The climate crisis is the biggest challenge humanity has ever faced. Tackling this challenge needs a multi-stakeholder approach where everyone needs to rapidly reduce carbon emissions. Many thinkers are blaming this cycle of endless production and consumption as a fundamental flaw and a huge detriment to reducing waste and carbon emissions. They are also blaming marketers forpersuading consumers that their happiness solely rests on buying the next new shiny thing. Can the advertising and marketing industry transform consumer behaviour? What are the pathways to this change? Charles Wright, a Principal at Wolff Olins highlights 3 key imperatives for branding.
1. Sustainability is not a differentiator for branding – The idea that companies only exist to make a profit is dead and buried. Sustainable business is now mainstream and this idea is spreading like wildfire. What does branding mean in this world? And What should be the role of marketing? Take the case of energy companies. A large energy company set itself a target of moving towards 70% renewable energy over five years. But in their desire to be a leading player in the alternative energy space what it would take for them to become credible? Could the commitment to green energy be the brand? What we really need to examine is that there are few companies that have already not made some kind of commitment to green energy. The desire to focus on green energy is important but not the main story. Also, there is a sea change in attitudes amongst the investment community towards renewable energy and sustainability in the narrow sense. A few years ago it was seen to be fringe and, at best, an interesting PR angle. The change in attitudes is such that investing in renewables is sound business- and vice versa. Sustainability is, therefore no longer a unique value proposition for many brands. It is an inherent expectation that a brand will be ethically made and will not harm the environment or the community.
2. Digital disruption is changing economics of scale and customer expectations – It is a truism that digital technologies are disrupting most categories. Even where this process is at an early stage, it is common to find that customer expectations of the category are taking incumbents by surprise. Take the case of telecom companies. With some notable exceptions, most are bleeding customers and find their brands have decreasing traction. Part of the problem is that they are being judged not by the traditional standards of their own sector but by benchmarks of service from other categories. “Service” in the world of telecoms has long meant problem resolution. But that is no longer enough if it ever was. Uber, Swiggy and Netflix have taught people that service really means some combination of convenience, personalisation, simplicity, and price- and ideally all four. If proof were needed of how powerful this combination can be, we need look no further than Jio. It disregarded the conventions of telecoms and entered the market like a digital player, upsetting the dynamics (and economics) of the entire category. Jio is an extreme case, but similar shifts in customer behavior can be seen in many countries and sectors which require incumbents to rethink how they work. The change in customer behavior can be the result of a new entrant like Jio playing by different rules, or it can be as a result of changes in technology. Going back to the example of electricity, the last 3 to 5 years have seen a big fall in cost of solar panels and battery storage. Large companies (and perhaps soon consumers) can now generate their own power at scale, more sustainably, more affordably and more reliably. One immediate result is that investing in renewable energy is widely seen as sound business for the mainstream, not just ethically sound for the few. The second effect is that large industrial companies are no longer beholden to energy providers. Even if no equivalent to Jio enters the electricity market, energy providers must now develop new skills in marketing. When customers have choice, brand begins to matter. A lot. And woe betide incumbents who react too slowly. Similar changes to those in energy and telecoms are underway in many other verticals. Enabled by the digital economy, consumers seem no longer interested in buying cars and homes in many parts of the world. This doesn’t just affect car companies or house builders. It has grave implications for the other services that depend on them, such as insurance, lending, maintenance. Younger consumers see themselves as part of the sharing economy where services simply ‘flow’ to them through subscriptions or rentals. The traditional concept of unmet needs and brands rushing up to solve them, therefore, seems dated. At the same time, some industries like finance and energy have managed to avoid any significant disruption. That’s because of their ability to manage regulation- and regulators. Charles says, “Some companies are repeatedly saying they want to be regulated. It is not too much of a stretch to conclude that they feel that regulation will then protect them from other newer entrants. It is hard to imagine this working long term. Looking more widely, in the West as much as in fast growing markets like India, we see many companies treating sustainability as an issue for mid-level CSR managers. But I think they are becoming the exception than the norm. The implications of the changes in consumer behaviour and the applications of technology are so profound that the concept of sustainability needs to extend to ensuring the continued viability of many current business models rather than merely greenwashing them. ”
3. Responsibility to a wider set of stakeholders has taken root and spreading like wildfire – This essentially means that brands need to stand for something more than the core functional value they provide. This takes us back to where we started – sustainability. It has a huge push from employees and customers and investors. In New York, CEOs from 181 of the world’s largest companies declared that the purpose of a corporation is not just to serve shareholders (their official position since 1997), but “to create value for all our stakeholders.” This stance is being feted by the stock markets as investors see a broader sense of responsibility of business. In the last 30 or 40 years, companies have built global supply chains where products are shipped around the world. A simple example would be car companies. They have a big massive carbon footprint because of the way they source, ship and manufacture their products. Construction, agriculture, energy and airlines also have large carbon footprints. We already hear about “flight shaming”. How far will similar attitudes spread? Many of the corporate initiatives around sustainability in the last decade or so have ultimately been about risk mitigation. Even through the lens of risk, it is fair to assume that they are now accountable to a wide set of stakeholders. But is that enough? When the Unilever CEO announced that they would henceforth have only brands with purpose, their share price jumped. Sustainability also means that we are likely to see more local products emerging. Especially in things like food, where the carbon footprint of growing certain types of foods is large and in addition, shipping it across the world further adds to emissions. Locally grown, sustainably marketed products and brands will emerge. The challenge though, will be around managing customers, who are now used to buying food from all across the world. Further, companies are talking about radical transparency. The challenge of transparency is the supply of too much information. Charles says, “Radical transparency may have unintended consequences, because of the inability or unwillingness of the customer to process so much information. Most consumers are comfortable with choosing from 5 or 6 types of olive oil but not more. I wonder if radical transparency may end up as ‘never beaten on price’ because no one has the time or inclination to checks it. If you’d like to check it’s all there, but the presumption is that you will not be interested enough to actually go check and rely on an app or a bot to check for you. In a world where radical transparency becomes the norm, it might matter to a small segment, but it will not be differentiating. This is something to be studied.” So, can marketing change consumer habits? “Yes, and vice versa”, says Charles. “There is a huge dichotomy between what customers say and what they actually do. Sustainable behavior that is both good for the planet and consumers is a challenge which may take time to work its way through. But the implication is that the boards of public companies need to take a wider sense of responsibility. The old adage of “hope for the best but plan for the worst” has never been more relevant.”
In conversation with Charles Wright, a Principal at Wolff Olins. For the Responsible Future blog