Creating value with purpose
Right now, talking about shopping can seem trite.
Yet, to address systemic racism, we need a more just economy. An economy slanted towards white ownership plus discriminatory labor practices perpetuate systemic racism.
As discussed in earlier columns (here and here), consumer demand drives 70 percent of the economy. Consumers and citizens have significant influence over the shape of the economy because we — in aggregate — ultimately control almost 70 percent of it.
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Consumers are spooked.
Record unemployment, continued levels of lockdown in many places and general uncertainty have most of us startled and longing for certainty. No wonder that we’ve seen plunges in consumer spending and confidence around the world.
Once consumption resumes, will people make choices to support a more sustainable economy?
In conversations among fellow sustainability leaders, I often hear optimism that shoppers will make decisions based on how companies behaved during the coronavirus pandemic. There is hope that shoppers will remember which companies treated their employees well and stepped up to provide technical or financial support during the pandemic.
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Most sustainability practitioners believe customers will reward a company for doing the right thing. We know it’s a complex story and that price, accessibility of product and perceived efficacy all affect shoppers’ choices. In general, however, we trust that customers will pick sustainable solutions if they are easy to find and price differences are negligible.
And there is evidence that consumers do prefer to buy sustainable products. NYU Stern’s landmark study found that 50 percent of CPG growth from 2013 to 2018 came from sustainability-marketed products. The study is based on what consumers actually bought — not what they said they would do.
Still, we were curious to explore if there was more to this story. Clearly, some customers reward companies by buying sustainable products, but did that hold true for more specific aspects of sustainability, such as climate change? If two products were equal and were equally priced, would a perception of climate action by the company make the difference?
Read this guest blog on GreenBiz.
As sustainability professionals, we’ve been talking for years about how consumers are increasingly influenced by values and sustainability. We search the data for proof points that people would prefer to buy from a more sustainable company. Indeed, even when we find the proof points, we also find a large action gap between what people say and what they do.
We think the action gap is about to get smaller, due to a set of trends and the context of the pandemic.
The pandemic has shaken the mental health and emotional well-being of people everywhere. It also has caused many people to consider more carefully what they value most: family; friends; health — and savings, if possible. As a result, consumers are paying increased attention to companies that treated their customers and employees well during the pandemic …
Read my guest blog on GreenBiz.
A materiality analysis for sustainability provides insights on business risks, opportunities and future trends that influence a company’s ability to create value. It tells you what’s important to internal and external stakeholders.
Next-generation materiality tools make it possible to access stakeholder views in a more comprehensive and affordable manner than before. These flexible tools can be deployed rapidly, enabling you to quickly assess the changing landscape to provide:
Daniel Aronson, Gil Friend and Andrew Winston, 3 long-established sustainability experts, lay out in a recent article how many materiality analyses fall short. They cite 6 key reasons:
I add a 7th point to the list: Analyses miss time and cost. Traditional materiality analysis is laborious, time-consuming and therefore costly. It requires hours of expensive labor to interview stakeholders and plot responses.
Winston points out that “there’s so much more to understanding what issues companies impact and are affected by that just a 2-dimensional grid. We live in a world of complicated systems and global crises, and increasingly companies are expected to understand these issues and help solve them.”
Clearly, materiality analyses need to overcome these 7 shortcomings. Framing the questions to expand time horizons, digging into the larger “important to the world” questions, and asking about dependencies can address half of these issues.
In a recent conversation with Daniel Aaronson of Valutus, I learned about two fundamental improvements that can strengthen a materiality analysis:
Since both of these questions are critical, I integrate them into my client work.
“Knowing what’s important is not enough. Without knowing your strengths and weaknesses, you’re flying blind. As we discovered working with a top-ranked leader, even the best companies can be surprised by which stakeholders think they’re doing well on what’s important and which don’t,” Aronson explains.
And finally, time and cost. We gain speed, cost and flexibility by automating surveys and enabling dynamic analysis of the findings.
Today we all face immense challenges and uncertainty. How your stakeholders’ priorities have changed doesn’t need to be an unknown.
The next-generation tools available now provide a finger on the pulse of your key stakeholders, including employees, supply chain partners, community members and shareholders.
When we exit the worst of the pandemic shut-down, the profound changes in their views will be critical to understand.
Let’s sharpen our materiality tools to make better decisions and apply the best information available in these complex times.
In tough times, “analysis paralysis” too often hijacks decision-making. We want more information. We want more data. We want more direction from political leaders. We want more clarity about what our customers need.
Companies that are purpose-driven find ways beyond the paralysis.
For example, Pernod Ricard’s raison d’être is “Convivialité” and to encourage people “to go out in search of friends old and new to create a better world.” While enacting this purpose seems daunting during social distancing, Pernod Ricard swiftly found a way to bring it to life and direct the company in a significant shift of resources.
The company is providing pure alcohol to produce hand sanitizer in France. Its subsidiaries around the world are supporting local efforts to produce hand sanitizer too.
In the past few days, we’ve seen stellar examples of purpose-driven companies exercising leadership.
I’m not privy to how these companies arrived at their decisions. We do know these decisions were taken and acted upon swiftly. That requires strong leaders who know their North Star.
In this very rough and tumble time, a few cases may not make a significant trend. But they certainly are bright spots.
As we know from behavior change experts Chip Heath and Dan Heath, bright spots not only catch our attention. They show us the way forward.