Why are these multinational for-profit companies taking such big steps?
By Maxwell Luthy, Director of Trends and Insights at Trendwatching
For a long time, most consumers around the world were living in a state of ignorant bliss when it came to the hidden effects of their consumption choices. But now the information age has shined a bright and wide-reaching light on the true impact of supply chains, environmental factors, foreign factory conditions, nutritional concerns, and more.
The bliss of consumerism was gradually replaced with guilt. Better-informed consumers became conscientious buyers with a new-found focus on purchasing or enjoying offerings that are less damaging to their health, society, and the planet. The large companies that had grown wildly successful during the era of ignorant bliss needed a new direction.
The common belief was that national and multinational corporations, caught up in the siren song of fat profits, had lost focus on the true cost of growth. But because of their large-scale supply chains and massive business footprints, it would take a long time for them to change course. In the meantime, consumers turned away from large, well-known brands and embraced new entrants in every category. Even if they had to pay a premium, people switched to start-ups that were founded on newly minted environmental ethics. Research has shown that 66 percent of global consumers are willing to pay more for products and services that come from companies who are committed to positive social and environmental impacts (The Nielsen Company, 2015).
In practically every category — from fashion, to financial services, to food and beverage — when start-ups were compared with legacy brands, it became clear who would have an easier time meeting expectations for products without negative impacts. Consumers eased their guilt with two assumptions when it came to brands: newer is better than older, and smaller is better than bigger.
The past 10 years have witnessed the birth of a multitude of innovative companies that have raised the standards in their own market space and beyond. TOMS, founded in 2006, introduced their One for One program that contributes products and services to those in need for every purchased product. We’ve seen waves of start-ups adopt a model of consumption as philanthropy for beauty products, stationery, eyeglasses, and more. In the year that TOMS was launched, Tesla introduced its first public-facing prototype, the all-electric Roadster. Like TOMS, Tesla demonstrated that guilt-free yet highly desirable products are possible. And new apparel companies, such as Everlane, have shown that the fashion industry can go beyond minimizing negative impacts and have positive effects. In 2015, Everlane donated its Black Friday profits to the workers who sew the brand’s garments in its Los Angeles factory. Their aim was to raise $110,000 to create a wellness program and offer healthcare, free food, and English classes to the employees.
Although we have seen myriad innovations from start-ups with regard to marketing, products, services, and business models that have a positive impact in the world, there’s more to the story. The theory that newer and smaller businesses are always better isn’t quite the full picture. The problems around the world, from mass migration, to widespread unemployment, to disease epidemics, are as varied as they are urgent, and neither small businesses nor government institutions have the resources to tackle the issues alone. This creates an opportunity — a big one — for massive brands to seek redemption and reclaim the trust and respect of consumers. How? It’s simple: Save the world. We already talked about initiatives by Volvo, IKEA, and Unilever; now let’s look at two more examples of giant companies that are taking the challenge.
In the United States, cigarette use is still the largest cause of preventable death and is responsible for more than 480,000 deaths per year (Centers for Disease Control and Prevention, 2016). Going after smoking in the United States is no small challenge, but CVS Health is on a mission to help create the first tobacco-free generation. Unlike some campaigns that are more about public relations than real action, in 2014, CVS Health stopped selling cigarette products in its 9,600 locations. This decision costs the company an estimated $2 billion per year in revenue from cigarette products, but the positive attention for the change boosted prescription drug revenues by 13.5 percent in 2015. To further their efforts, in March 2016, CVS Health announced a $50 million plan to join forces with anti-tobacco and youth organizations to reduce the number of new young smokers by 10 percent.
In cities across the United States, hundreds of neighborhoods have faced long-term economic neglect with disastrous consequences for residents. Meanwhile, major financial institutions are still repairing their damaged reputations from the Great Recession. JPMorgan Chase realized that to achieve redemption, they’d have to go big. In April 2016 the company launched PRO Neighborhoods, a $125 million commitment to revitalize neglected neighborhoods across America. Using data from a two-year pilot study in Detroit, JPMorgan Chase identifies and supports failing neighborhoods by partnering with local community development financial institutions to fund new local businesses and create affordable housing and community services. Research shows that JPMorgan Chase’s 2014 investment of $33 million in Detroit attracted an additional $226 million in investment capital from other sources (Harvard Joint Center for Housing Studies, 2015).
When 80 percent of consumers expect businesses to lead in solving social problems (Edelman, 2016), big brand redemption isn’t an optional pillar in your strategy; it’s increasingly vital to your survival. Big brands must do what they can to set their organizations on the right path. Small steps are good; giant leaps are better.
Centers for Disease Control and Prevention. (2016). Tobacco-related mortality. Retrieved from https://www.cdc.gov/tobacco/data_statistics/fact_sheets/health_effects/tobacco_related_mortality/
Edelman. (2016). 2016 Edelman trust barometer: Global report. Retrieved from http://www.edelman.com/insights/intellectual-property/2016-edelman-trust-barometer/global-results/
Harvard Joint Center for Housing Studies. (2015). CDFI cluster demonstration project. Retrieved from http://housingperspectives.blogspot.com/2015/12/cdfi-cluster-demonstration-project.html
The Nielsen Company. (2015). The sustainability imperative: New insights on consumer expectations. Retrieved from http://www.nielsen.com/content/dam/nielsenglobal/dk/docs/global-sustainability-report-oct-2015.pdf
Maxwell Luthy is Director of Trends and Insights at TrendWatching and delivers lively workshops for leading brands from Samsung to Disney, along with insight-packed keynotes at conferences around the world. He previously oversaw TrendWatching’s 3,000-member spotter network. Luthy co-authored the book Trend-Driven Innovation (Wiley, 2015).