It’s marketing 101 for consumer companies: What you stand for is as important as what you sell.
One in three consumers choose brands based on their social and environmental impact, a rate that’s probably climbing.
When a consumer company’s values align with its customers’ values, it’s good for business. Patagonia, the quintessential purpose-led success story, declares, “We’re in business to save our home planet.”
When brand values don’t entirely mesh with consumers’ values, a brand can expect to lose sales, or maybe even get boycotted. Ask Chick-fil-A.
Values alignment is a major business responsibility as consumers look into companies’ ethics, actions and financial flows. An entire communications industry has arisen around helping consumer companies practice and showcase the right values: corporate social responsibility.
What’s new and surprising for many companies is that this values imperative is crossing over into the business-to-business (B2B) sector. B2B companies, too, have to declare a purpose beyond profit and prove they are socially and environmentally sustainable. The consumer brands they serve depend on it.
That’s because consumers are looking more deeply than ever at the products they might buy and wondering:
- Do the people who made that earn a living wage?
- How are the raw materials in this product obtained?
- Is anyone getting sick or injured in the mines or factories?
- What’s the carbon footprint of this product from cradle to grave?
- Do I need all this packaging?
- Does this company support diversity and inclusion, even at the executive and board levels? Are the overpaid compared with workers?
- And so on …executives
Because supplier actions directly affect consumer companies’ reputations, brands increasingly make procurement choices that position their supply chains as ethical, environmentally sustainable, fair and diverse, and transparent.
“For the next generation of consumers (and an increasing percentage of us today), price is no longer a key determining purchase factor,” writes Raw London CEO Ryan Wilkins. “In fact, quite the opposite is true: Super-low prices are beginning to ring alarm bells with consumers who increasingly question which resource, individual or community has been abused in order to deliver the cut-price garment, plastic toy or beauty product in their hand.”
Author Kevin Bales puts a finer point on that idea: “To make our consumer economy hum and grow and instantly gratify, costs are driven down as low as they can go, especially at the bottom of the supply chain; this can lead to abusive conditions for workers and harm to the natural world. Taken to the extreme it means slavery and catastrophic environmental destruction. But all this normally happens far from any prying eyes. It’s a hidden world that keeps its secrets.”
The landscape shifts
Heeding the call to do better, many companies have signed on to tackling one or more of the United Nation’s 17 Sustainable Development Goals. One hundred eighty-one CEOs of the Business Roundtable in August signed a statement redefining the “purpose of a corporation” to include “diversity and inclusion” … “dealing fairly and ethically with our suppliers” … “embracing sustainable practices across our businesses” … and “transparency and effective engagement with shareholders.” All have implications for suppliers seeking contracts from consumer brands.
Accordingly, big brands are making prominent supply chain decisions. For example:
- Lego has begun making blocks from plant-based plastic.
- Since the summer, McDonald’s Google, and Microsoft have made high-profile renewable energy commitments.
- Walmart’s Project Gigaton has set a goal of cutting 1 billion metric tons of greenhouse gases from the company’s global value chain by 2030. It its first two years, suppliers report reducing more than 93 million metric tons of emissions. Suppliers are encouraged to set targets in one or more of six key areas: energy, waste, packaging, agriculture, forests or product use.
To win contracts, suppliers will need to ace ESG ratings and report the social and environmental impact of their operations from beginning to end. They will have to perform the same audits, business process adjustment, compliance and reporting that consumer companies do.
Takeaways for PR pros
B2B companies will have to disclose and report on their ESG goals and progress, telling their stories along the journey. If you are a B2B communications pro, here’s how to get started in improving your ESG reputation as a preferred supplier:
- Assess your internal landscape. Survey your employees, customers and partners about their perception of your company in the areas of environmental sustainability, diversity and inclusion, community impact and governance. See what you’re doing right and wrong from “the family’s” perspective.
- Assess the external landscape. See whether you’re rated by third-party agencies like Dow Jones Sustainability Indices, CDP and ecovadis and, if so, how you compare against your competitors’ ratings.
- Conduct a materiality assessment. That’s industry terminology for discovering which of the many facets of environmental, social and governance criteria matter to your business, customers, employees, partners and industry.
- Define a strategy and set goals. Start with easy wins and move up the chain to high-impact initiatives.
- Engage and align the business. Get everyone in the business thinking and caring about the connection between ESG and the company’s reputation.
- Report on your progress. The Global Reporting Initiative sets out universally accepted principles for ESG reporting.
As you can see, doing the work and getting it right are big projects. But a few stellar consumer companies have shown B2B companies the way, led by consumers who demand more than a great product at a low price.
“Purpose can’t be viewed as a department or an initiative,” says Alicia Tilman, chief executive officer at SAP. “It must be woven into a company’s operational fabric. Purpose is a lodestar guiding and inspiring everyone to create economic and societal value together.”
It’s time for B2B companies to catch up.