You are proud of your corporation’s commitment to being a responsible citizen, and rightly so. Yet you face constant questions from advocacy groups and their allies in the media about your products and production processes. What changes have you made to address global warming? Are you aware of your “carbon footprint?” What about your supply chain? Does it take into account the latest sustainability standards? It’s enough to give everyone from the CEO to human resources a case of angina. But these issues need to be confronted as competitors increasingly embrace green and cause-related messages.
Sustainability and corporate social responsibility (CSR) programs can bring valuable side benefits like attracting better employees, stimulating innovation and building stronger relationships with customers. Yet there are increasing pressures throughout the world for companies to partner with their critics. But executives should carefully weigh the pros and cons of working with advocacy groups or NGOs. Danger can lurk in satisfying them and rejecting demands that don’t make business sense.
Chiquita has made it work. Once a symbol of banana capitalism, Chiquita made a conscious decision in the early 1990s to become more transparent and sustainable. It approached one of its harshest critics, Rainforest Alliance, which is dedicated to protecting rainforest and related ecosystems. To say the least, both sides were wary: Each had a brand to protect and any romance, if it became public and then soured, could have devastated both of them.
Chiquita, quietly at first, invited the Rainforest Alliance and later the international banana unions to discuss their grievances and its practices. The result has been one of the most successful company-NGO partnerships of the past decade. It’s led to improved wildlife and water conservation, integrated waste and pest management, and better working conditions. Perhaps the most important lesson is that Chiquita worked with the Rainforest Alliance for nearly a decade before discussing it publicly, showing this wasn’t just a PR stunt. Now it brands all its bananas in Europe with a Rainforest Alliance sticker, and charges a price premium. The partnership also has paid huge dividends when Chiquita came under fire for paying off terrorists. The Rainforest Alliance and international unions came to its defense, endorsing Chiquita’s contention that it was a necessary expense to protect vulnerable workers.
But partnering with NGOs, particularly critics, hasn’t always worked this well. Before jumping into bed with sustainability advocates, executives should consider the promises and perils.
1. Cautious Partnerships vs. Broken Promises
CSR initiatives are often begun in times of prosperity, when business is strong and there is money to invest. But economic downturns, changing legislation, new competitors and a host of other threats can force corporations to make tough decisions.
Cutting back on sustainability initiatives also can provoke harsh criticism, especially from advocates brought in as partners who fear their credibility will be damaged. Consider Ford Motors. After taking over as CEO in 2001, William Ford Jr. marked the company’s embrace of environmentalism with a $2 billion redesign of the iconic River Rouge plant, fashioning a marvel of sustainability complete with a 450,000-square-foot roof carpet of plants. A global opinion survey, Green Index, touted Ford as the auto industry’s environmental leader, ahead of Toyota and Honda. But faced with the low profits from the flexible-fuel cars and draining of revenue to support sustainable efforts, Ford scaled back green initiatives to preserve jobs, and was crucified in the press.
Corporations need to carefully assess their own limits, the bottom-line expectations of their potential advocacy group partners, anticipate changes in the economy, and then assess how much their interests overlap. Only they can they decide the parameters of a relationship.
2. The No-Win Situation
While corporations that impact the environment directly, such as energy and utility companies, could make the greatest strides toward cleaning up the environment, they need to tread especially lightly when working with NGOs. Some natural resource companies have made thoughtful partnerships. Doe Run, the St. Louis-based mining company with operations in Peru, has teamed with Freedom from Hunger to attack poverty in Peru – a move that Freedom from Hunger describes as “very generous.” It’s a brilliant move. Doe Run will never be able to appease some critics. But it was able to demonstrate its responsibility in another arena.
But green initiatives aren’t working as well for BHP Billiton. The global diversified resources company has drawn condemnation for the damage caused by its mines in New Guinea. It has taken steps to clean up its practices and its image, including sponsoring the Sustainability Institute at Michigan. But that is not without its own risk. BHP Billiton and the university have been the subject of sharp attacks by environmentalists and activists, underscoring the ethical dilemma facing corporations and their charitable beneficiaries.
Examples like this have led some corporate groups and other organizations to avoid sustainability initiatives out of fear they will be accused of greenwashing. The American Petroleum Institute became so incensed over criticism of its funding a major exhibit on the oceans at the Smithsonian Institute that it rescinded $5 million of support, which caused the program to be killed to the Smithsonian’s great embarrassment.
3. Left Hook, Right Jab
It’s true that many NGOs and corporate social responsibility advocates come from liberal groups pushing progressive changes. But it is risky to assume that it’s all coming from the left. More and more, right wing groups are attacking companies for promoting liberal causes.
Companies that offend the rightwing can find themselves in the line of fire. Brutally criticized, Microsoft briefly abandoned its support of a gay rights initiative in Washington only to reverse itself when left critics shouted even louder. Kraft Foods was shunned for sponsoring gay events. Target and Procter & Gamble were criticized for allegedly supporting abortion rights. Warren Buffet and Berkshire Hathaway were attacked when its newly acquired brand Pampered Chef donated to Planned Parenthood. Buffet responded by ending Berkshire Hathaway’s policy of making corporate donations to any non-profits.
4. Make Sure Rhetoric Matches Practices
Trying to catch the early wave in the global warming and climate change debate, British Petroleum renamed itself BP in 2002, coined the glib nickname “Beyond Petroleum,” and began promoting itself as a leader in alternative energy. According to John Kenney, the advertising agency director who crafted the revamp, the words projected BP as an environmental leader willing to “confront the debate” over the environment and “change the paradigm.”
Its executives began attending ethics conferences, cozying up to NGOs, and pledging their eternal opposition to global warming, as if the company was embarrassed to be part of the fossil fuel industry. Even after it took a huge stake in the Russian oil industry and emerged as the world’s second largest oil and gas producer, the gambit seemed to work, as it was celebrated by Calvert Group for its “positive contribution to the environment” and added to various green funds and sustainability indices. That of course blew up in BP’s face, literally, after an explosion and fire in its Texas refinery set in motion a series of investigations that laid the company bare as an ethical problem child. Its former NGO supporters turned on it in droves.
Green marketing and NGO partnerships have evolved into a potentially lucrative but problematic marketing and communications tool. If used effectively so as to become part of a company’s brand equity, cause-related initiatives offer the opportunity to differentiate products in an ultra-competitive commodity marketplace, and can result in “integrity premiums” that increases profit margins. But if stakeholders believe that integrity is a mere marketing strategy, rather than a fundamental representation of corporate culture, there can be a harsh backlash.
The final lesson: Green marketing can more than pay for itself, but like most things in life, tread carefully, because it can come with a price.
This article was written by Jon Entine and Rich Miller. Entine is Northlich’s senior counselor of Northlich and Miller is its president of public relations.