay the same salaries as the financial sector but our employees’ engagement and motivation have gone up enormously over the last four or five years – people are proud to work on something where it actually makes a difference in life and that is obviously the hallmark of a purpose-driven business model. We also want to change our shareholder base – we want people with similar objectives – corporate social responsibility and philanthropy are all very well but we have to go beyond that – we have to make a positive contribution.

The Economist sniffly commented “Polson sounds more like the chairman of Occupy Wall Street than the chairman of a large corporation.”

But it is Unilever’s long-running marketing communications campaign for Dove that represents the company’s most visible role as a socially active business. Dove was launched in 1957 as an alternative to pure soap with the claim that it would not dry out your skin. Over forty years later the brand encompassed a range of beauty products and a Unilever marketing executive, Silvia Lagnado, who had been given responsibility for the brand, wrote a positioning paper called “The Theory of Beauty”, which argued that contemporary society’s portrayal of beauty was too narrowly focused on thinness, especially in the influential fashion and entertainment businesses. A research study carried out in 2002 showed that half of all women said their own body “disgusted them”. In response, the Dove Self-Esteem campaign was launched and is still going strong. In addition to a series of ads on traditional media advocating self-esteem to young women, teaching that our perception of beauty has been completely distorted by the fashion industry, Dove has run a series of critically acclaimed videos on the internet, including one warning mothers to “talk to your daughter before the fashion industry does”. The campaign has also featured educational films and discussions in classrooms spreading the message that young girls are dangerously obsessed with narrowly defined images of beauty. It has arguably been the most influential campaign of the twenty-first century and has inspired a host of similar approaches referred to as the “Dove Effect”, with more and more brands recognising that “taking a strong socially progressive stand” can be very profitable.

Inevitably, increasing social activism among businesses has attracted criticism, in particular from those who believe that the sole focus of a business should be to maximise shareholder revenue. A much-quoted article from The New York Times in September 1970 by the most influential economist of the time, Milton Friedman, is the most frequent reference point for this argument. Friedman denounced the whole concept of corporate social responsibility, referring to it as a “fundamentally subversive doctrine”, and adding that “there is one and only one social responsibility of business – to use its resources to engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say engages in open and free competition without deception or fraud”. Ironically it was this emphasis on maximising shareholder value, on making return on investment the single benchmark against which all of a business’s managerial, technological and employee actions could be measured to the exclusion of all other goals that ultimately brought about the financial crash of 2008. In 2013 the influential UK-based marketing communications journal Admap, ran an essay competition under the title “Can Brands Maximise Profits and at the Same Time be a Force for Social Good?” All of the shortlisted entries agreed with the proposition and most of them quoted the Milton Friedman article and concluded that in today’s business world the idea that the sole purpose of business was to maximise shareholder revenue was redundant. More recently the growing societal intervention by brands has prompted concern about unelected and often unqualified business people becoming involved in areas which should be the sole preserve of government. But debt and demography are creating such pressure on the public purse that cash-starved governments are unlikely to turn down any offer of help, so it looks like the trend towards more active societal interventions from business will continue.

Anne Marie Slaughter, former director of policy planning under Hillary Clinton at the US State Department has made the same point:

... over the course of the next two decades solutions to global problems will come less from governments and more from non-government actors, including businesses, which self-organise around issues of importance. Some brands are already doing this – tackling issues of social importance, making the world a better place.

There are three main drivers of this development from a business perspective. The first lies in the nature of competition. All of the major consumer goods companies are engaged in fierce competition, not just with businesses operating in the same markets but with the increasingly powerful retailers who are eroding their profitability through the introduction of retailer brands. They can’t claim any functional difference between their own and competitive brands and the capacity to create an advantage through emotionally charged advertising has been weakened by the digital revolution. They are being drawn into adapting communication strategies that transcend the product category, espousing visions, convictions or philosophies which can credibly be related to the product in question but which position it in an attractive and distinctive way. Adopting a position on an issue of societal concern offers ample opportunities for creating a distinctive brand statement.

The second driver is public opinion. The public are aware of the budgetary difficulties facing governments and repeated surveys, including those cited earlier by David Jones, show a huge majority of respondents in developed economies demanding that business should play a greater societal role. The internet has made all business operations and practices more visible to the public, who in turn are increasingly prepared to become consumer activists. It could also be argued that when businesses respond to either of these pressures society will benefit but the primary motivation is that this is now perceived as a way to maximise profitability for the business concerned.

The third driver is different, is only in a very embryonic stage at present but could turn out to have the most profound consequences of all: a nascent realisation that the endless cycle of perpetual and unending competition has become a process divested of all purpose. Business has become an endless tournament, preoccupied with continually improving means without ever reflecting on ends. Social psychologists have long pointed out that people feel the need to be part of something greater than themselves and that history’s greatest achievements have been driven more by purpose rather than profit. The fact that this view is gaining ground in the business world is evidenced by some of the examples quoted above.

However, for the most prominent example, Unilever, it may just be a case of returning to its roots. This business traces its origins back to the late nineteenth century in the northwest of England where a local retailer, William Lever, appalled by the deprivation in the area, built a factory to make soap and provide employment and a town to house the workers and their families. The town was Port Sunlight and Sunlight Soap was the first Unilever brand.

Books quoted in this article:
Brands with a Conscience: How to Build a Successful and Responsible Brand, by Nicholas Ind and Sandra Horlings, Kogan Page, 240 pp, £19.99, ISBN: 978-0749475444
Who Cares wins: Why Good Business is Better Business, by David Jones, Pearson, 208 pp, £14.99, ISBN: 978-0273762539

1/4/2017

John Fanning is a former managing director and chairman of McConnell’s Advertising.

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