Defining Green Brand Leadership

October 29, 2007

“We will not be measured by our aspirations.  We will be measured by our actions”                   

— Wal-Mart CEO Lee Scott in making sustainability part of his core strategy

Great brands today understand that return on investment (ROI) using hard dollars is not sufficient to assess the overall impact of environmental initiatives.  Today, social norms regarding the environment are changing and consumers are increasingly holding brands accountable for what they do (and don’t do) rather than just what they say.  As a result, more and more companies are making investment decisions that incorporate brand impact and brand risk into their equations. 

Wikipedia defines brand as the “embodiment of all information connected to [a] product and serves to create associations and expectations around it.”  Though intangible, a brand may generate significant value for a company based on its ability to create differentiated experiences for consumers – and enable the company to generate and sustain future cash flows as a result. 

One way to view a brand is that it can enable companies to charge a premium for what may ordinarily be perceived as a commodity product.  Take for example Coca-Cola, the #1 brand based on the 2007 BusinessWeek/Interbrand survey.  According to the Brand Finance 250 annual report, Coca-Cola has the highest brand value – over $43 billion or nearly 40% of its total $110 billion enterprise value – in a highly competitive beverage market.   

While taste is indeed an important differentiator, Coca-Cola is able to charge a premium for its products – and generate significant brand value – primarily due to the strong brand loyalty of its customers. 

Increasingly, leading brand companies are recognizing that environmental issues have the potential to impact brand value – positively or negatively – and are taking action.  Coca-Cola clearly understands this and is aggressively responding with bold initiatives that are intent on shoring up its green credentials. 

For example, consumers today are less willing to accept that a plastic bottle will take 1,000 years to decompose in a landfill.  By proactively redesigning its bottle to reduce material use and pledging to recycle 100% of bottles sold in the US, Coca-Cola is clearly taking action to stay ahead of consumer brand expectations – and by doing so, defending (or perhaps enhancing) its brand value.

Does reduced material use lower production costs for Coca-Cola?  Absolutely.  Does committing to recycling 100% of its bottles help attract new customers?  Not necessarily.  Regardless, recycling bottles impacts its brand value – and ability to continue to sustain future cash flows – by strengthening connections with existing customers and mitigating potential risk to its corporate reputation as a result of negative PR.

Today, many leading brands like Coca-Cola are responding to consumer concerns about the environment by making investments that strengthen or shore up brand value.  Marketing Green believes that there are five actions that define green brand leaders. These five actions need to be considered by companies looking to green their brands: 

Be accountable.  Companies should acknowledge that environmental issues such as climate change are real and that, despite good intentions, they are part of the problem (and can be part of the solution). At this point, businesses are likely to alienate few consumers with such a statement and can begin to attract the growing group of consumers looking for green brand leadership.    

Additionally, businesses should audit their own operations and the lifecycle of their products – including sourcing, use and disposal – to determine their environmental impact and track these metrics over time. Indeed accountability, now considered one of the top pillars of successful marketing communications, cannot be underestimated when it comes to the environmental space.

Consumers are becoming increasingly savvy and increasingly demanding when it comes to the environment.  Companies should not be shy in setting high goals for themselves when it comes to the environment; if there’s any time to admit the future needs to be different than the past, it’s now.  

Be transparent.  More and more, leading brands are providing public disclosures of their environmental and social impact.  Today, in fact, 43 of the top 100 brands – including 12 of the top 15 – make public disclosures based on sustainability guidelines set by the Global Reporting Initiative. 

This reporting framework – first proposed by Boston-based non-profit CERES, endorsed by the United Nations Environmental Programme and supported by a consortium of leading brands including Alcan, BP, Ford, GM, Microsoft, RBC Financial and Shell – has become the de facto standard for environmental and social reporting globally.  Currently, more than 1,250 companies in over 60 countries are making disclosures using this framework. 

Another way that companies are demonstrating transparency is through partnerships with non-governmental organizations (NGOs) such as the National Resource Defense Council and Environmental Defense (ED).  NGOs provide credibility for a company because consumers view them as industry watch dogs. 

Certainly, one of the best partnership examples is the one forged between Wal-Mart and ED to make Wal-Mart’s operations and supply chain more sustainable.  In effect, Wal-Mart – not ranked in the BusinessWeek/Interbrand survey because it operates internationally under different brand names – has turned to a respected NGO to endorse its environmental efforts. 

This partnership hold such promise that ED announced last year that it was adding a staff position in Bentonville, AR in order to coordinate ongoing work with the retail giant.

Be credible.  Today, consumers are skeptical; too many companies have tried to green wash hollow environmental efforts.  As such, companies must work hard to build credibility and earn consumer trust over time.   

One way for a company to do so is to first green its internal operations, followed by its products and services, and then its marketing communications.  This way, companies ensure that they take responsibility for their own actions before encouraging consumers to do so with their products or through their messaging. 

But this is not the only way to gain credibility with consumers.  Companies like Toyota (# 6 ranked brand) started by greening its products (eg, hybrids) first.  The risk for a company, however, is that over time its own product enthusiasts are likely to challenge how the product is made.  In the case of Toyota, hybrid owners are now pressuring it to green its operations and manufacturing facilities and Toyota is taking action, according to Marjorie Schussel, National Manager of Corporate Communications, at the recent Green Conference sponsored by Ad Age. 

In contrast, Dell (#31 ranked brand, in contrast to #3 IBM and Dell archrival #12 ranked HP) started with its marketing communications first, declaring that it was going to be the greenest IT company on earth.  In doing so, it essentially admitted that its operations and products were not green yet but that it had every intention to make them green over time.  To help facilitate this transformation, Dell created a site called IdeaStorm to solicit input from its customers on ways by which it could go green. 

Be an enabler.  Leading brands should recognize that consumer expectations have changed.  It is not enough for a company to green its products; consumers expect the products that they purchase to help reduce the environmental impact in their own lives too. 

Recent research by Umbria, a marketing intelligence company, supports this.  Averill Doering, a consumer research analyst with Umbria, made the following observation: “[Consumers] see the [environmental] problem. They want to do something about it.  And, they want the companies they buy from to help them do it.” 

Such consumer expectations raise the bar and imply that consumers may hold companies responsible for the environmental impact of the products that they buy – across the entire lifecycle.  Consumers may increasingly care not just about product sourcing, but about its use and disposal too.  The emergence of eco-labels may serve to reinforce these consumer expectations as they will provide consumers with the necessary information to make greener choices by comparison shopping.  

Leading brands only need to witness the growth in hybrid sales – 49% during the first seven months of 2007 over the same period in 2006 – to recognize that consumers are actively seeking products that enable them to be greener.  Today, every major automobile company is following suit and is accelerating development and commercialization of greener automobiles. 

Be visionary. Visionaries are willing to make bold decisions that redefine their strategy or reshape industry dynamics.  Today, there are many emerging green visionaries.  Among them is Wal-Mart. 

In June of 2004, a pivotal meeting took place between CEO Lee Scott, Rob Walton, Board member and son of the late founder, and Peter Seligmann, Co-founder and CEO of Conservation International.  Walton and Seligmann were friends and had often discussed the potential impact that Wal-Mart could have as the largest global retailer if it were to change the way it did business.   

The pitch to Scott: Wal-Mart had long been criticized for its labor practices, employee health benefits and environmental record.  Given its buying power as the world’s largest retailer, Wal-Mart was in a unique position to affect change in the retail space and do so in a way that would greatly reduce its impact on the environment while saving money, growing revenue and positively impacting its brand image. 

Over time, Scott has essentially turned this pitch into Wal-Mart’s modus operandi.  Not only did Scott set ambitious goals regarding sustainability – 100% renewable energy, zero waste, products that sustain our resources and environment – but he has made it a central component of his strategy and brand positioning.   

Wal-Mart first demonstrated the demand for more sustainable products when it began selling organic cotton yoga outfits through Sam’s Club: 190K sold in less than 10 weeks. This year, Wal-Mart challenged itself to sell 100MM compact fluorescent light bulbs (CFLs) and has already surpassed that goal.  To do so, it combined its marketing muscle to heavily advertise the CFLs in its stores, and purchasing clout to be able to drive down the cost substantially over just one year ago. 

Moreover, Wal-Mart is intent on making its suppliers more sustainable.  Earlier this year, Wal-Mart launched Sustainability 360º, a program intended to enlist its employees, suppliers, customers and local communities to help reduce environmental impact.  This month Scott hosted a Sustainability Summit to connect Wal-Mart suppliers with vendors that could help them become more sustainable.  

Finally, Wal-Mart has expanded its brand positioning to include not just its long time low cost promise, but also “affordable, sustainable products that help [customers] live better every day.”  “Save Money. Live Better” is now the Wal-Mart tag line.    

Increasingly, companies recognize that environmental issues can impact brand value.  In response, leading brands are increasingly incorporating brand metrics into their evaluation criteria for green investments; they are also taking action to green their operations, products and marketing communications.   

Smart brand marketers should think twice about simply focusing on near-term green revenue and cost savings opportunities; the path for sustaining growth needs to also start with greening the brand.


Green Brand Disconnect

October 26, 2007

This week’s cover story in BusinessWeek featured the experience of Auden Schendler, corporate director of environmental affairs at the Aspen Skiing Company (ASC), as he tried to convince his senior management that going green was worth the investment (“Little Green Lies,” October 29, 2007).

 

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From an outsider’s perspective, one might think that ASC would be highly receptive to eco-friendly investment opportunities, as the company has incorporated green as a core brand pillar and a central theme in its marketing communications.  Yet, as Schendler points out, things are not always at they appear; apparently, ASC is not as green as its brand might suggest.

In one example, Schendler points out that in the past, senior management has resisted even modest investments in proven technologies – such as compact florescent light bulbs (CFLs) in hotel rooms – that yield measurable cost savings and a positive ROI.  The rationale: CFLs are not aligned with the brand experience ASC wants for its customers.  As one hotel manager said, “Fluorescent light would suggest a waiting-room ambience, jeopardizing the establishment’s five-star rating.” 

Such a world view, however, does not seem to acknowledge evolving social norms and consumer expectations regarding green.   According to a recent JD Powers Hotel Guest Satisfaction Survey, 75% of hotel guests are willing to participate in environmental programs.  In the luxury hotel category, an even higher percentage of guests are willing to participate: 87% of Baby Boomers, 95% of Gen Xers and 79% Gen Yers.  Based on this consumer data it seems that ASC may be underestimating their guests’ interest in and expectations for green as part of their hotel experience. 

As such, it seems that ASC’s decision not to invest in CFLs may be at odds with current consumer sentiment.  In fact, CFLs have already gone mainstream.  Today, many luxury hotels already use CFLs for lighting.  Their light quality has improved tremendously.  And, retailers are selling them aggressively, despite the fact that incandescent light bulbs are more profitable for them.  In fact, Wal-Mart has sold over 100MM of these bulbs this year alone.  

Moreover, not investing in CFLs seems contrary to ASC’s own brand positioning and communications in the market.  In fact, just weeks before the BusinessWeek article ran, ASC launched a new advertising campaign that, according to the Salt Lake Tribune, used “high-profile skiers and snowboarders to tout the resort operator’s environmental record and urging others to take action, too.”   This campaign is supported by a lightly branded microsite called Save Snow which educates visitors about what ASC is doing and what others can do to reduce climate impact.   

Ironically, the campaign also includes plans to send 40,000 CFLs to its customers.   

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So, marketers should take note.  Consumers are increasingly willing to participate in environmental programs at hotels, and especially at luxury ones.  

Hotels should not be afraid to invest in green initaitives including CFLs.  Not only can such programs provide attractive ROIs, but, for companies such as ASC, they can ensure that the consumer experience aligns with their brand positioning in the market.  For ASC, the decision not to purchase CFLs is, at best, inconsistent with its brand.  At worst, the company risks that its marketing efforts are perceived as green washing.


Drought Can Spark a National Dialogue on Climate Change – Part II

October 20, 2007

“You can’t call it a drought anymore, because [the US Southwest is] going over to a drier climate.  No one says the Sahara is in a drought.”   — Richard Seager, Scientist, Columbia University’s Lamont Doherty Earth Observatory as quoted in “The Future is Drying Up”, New York Times Magazine, October 21, 2007 

As first published in its July 14, 2007 posting, Marketing Green believes that persistent drought in the US can be an effective catalyst that sparks a broader, national dialogue on climate change.  With drought conditions worsening in areas of the US, the time is now for such a conversation. 

Drought can be a catalyst for a broader dialogue for many reasons. First, drought will directly impact the human condition, causing inconvenience and suffering.  Second, drought will likely cause economic hardship by limiting growth, reducing output, and significantly increasing costs (eg, building infrastructure to move water long distances or desalinate water).  Finally, droughts force political leaders to make unpopular trade-offs that require voter sacrifice. 

Indeed, as tomorrow’s New York Times Magazine reports, drought conditions are worsening in the historically dry Southwest while expected population growth will put more demands on limited resources in the years to come.  Shortages are on the horizon across the region, but are especially apparent in cities like Las Vegas which is dependent on water from Lake Mead, the largest man-made reservoir in the US, that is currently at less than half of its capacity.   Moreover, continued shortages will likely pit one entity against another in price wars and legal battles as individuals, businesses and governments compete for scarcer resources. 

Drought conditions in the typically temperate US Southeast may demonstrate a more alarming trend because they are so unexpected.  With scorching heat this past summer and a hurricane season that failed to materialize, the city of Atlanta confronts the drier winter season with record low water levels in its reservoirs.   Most experts agree, it is the driest period every recorded in the Southeast; few signs are on the horizon that suggest the situation is likely to improve any time soon. 

Interestingly, extreme drought in the Southeast is fueling water disputes between regional states over scheduled water releases from Lake Lanier, the primary water source for three million Georgian residents, that are mandated by the Endangered Species Act and enforced by the US Army Corps of Engineers. 

Currently, as Georgia enters what is typically its driest month, Lake Lanier holds a mere 81 days of stored water left.  Georgians have responded by imposing severe restrictions on water use, but unbridled growth over the past decade and limited water use planning up until now have put a strain on existing resources.   

But, it is the actions by the Georgia legislature that, perhaps, are generating the most controversy.  Pending legislation would temporarily wave compliance with the federal Endangered Species Act and allow Georgia (via the Corps) to suspend water releases from the Lanier that currently protect endangered mussels and sturgeon downstream.  So far, the Corps refuses to budge which means that a legal showdown is likely ahead. 

The state of Florida has leveled a complaint already, asking Georgia to release more, not less, water to protect Floridian biodiversity.  Moreover, Gov. Bob Riley of Alabama has asked the Corps to release additional water from other Georgian water sources in order to alleviate shortages in that state.    

It is likely that cross-border disputes will only intensify if sufficient rains do not come soon.  In fact, facing severe water shortages, Atlanta may soon become the first metropolitan region to reduce water available for commercial and industrial activities, a threat to the local economy.   These threats will only be compounded if reservoirs do not refill before next summer when water use is traditionally the highest.  

As water become more scarce and entities compete for dwindling resources, marketers have an opening to leverage drought a conversation starter for a national dialogue on climate change.  In many ways, expanding drought conditions will force the conversation as we will have to deal with consequences of a drier climate whether we are prepared to do so or not.  

Because the populous in the US is geographically dispersed, however, marketers risk that such discussions will be isolated to those regions most affected.  As such, it is an imperative for marketers to broaden the discussion regarding worsening drought conditions and their causes to create a truly national debate.


Greener SimCity Virtual World as Channel to Influence Real World Behaviors

October 17, 2007

Electronic Arts (EA)’s SimCity, the popular simulation game that challenges users to build and run a metropolis, is set to release its latest version in mid-November – SimCity Societies – and is generating a lot of buzz in the process.  

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One way that sets Societies apart from previous versions is its new functionality that requires users to take economic and environmental factors into consideration when making energy production decisions.  (Other simulation games that require users to make trade-offs between energy and environmental concerns include Energyville, recently launched by Chevron and The Economist Group; ElectroCity, sponsored by Genesis Energy in New Zealand; and My Abode, sponsored by the UK’s Department for Environment, Food and Rural Affairs.)

While this novel functionality is generating significant buzz in the market, the real learnings for green marketers may be how EA and energy giant BP are leveraging the game itself as a marketing channel to influence its audience.  In doing so, EA and BP will have impact across the purchase funnel:

Awareness: As a key sponsor of Societies, BP will place its logo on renewable energy sources throughout the game.  BP is likely betting that branding renewable energy in this virtual world will have a positive impact on brand awareness, favorability and purchase intent in the real world.

Cleverly, while BP plans to place its logo on (not so eco-friendly) gasoline stations within the game, it is purposefully not associating its brand with dirtier energy sources that are used to generate electricity like coal (though this positioning may be somewhat inconsistent with its real-world energy mix).

Consideration: The game itself provides a high impact channel to educate consumers about real-life trade offs that are increasingly required today.  

In this simulation game users make decisions regarding how to meet the growing energy needs as well as how to deal with their consequences over time.  For example, users that choose to fuel industrial growth with low cost, but high polluting energy sources may find themselves facing droughts, heat waves and other weather-related consequences of global warming.  

Ultimately, companies like BP will benefit from such presence if consideration for renewable energy in the virtual world translates into the real-life consideration as a result. 

Purchase: Perhaps the most powerful use of this gaming channel has yet to be explored, that is, driving transactions.  While enabling functionality is not planned for this version, the potential exists to facilitate purchases longer term. 

In a gaming environment there are several ways in which real-world transactions could take place.  One way could be to allow users to sign up for or indicate interest in renewable energy directly through the gaming environment or an associated micro site. 

Moreover, it may even be possible to exchange Simoleans, or SimCity virtual currency, to purchase renewable energy in the real world over time.  This would be similar to the way virtual Linden dollars can be exchanged for real dollars in the popular virtual world of Second Life.

So, marketers should take note. Gaming is an emerging channel that may be used to reach new audiences and influence behaviors across the purchase funnel.  The virtual world of SimCity Societies requires users to make economic and environmental trade-offs similar to those that we increasingly confront today.    For marketers like BP, such an immersive environment offers the chance not only to influence awareness and consideration in a virtual world, but to shape behaviors that impact the bottom line in the real one.


Green Marketing as a Vehicle for Consumer Engagement

October 12, 2007

Today, smart marketers are focused not only on whether consumers view their message, but to what extent they engage with it.  One definition of engagement is as a measure of consumer involvement with a marketing vehicle.  As defined, it implies that engagement should be considered as both a marketing tactic and a metric that can be measured and optimized. 

The green space is ripe for engagement in large part because consumers are interested in green not just as a product category but as a social cause.  As a result, consumers are not only highly open to invitations to engage, but eager to do so when given the opportunity.   Many, in fact, actively seek outlets for their passion; marketers only need to activate them by providing the opportunity. 

Several marketers have already tapped into this passion by creating points of engagement that go well beyond your average marketing communication. 

One such example is CNN’s Impact your World.  CNN is one of the premier news brands today.  Traditionally, news organizations like CNN have provided ways to consume and subsequently react to news by providing the opportunity to comment on news stories – a form of engagement in of itself.  

Yet, CNN Impact takes engagement to the next level by providing consumers with a way to act on their interests in or passion for particular news events – green or otherwise.  One great example is the recent story of the small Iraqi child that suffered severe burns.  CNN Impact enabled its viewers not only to read articles about the child but to take action by making donations to cover his medical bills.   engagement-tactics_3.gif 

In the green space, CNN Impact provides the opportunity for viewers to take action through its “Planet in Peril” section.  CNN provides links to relevant content as well as to environmental non-profits where viewers can make a donation.  CNN facilitates donations by partnering with Charity Navigator to provide information on non-profits to enable users to make more informed decisions. 

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Another great vehicle for driving engagement was the recent Members Project by American Express.  In this project, American Express designated significant funds to be donated to a cause of its cardmember’s choosing.   A platform was created for cardmembers to nominate and vote on different projects over a three month period. 

In the end, American Express cardmembers chose to fund a UNICEF project to bring clean drinking water to children (a noble project that is at the intersection of green and human health).  American Express provided the platform for the project; cardmembers engaged with each other through this platform to determine the project’s outcome. 

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Smart green marketers should take advantage of green as both a product and a social cause by creating deeper opportunities for engagement with their consumers.  Companies can facilitate engagement in multiple ways: by enabling consumers to act on their interests (eg, by connecting them with volunteer opportunities, enabling donations as in CNN Impact) or interact with peers (eg, through community or discussion boards), by encouraging content creation and distribution, and by facilitating product ideation (eg, through collaborative environments) or direct feedback to a company.   

Moreover, marketers may motivate consumer engagement by wrapping a product with an affinity-based experience (eg, Members Project) or by providing access to an event or experience that has perceived value or is deemed exclusive. 

Given the passion that some consumers have for the category, marketers may be surprised by the response and the impact that such marketing vehicles may have on the bottom line.  

(Disclosure: American Express is a client of Digitas)


Greening Your Brand in a Web 2.0 World

October 3, 2007

Last Friday, I have the pleasure of moderating a panel at the Sustainable Brands conference in New Orleans.  Panel participants included: 

  • Susan Space, Director, Brands & Advertising, at Sun Microsystems
  • Brian Reich, Director of New Media at Cone, a brand and cause marketing agency, and
  • Janet Eden-Harris, CEO of Umbria, a marketing intelligence company.  

I have included my opening remarks below (and will follow up with the transcript of the discussion when it becomes available):

Web 2.0 enable consumers to participate, share and collaborate online like never before.  And whether you are a B2B or B2C marketer, you probably have noticed that consumers are embracing these technologies not only to participate but to control and dictate when, where and how they want to be communicated to. 

Today, consumers view six times the number of ads that they did 20 years ago. And not surprisingly, customers feel inundated and are tuning them out.  (Ad Age, February 4, 2006) In fact, consumers are finding ways to opt out of viewing our advertising altogether by using Pop-up blockers, spam filters, and DVRs and by signing up for Do Not Call Lists and even Do Not Mail Lists. 

At the same time, they are opting in to view content of their choosing by using blog readers like Technorati, customzied news feeds like NewsVine or even signing up for emails with green lifestyle tips from sites like the Daily Green. 

Today, more and more consumers are active contributors online, and in the process, blurring the distinctions between advertising and content and between consumer and publisher.  In this new world, ads are no longer the stuff that fills the gaps between the content.  Content, in effect, is advertising.  And, advertising is increasingly distributed as content.   With nearly 50% of consumers generating – or perhaps I should say publishing – content online, this shift has already taken hold.  (Pew Research) 

Moreover, distrust of product companies will only accelerate this trend, as consumers increasingly turn to their peers for seemingly unbiased opinions and information. 

And, it is in this environment that most marketers focus on the loss of control over brand messaging and identify, rather than the opportunity.  

How then do marketers – and particularly green marketers – take advantage of this new Web 2.0 order?   

We need to first recognize that the rules of engagement have changed; many traditional assumptions regarding marketing, media and branding no longer hold true.  Yet, as marketers, our response should not be to shy away from this change, but to encourage and embrace it through new marketing approaches. 

And, as it turns out, the green category is defined by specific consumer, product and brand characteristics that can take full advantage of Web 2.0 capabilities.

First, green is an emerging product category.   Consumers are not very familiar with the products available today.  Few standards exist.  And, new products and technology solutions are coming to market each day. 

As such, marketers have the opportunity to leverage Web 2.0 capabilities to help consumers to navigate the category, facilitate consumer education and drive product development through collaborative environments and communities 

Second, many consumers are not fully committed to being green yet.  Attitudes are evolving.  Purchase behavior is inconsistent.  And, perceptions about corporate brands are still be formed. 

Marketers have the opportunity to influence this evolution through transparent participation in the online dialogue, encouragement of WOM marketing and facilitation of consumer engagement online.  

As with consumers, the greening of a company and a brand should be considered a journey.  One challenge for green marketers then is to keep the journey of your own brand one step ahead that of your customers. 

Third, it is important to remember that for some, green describes not only a product attribute but a social cause.  All marketers should take advantage of this by activating those consumers most passionate about the category.   

The challenge for marketers then is to act in a way that is perceived as genuine and not simply “greenwashing”.  

And, it is in this context and this environment that we welcome our panelists and begin our discussion.  

(Special thanks to Carl Fremont, EVP and Global Head of Media at Digitas for his contributions)


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