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9Responsible Marketing / Vol. 8, No. 1, 2016 / GfK MIR
Opening up the marketing horizon /// Traditionally, profit
maximization has been the primary objective of marketing
activities, which tend to be predominantly firm-centric. Very
little or no attention is paid to the numerous social actors
who have the potential to influence and be influenced by
companies’ actions. Nevertheless, recent pressing issues such
as global warming, human rights violations and food secu-
rity, among many others, which are in large part fueled by
the consumption hype created by marketers have provoked
a backlash from various stakeholders. These stakeholders,
including activists, employees, regulators and investors, are
now regularly pressuring companies to go beyond a focus on
customers and adopt a broader and more inclusive approach
in their marketing activities. In other words, companies and
customers should no longer be the major beneficiary of mar-
keting, and marketing as a discipline needs to take respon-
sibility for its actions. To illustrate the tension between the
current dominant paradigm of profit maximization at all
costs and that of responsible marketing, let us hark back
to the 19th century and the tragedy of the commons. The
phenomenon of the tragedy of the commons was originally
noted by William Forster Lloyd to illustrate a situation where
individuals act in their own best interest without considering
the total welfare of the group and as a result end up deplet-
ing a common resource. His specific example focused on the
effects of unregulated grazing on common land. Maximizing
private gain led to collective loss, and it still does in our times.
Responsible Marketing:
Doing Well by Doing Good
CB Bhattacharya
keywords
CSR, Corporate Social Responsibility,
Shared Value, Sustainability,
Stakeholders, Triple Bottom Line
•
the author
CB Bhattacharya,
Pietro Ferrero Chair in Sustainability and Director,
Center for Sustainable Business at ESMT –
European School of Management and Technology,
Berlin, Germany
cb@esmt.org
OPEN
doi 10.1515 / gfkmir-2016-0002
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10 GfK MIR / Vol. 8, No. 1, 2016 / Responsible Marketing
Today, this dilemma is connected with sustainable develop-
ment and used to demonstrate issues around economic slow-
down in emerging economies, environmental protection and
global warming. In the United Nation’s Bruntland Commis-
sion’s report in 1987, sustainable development was defined
as “meeting the needs of the present without compromising
the ability of future generations to meet their own needs.”
According to the World Wildlife Fund (WWF), we are currently
consuming resources worth 1.5 planets, and if we continue
business as usual, this consumption level will rise to 3 plan-
ets by 2050. Given these facts, sustainability is a business
imperative, and if businesses do not get this by themselves,
stakeholder pressures will rise to untenable levels.
More value by sharing value: Using a triple bottom line
/// Figure 1 shows that business value and social or envi-
ronmental values can go hand in hand. Simply put, companies
can no longer afford to be on the top-left quadrant of Figure 1
where they had their glory days and maximized business
value while depleting socio-environmental value. To have the
license to operate, creating positive social and environmental
value is a must in today’s day and age.
Moving to the right-hand side of Figure 1, some companies
have ended up on the bottom-right because they failed to
integrate their sustainability efforts into marketing and
business strategy. They spend resources on ad-hoc social
and environmental initiatives that don’t generate any
corresponding business returns, and since such initiatives
aren’t costless, they prove to be a drag on business value.
This is possibly why sustainability initiatives are inherently
perceived to be in competition with business objectives.
I believe that companies should focus on the top-right quad-
rant, which is what we call the “triple bottom line.” In this
field companies not only create socio-environmental value by
caring for people and our planet, but they also drive business
value and profit through such initiatives. In such a company,
sustainability initiatives are close to the core businesses; this
leverages the company’s competencies and is in line with
company values and principles. The business value created
by such initiatives includes employee and customer loyalty,
positive word of mouth, resilience to negative information
about the company, and several other coveted business out-
comes. In this sense, strategic engagement in sustainability
figure 1 :
Combining business value
and stakeholder value
Business Value
Socio-
environmental
Value
TRAgedY of
THe Commons
TRiple boTTom line
people, plAneT, pRofiT
CoRpoRATe
ResponsibiliTY
sTRAT eg i C CsR/
susTAinAbiliTY
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11
initiatives, commonly referred to as corporate social respon-
sibility (CSR), can be a source of competitive differentiation
and advantage.
Sustainability: A new source for value /// Our research
suggests that value can come from two basic routes: direct
and indirect. A company can, for example, streamline its
operations and renovate its physical facilities to be more
“green” and energy efficient. This can directly lead to cost
savings, which is a direct source of business value. Simi-
larly, since energy is a precious resource, conserving it leads
to a positive societal outcome as well. However, there is
another, more indirect route of value creation via stake-
holder reactions. As a result of the sustainability initiative
to be greener, this company’s employees and consumers
Responsible Marketing / Vol. 8, No. 1, 2016 / GfK MIR
figure 2:
How sustainability initiatives create value
Direct Route Indirect Route
business
ouTComes
Csr
Input
so Ci eTAl
ouTComes
sTAkeHoldeR
ReACTions
CsR vAlue
(economic, social,
environmental)
Source: Bhattacharya et al., 2011
may react positively by being more likely to purchase their
products, seek employment, be engaged at work or talk to
others about what a great company this is. This represents
the indirect route. However, all stakeholders do not react
in the same way, and so companies need to have a clearer
understanding of when, how and why these reactions can
create value for the firm. While the direct route falls more
under the purview of operations and includes dealing with
issues like carbon footprinting, water footprinting, etc., the
indirect route of stakeholder reactions is clearly in market-
ing’s corner. To better understand stakeholder reactions,
along with my coauthors Daniel Korschun and Sankar Sen,
I have studied thousands of stakeholders in multiple com-
panies to shed light on the conditions under which “it pays
to be good.”
go
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12 GfK MIR / Vol. 8, No. 1, 2016 / Responsible Marketing
(e.g., energy savings from more efficient appliances) or
psychosocial (e.g., better integration of work and personal
life from working for a socially responsible company).
> Understanding and usefulness work together to create a
sense of unity, the third lever in the described framework,
which is best described as a sense of belonging to the
company or a connection between the stakeholder and
the company. We provide plenty of evidence showing that
when these levers work harmoniously, they produce the
greatest value for both the company and society, maxi-
mizing the triple bottom line of people, planet and profit.
Our article from Shuili Du and Sankar Sen (pp. 18) shows how
understanding, usefulness and unity help a company improve
consumer well-being while simultaneously attaining strate-
gic goals. The authors investigate a CSR program in the USA
dealing with oral hygiene among Hispanic immigrants. The
brand in question attempted to gain market share against the
dominant player in this growing Hispanic segment and by the
help of the initiative managed to gain some ground ... indeed
a great example of the upper-right quadrant in Figure 1.
This research identifies three interdependent psychological
levers that drive stakeholder reactions to corporate respon-
sibility: understanding, usefulness, unity (see Figure 3).
> The first lever is a stakeholder’s understanding of a com-
pany’s sustainability initiatives. It begins with awareness:
Most customers and even many employees are not aware
of a company’s actions in the sustainability arena. If stake -
holders are not aware, there is no way they can reward the
company. Next, stakeholders often question the com pany’s
motivations for engaging in sustainability: Is the com-
pany seriously trying to help the community, or is it just
about profit? Notably, stakeholders are remarkably
supportive of profit motives as long as the company
shows a genuine interest in and makes a difference for
the social cause as well.
>
The second lever underlying stakeholder reaction to
corporate responsibility is usefulness, or the degree to
which a sustainability initiative provides benefit to the
stakeholder. The needs sustainability fulfills and the
concomitant benefits it provides can either be functional
figure 3:
e three levers that drive CSR returns
undeRsTAnding
usefulness
uniTY
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13Responsible Marketing / Vol. 8, No. 1, 2016 / GfK MIR
Embedding sustainability: Mastering stumbling blocks
on the way /// One may ask at this point that despite all
this research on sustainability and corporate responsibility,
why aren’t more companies able to bring the triple bottom
line to life and drive business value via socio-environmental
initiatives? Why aren’t more stakeholders rewarding com-
panies for their sustainability initiatives? How can com-
panies embed sustainability in their folds such that every
decision made by employees is viewed through a sustain-
ability lens? These are some of the questions I have been
researching lately. In this regard, I have been studying com-
panies like Allianz, BASF, IBM, Nestle, Unilever and many
more to uncover the key success factors for embedding and
mainstreaming sustainability. Needless to say, getting your
employees aboard the sustainability journey is a necessary
first step to implementing responsible marketing strategies
that will have societal impact. So internal marketing is the
order of the day.
Another thing I have learned from my research is that it is
hard to change mindsets and this is a marketing challenge
»
If stakeholders are not aware,
there is no way they can
reward the company.
«
as well. Moving from the upper-left quadrant and even the
lower-right quadrant to the upper-right of Figure 1 takes
time: The profit maximization motive and short-termism are
well entrenched.
Digging deeper, I also learned that a key reason for this
is that most businesses have been unable to articulate a
higher purpose for their existence and “bring it to life” by
driving it through the organization so that it touches their
employees and other stakeholders. There is a “purpose gap”
between what employees yearn for and what the organiza-
tion asks them to do. In other words, we need to understand
how to bridge this purpose gap. A key insight is that in most
companies, employees use a rational cost-benefit calculus to
decide how to act and please their superiors. All too often,
in the dominant paradigm of profit maximization, this is
counter to the values by which they conduct other aspects
of their life. The neat thing about the sustainability move-
ment is that the right strategy enables employees to align
the rational cost-benefit balance with their personal values
and hence resolve this tension.
1
23
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14 GfK MIR / Vol. 8, No. 1, 2016 / Responsible Marketing
In the article with my co-authors Daniel Korschun and Scott D.
Swain (pp. 24), we have a closer look on such internal effects
of CSR. We argue that when employees better identify with
their companies through sustainability initiatives, they also
form a psychological bond with their employer. This results
in a more motivated workforce. In a model we investigate
the ways in which CSR works to improve the job performance
of frontline employees. This is again clear evidence that the
triple bottom line in figure 1 can be brought to life.
Another critical factor are consumers’ reactions to CSR. It
cannot be taken for granted that consumers will embrace
each and every form of social or environmental initiative with
open arms. Companies might be challenged to communicate
their actions cautiously to gain support from consumers.
George E. Newman and his co-authors (pp. 42) shows us
that there is potential “dark side” to CSR initiatives and warn
us to be cautious in communicating the benefits of green
products. Intended environmental improvements performed
by a company might lead to customers suspecting lower
product quality. In order to circumvent these negative effects
of customer perceptions, the authors provide valuable
insight into feasible communication strategies that would
create business value.
Our GfK-research article by Ronald Frank and his co-authors
(pp. 52) deals with consumers’ reluctance to buy fair trade
or ecological clothing. A recent German survey reveals a gap
between what consumers think and what they actually do
in respect to their buying decisions for clothes. Based on
the results of the study and a behavioral economic game
inves
tigating altruistic behavior, they suggest several ways
to
market ecological and fair trade clothing more successfully
and to encourage consumers to act more in line with their
stated values.
»
It is hard to change mindsets.
«
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15Responsible Marketing / Vol. 8, No. 1, 2016 / GfK MIR
The Unilever Sustainable Living Plan (USLP) was intro-
duced five years ago and is a blueprint for growth of
the company, but growth that is sustainable. The plan
has three main goals:
> improving health and well-being for more than
one billion by 2020
> reducing environmental impact by half by 2020
> enhancing livelihoods for millions by 2020
Unilever articulated their purpose in plain English,
“to make sustainable living commonplace,” which is
easy to understand and communicate. The company’s
approach to sustainability is systematic and holistic.
It is embedded in brands and categories, within R&D,
within its reward and measurement systems, and
through an integrated governance system. Through
cross-functional communication, training and devel-
opment, accountability, and a host of other measures,
sustainability has been embedded to a great extent.
Managers across all functions and within its categories
(Foods, Refreshment, Personal Care, and Home Care)
work up, down and across the organization. They are
looking at their own operations as well as those of
their suppliers and distributors, all the way to the end
consumer, through a “sustainability lens.” In turn,
sustainability has stopped being “someone’s job” and
has become everyone’s job in all countries, all brands
and all divisions.
Another way in which purpose comes to life at Unilever
is via its brands, which are the main conduit with its
stakeholders. The company is working hard to imbue
all its brands with a purpose. While marketers are no
doubt familiar with brand positioning statements,
Unilever now has “brand purpose statements.” Take
Domestos for example. Domestos is a toilet cleaner
whose social mission is to improve health and well-
being by attacking the issues of open defecation and
providing access to toilets to the large segment that
needs such access. Unilever has committed to helping
25 million people gain access to toilets by 2020, and
they have also founded the Toilet Board Coalition for
this purpose. Needless to say, more toilets potentially
mean more Domestos sales, but that doesn’t detract
from the social benefit of providing better sanitation,
reduced incidence of disease and the human dignity
that goes with being able to use a toilet. Along with
other purpose brands (such as Dove, Pureit, Lifebuoy,
Knorr and others), Domestos is one of the fastest-
growing Unilever brands.
For Unilever, the business case for integrating sustain
-
ability into the company’s business model is also clear
and persuasive: Unilever’s Sustainable Living Plan has
the ability to provide the company with a strategic
advantage and to set it apart from its competitors. Its
stock price has nearly doubled (from $22 to $42) in
the last six years (since USLP was launched). In 2012,
more than 55% of Unilever’s revenues were gener-
ated from developing markets in Asia, Africa, Central
and Eastern Europe, and Latin America.
In addition, their achievements in the sustainability
area are widely recognized. For instance, Unilever
has been named a leader of the Food, Beverage and
Tobacco Industry Group in 2015 by Dow Jones Sustain-
ability Index (DJSI). Furthermore, Unilever enjoys the
benefits of a good reputation; it is now the third most
looked-up company after Google and Apple on Linke-
dIn. Finally, the Global People Survey, which is done
every year among all Unilever employees, shows that
80% of employees fully support USLP, and many claim
that it is the reason why they are working at Unilever in
the first place. Employees truly appreciate the opportu-
nity to make a contribution for the greater good.
UNILEVER SUCCESS BASED
ON SUSTAINABILITY
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Embedding sustainability: Learning from the pioneers
/// While many companies are still either ignoring their
societal responsibility or experimenting with ways of dealing
with it, others have impressive accounts of success for their
business and for society. One of the companies that has made
quite some progress in this area and with whom I have had
the privilege of working closely is Unilever. When Paul Polman
was appointed CEO in 2009, he immediately set out to trans-
form Unilever into an enterprise that would continue to grow
and prosper but also one that would be driven by purpose
and tackle the complex global issues of the 21st century. Box 1
describes the Unilever approach and its effects in detail. But
this issue contains many more CSR success stories. The article
by Craig Smith (pp. 30) focuses on the important question
of how large pharmaceutical corporations can achieve growth
by creating shared value. Due to public concern, we have seen
that many pharmaceutical companies have been throwing
money at charities, acting in the lower-right quadrant of fig-
ure 1. Smith tackles the question how pharmaceutical com-
panies can create value both for themselves and society at
large and shows how some pharmaceutical companies have
moved to the upper-right quadrant by introducing insightful
best practice examples.
Thomas Osburg (pp. 36) gives an example of the “direct route”
(Figure 2) to creating value from sustainability initiatives
and explains Intel’s struggles in tracing and tracking its own
supply chain in the case of conflict minerals, often sourced
from the worst conflict regions in Africa. Intel is one of the
forerunners when it comes to sustainability and corporate
responsibility. The article illustrates the journey Intel took in
order to overcome the hurdles of assuming the control of its
supply chain of minerals and producing the first conflict-free
microprocessor.
Finally, in our interview I talked to Carlo Vassallo, CEO of Ferrero
Germany, in yet another industry (pp. 46). He explains the
Ferrero way of sourcing cocoa, nuts and palm oilfor their
confectionary business in a responsible way. Being the single
largest buyer of fair-trade cocoa in Germany already, they
have even more ambitious CSR goals for the upcoming years.
Carlo Vassallo explains how they cooperate with internal and
external stakeholders to generate direct and indirect value
(Figure2) for people, our planet and the Ferrero company,
clearly serving as another best-practice case within the
chocolate industry.
All these cases show that it is possible to market sustainabil-
ity both internally and externally and to transform organiza-
tions for the better. I hope that some of these lessons learned
will be useful to many other companies that want – or need
– to go down this path.
figure 4 :
4 Cs for making CSR activities successful
CommiTmenT
CAlib R AT io n
Co - C R eAT i o n Co m m u n iC AT i o n
GfK MIR / Vol. 8, No. 1, 2016 / Responsible Marketing
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17
Bhattacharya, CB; Korschun, D. (2008):
“Stakeholder Marketing: Beyond the Four Ps and the
Customer,” Journal of Public Policy & Marketing,
Vol. 27, No. 1, pp. 113–116.
Bhattacharya, C.B.; Sen, S.; Korschun, D. (2011):
Leveraging Corporate Responsibility: The Stakeholder
Route to Maximizing Business and Social Value,
Cambridge University Press.
Lloyd, William Forster (1833):
Two Lectures on the Checks to Population.
WCED, U.N. (1987):
“Our Common Future,” World Commission on
Environment and Development,
Oxford University Press.
WWF (2010):
Living Planet Report, WWF.
FURTHER READING
Keys to successful CSR /// So, what does it take to succeed
in the sustainability journey? While there are several factors,
four essential ones need to be named, which we call the 4 Cs.
First and foremost, commitment is the first necessary step:
Leadership has to express dedication to the cause and should
be able to communicate the message through the different
functions and business units across the organization. This
message should resonate with the workforce, and the sus-
tainability initiative should motivate employees and increase
their level of identification with the company.
Furthermore, top management should have the capabilities
to engage and involve internal and external stakeholders
systematically. Co-creation activities will help stakeholders
feel good about the company and they will be less suscep-
tible to negative information and will develop feelings of
loyalty. To achieve this objective, utilizing communication
tools is essential. To demonstrate transparency, authenti-
c
ity and credibility, companies need to inform stakeholders
about the rationale and specifics of their motives. Last but
not least, companies should be able to calibrate or evaluate
their impact. Much like other aspects of marketing strategy,
there is a need to monitor and measure sustainability efforts.
Companies need to identify relevant key performance indica-
tors (KPIs) and should come up with ways in which they can
measure these KPIs accurately and effectively. Only then it
is possible to improve continuously and begin on the never-
ending journey of sustainability.
.
»
Leadership has to express
dedication to the cause and should
be able to communicate the message
across the organization.
«
doing
good!
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