As consumers grapple with the emotional fallout of the recession, brands can no longer merely say they are responsible, they must show it in every facet of their business, writes David Benady.
It is not every day that a brand waves goodbye to £1bn in profit on ethical grounds, yet Barclays did just that earlier this month when it announced the closure of its tax-avoidance division Structured Capital Markets.
The bank's new chief executive, Antony Jenkins, reasoned that the activities of the prodigiously profitable tax planning unit were at odds with Barclays' newly stated ethical principles. 'We get it. The old ways weren't the right ways to behave, nor did they deliver the right results for the bank or for wider society,' he proclaimed, addressing a room full of analysts and journalists.
Critics have long derided the way some companies cloak themselves in CSR as little more than a PR stunt, so much 'greenwash' cooked up by their spin doctors to sell more products. Unilever's chief marketing officer, Keith Weed, recently spoke at a Chartered Institute of Marketing debate, declaring: 'Social-responsibility claims by businesses amount to little more than posturing to gain commercial advantage.'
The sudden bout of moral righteousness at Barclays has come as it tries to waft away the bad odour left by some of its more exotic activities - mis-selling, rate-fixing and tax-avoidance. It is the latest in a long line of corporate Damascene conversions as companies face heightened levels of public and media scrutiny. Like Barclays, however, many seem to adopt the ethical cause only after dubious behaviour has been exposed.
Starbucks' belated decision to direct extra funds to HMRC after years of paying minimal corporation tax came only after it was humiliated by the House of Commons Public Accounts Committee. Coca-Cola, meanwhile, has tied up with conservation body WWF to protect water supplies in the face of ferocious campaigning by critics. Retailer Primark turned to CSR after allegations by the BBC's Panorama that child labour was used to produce some of its garments.
Swamped by protest
Many such accusations are amplified via social media. The issue of tax-avoidance has turned viral, with protests by campaigning group UK Uncut putting Starbucks and Barclays in the spotlight with Google and Amazon. Tesco's Facebook page, meanwhile, was swamped by protests about its participation in the government's controversial Workfare scheme.
CSR has now become far more than a marketing exercise. Businesses need to identify potentially toxic issues and act before they hit the headlines for the wrong reasons. They must change their values or face a Twitter storm or Facebook-page takeover.
Unilever's Weed says social responsibility should be woven into a company's DNA, not just 'a tool to paper over the cracks'. During a debate on the issue at the House of Commons in January, he stated: 'It is not enough to put a glossy picture in your annual report to demonstrate investment in a project in Africa in order to show you are a caring company.'
Weed believes businesses need to develop a new model to serve the environment and society in which they operate. 'We need to think differently about doing business in the 21st century. We cannot have healthy business without a healthy society. Businesses and not just government need to step up,' he told the debate.
Retailer Marks & Spencer believes that its 'Plan A' responsible-business programme, launched in 2007, will help future-proof it against becoming a target. Plan A set out 100 socially responsible commitments for the business to achieve by 2010 - a further 80 have been added since. These have covered combating climate change, reducing waste, using sustainable raw materials, trading ethically and encouraging healthy eating.
Plan A head of delivery, Adam Elman, says the strategy is geared toward picking up on new and changing concerns and listening for emerging issues in ethical business.
'When we launched, the mindset wasn't to cherry-pick or do things that were popular with customers, or even to save money, but to tackle all the issues across the supply chain,' he adds. 'We keep reviewing, refreshing, making sure we tackle those big issues. We work with a large group of stakeholders, including NGOs and opinion-formers, and once a year get them all together (in) open sessions. It is important that we respond and engage with them.'
Elman gives the example of environmental organisation Greenpeace coming to M&S about its campaign against the use of toxic chemicals in clothing production. The retailer joined the campaign, which targeted rivals.
According to Elman, M&S' approach means that, while it consequently picks up the big issues, it can also ensure it responds promptly to any new ones that arise.
Similarly, Sainsbury's believes it is embedding social responsibility into its operations with the 20x20 Sustainability Plan, which sets out 20 sustainability goals for the supermarket to achieve by 2020.
Stuart Wright, head of CSR at Sainsbury's, says the strategy has emerged from the brand's focus on consumers.
'It is about (helping) customers (make) better-informed ... decisions,' he says. 'We have a huge responsibility - sustainability isn't an add-on, it is a fundamental part of our strategy. We speak to consumers from the insight point of view.'
As Barclays discovered, CSR can be costly. With social-media transparency paramount, however, acting ethically may prove far less expensive than having your brand's reputation dragged through the mud.
SUSTAINABILITY IN ACTION
The John Lewis Partnership Partnership in practice
The John Lewis Partnership model of staff ownership is often described as one for other companies to follow - an alternative to shareholder ownership, which puts staff at the heart of the business. The retailer, which owns the John Lewis department store and Waitrose supermarket chain, is seen as a successful example of a democratically controlled business where decisions are ratified by the workforce, who share profits. This ensures that the company works ethically, rather than promoting the interests of shareholders above concerns about the environment or social responsibility.
The partnership model has its limits, however. Some see it as a 'closed shop' where an inner core of workers are favoured over outsourced workers.
This issue boiled over last summer when John Lewis store cleaners employed by an agency went on strike over plans to cut jobs and pay. This raised the question of whether these outsourced workers should be eligible to become partners. The business has decided against this, however. In a statement, The John Lewis Partnership said: 'Earlier this year, we were criticised for outsourcing our cleaning by some who thought this practice was inconsistent with our values. We do not believe, however, that our values require us to extend membership to all who work for us or with us. In the modern world, "insourcing" all activities would be impossible.'
SAINSBURY'S 'SWITCH THE FISH'
Sainsbury's 'Switch the fish' campaign encourages shoppers to switch away from the 'big five' fish species that have stocks under threat.
The supermarket's head of CSR, Stuart Wright, says: 'We want to help customers broaden their repertoire so we have chosen five alternative British species and promoted them through recipe ideas and social media.'
The retailer sees its role as encouraging behaviour change, though Wright says it is mindful that this can be achieved only through giving consumers the information they need. However, he rejects the accusation that CSR is a way of 'premiumising' Sainsbury's in the eyes of its affluent customers.
'Irrespective of their socio-economic class, consumers care about sustainability. They care irrespective of how much they spend. From Basics to Taste The Difference, we are working hard to embed sustainability.'
Nonetheless, Sainsbury's argues that CSR can be a way of differentiating itself from rivals. 'We believe our values give us real competitive advantage and look to differentiate on this basis for customers, colleagues, suppliers and stakeholders,' it says on its CSR website.
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