Corporate ethics is booming. Every major company has its own social responsibility (CSR) program, sustainability consulting is big business, and more and more companies are jumping onto the do-good, do-green bandwagon.
This is a great development–an indication that leading businesses are beginning to define their roles as true stakeholders in the future of our planet. But one fundamental question still lingers: Is sustainability economically sustainable? Analysts who have compared the financial performance of firms with strong sustainability records against companies without them, say the verdict is still out. Proponents of CSR argue that, given enough time, sustainability will prove profitable, while some hard-nosed business strategists contend that CSR distracts from the more important objective: doing business.
We believe that they’re all wrong. The reality is that a sustainability program can be tremendously beneficial in the long and short terms if it’s tailored to a company’s strengths. Unfortunately, too many businesses are trapped in a rigid, standardized, me-too model of responsibility. Take, for example, the ISO 26000, the broadly recognized international standard for CSR. ISO tells you all the things you and everyone else should do. And that is exactly why it can’t help a company build a competitive advantage.
In some ways, the situation is comparable to the manufacturing crisis the U.S. faced in the ’80s. American manufacturers had unilaterally defined quality as a set of standards. Japanese manufacturers, however, had no such fixed norms and therefore defined quality as a process of continuous improvement. As a result, Japanese products proved superior and overtook the market. Similarly, today’s companies call themselves sustainable if they meet certain predetermined standards, rather than exceeding them.
To make CSR more meaningful, businesses should incorporate a basic branding insight and embrace uniqueness instead of sameness. Just as great brands in some shape or form have a Unique Selling Proposition, companies must develop their own differentiated approach to responsibility and sustainability. They must develop what we call a “unique ethical proposition,” or UEP.
So far, the link between branding and CSR has been mainly about greening the brand, protecting a company’s reputation, and presenting glossy sustainability reports. It’s no wonder that more and more consumers are calling companies out on their attempts at “green washing.” Instead, companies should be leveraging their brands, core ideas, philosophies, and competitive advantages to tackle the major societal and environmental challenges that they’re uniquely positioned to address.
An example of such a cross-bred initiative is Vestas’s WindMade labeling program. The world’s first consumer wind brand, Vestas set up a nonprofit organization to inform consumers of which products are produced in part with wind-generated energy. Vestas has pledged 10% of its annual marketing budget to push the initiative forward. This works well for several reasons. First, it cements Vestas’s position as the industry leader in wind energy. Second, it benefits the company’s direct customers (typically, energy companies) by increasing the demand for wind energy. Third, by setting up the initiative as a nonprofit, it allows Vestas to engage stakeholders, such as regulatory authorities, in open dialogue. Lastly, the initiative has given Vestas PR that is worth as much as their initial investment.
To the health-care company Novo Nordisk, UEP means fighting diabetes and obesity all over the world; to GE, it translates into new energy-saving products; and to the technology firm INTUIT, it means improving the productivity of farming in India through better and free information to farmers. All these firms have strong CSR records, but they hit on the right formula only by focusing on their particular strengths and the changes they were well suited to make in the world. For these companies, CSR moved isn’t a peripheral concern but part of the core business, which in turn informs product design and branding.
We need to move away from the absolutist approach to CSR. Business ethics is a relative process of improvement, rather than as an absolute norm or universal standard. There certainly are some minimum standards that we should all adhere to, but just as there are times when we should exceed them, there are times when we must make certain trade-offs. Using recycled toilet paper, for instance, might not be as important as making changes that will have a greater impact on core company culture.
Once you start fleshing out and focusing on your UEP–on what value you can bring–rather than on a one-size-fits-all definition of sustainability, you can begin a genuine, aggressive strategy that will address the real needs of this planet and its inhabitants. And you might even make money doing it.
Written by Jens Martin Skibsted and Rasmus Bech Hansen.