Aspire Thought Leadership! Wondering about effects of Branding Sustainability?. Find out more on how fortune 500 companies use this approach. Come rig
Why has merging the brand and supply chain [branding sustainability] two very distant domains that have hardly ever spoken to one other become so relevant today and tomorrow?
The COVID-19 pandemic and the resulting economic turmoil have accelerated some transformations already in place in the world of brands.
- The quest for RELEVANCE. Researchers say that by 2030, half of all S&P 500 companies may no longer exist, as disruption leads many companies and brands to irrelevance. Today, relevance is probably the most reliable indicator of a brand’s long-term success. Relevance is about customer understanding, making emotional connections, earning trust from employees and partners and pushing the status quo. This raises brand competition to a new level. Consumers want relevant products and promises; employees want meaningful work and culture; investors ask for measurable and meaningful strategies in addressing the “triple-bottom line” concept (minimizing negative effects and maximizing their positive effects on people, the planet and profit – some suggest prosperity as the last P instead of profit, as a more accurate target). Brands should be able to integrate all these instances at once, also fulfilling the larger organizational purpose.
- The quest for TRANSPARENCY and ACCOUNTABILITY. In a world where everyone can connect, interact and broadcast, every brand is under pervasive scrutiny and the reputational risk is on the rise. The pandemic exposed the fact that there are many inequalities among global but also local supply chains, opening up the fact that we have deep societal challenges. Opinion leaders, consumers and investors are increasingly interested in what happens “behind the scenes” of brands: where, how and by whom products are made, what the impact of the brand activities is, how value is redistributed along the supply chain, how they can contribute to a better planet with their purchases. As seen recently in the case of many fashion brands, “clicktivists”, using social media to promote a cause, can damage years of brand equity building in just one day. [What is a brand?]
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| Branding Sustainability |
The challenge for brands is that delivering on promises of transparency requires an understanding of the supply chain that few companies have. Supply chains are often complex, multitiered and interconnected and companies must take an integrated approach to responsibility, recognizing it as an ongoing journey of transformation.
What is branding sustainability all about?
Speaking of companies, we have acknowledged that the need to reconcile relevance with transparency, profits with ethics, dreams with deeds, people with technology and business sustainability with social sustainability is today at the top of the agenda for most business leaders. Being accountable, relevant and transparent for all stakeholders implies a shift in paradigm for brands, starting from reconsidering the concept of sustainability itself.
Not only it has become meaningless, but it is a blanket term that obscures real issues. We are all now aware that sustainability should go beyond green, eco and bio; beyond wearing organic, vegan or no-fur garments. Sustainability is a common noun that has to be precisely defined and measured when associated with products, processes and business strategy models. The definition is wide and inspiring but, to date, most corporate initiatives related to sustainability have been limited, often not measured in their effective impact, hardly discussed within board meetings and even less incorporated into MBO programs. They are described in a technical jargon as an endless list of certifications in the sustainability reports, a document usually targeted to a niche, professional audience. Most brands have set sustainability goals within their own frameworks, and sustainability ended up being whatever companies wanted it to be, and often, what was most convenient.
Only recently, the generic “doing well by doing good” has evolved to a more meaningful rubric and we are now fast progressing to a much clearer context driven not so much by consumer demand yet, but rather by financial investors’ expectations. ESG or “environmental, social, governance” has become the term of choice for capital markets to indicate data used to identify superior risk-adjusted returns1. ESG strategies allow investors to express their social views through their investments, and companies failing to meet investor expectations on ESG factors risk losing access to capital markets. It is said that there are $40,5 billion to be invested in the USA following ESG criteria.
ESG criteria connect with the concept of Corporate Social Responsibility (CSR), a more precise definition than sustainability, as it describes how a company interacts with stakeholders (customers, suppliers, employees, investors and communities) in an accountable and transparent way to generate shared and measurable value (the concept of stakeholder value). Whereas ESG criteria are a set of international standards used by investors, CSR is essentially a code of ethical conduct for a company. Although companies can adopt their own code of ethics, sustainability has to comply with international standards set by global institutions such as the UN or the EU as we shall see.
Integrating ESGs in the corporate strategy goes far beyond charity, green products and upcycling. Starting from the consideration that all human activity has environmental and social impacts, companies need to take responsibility for most, if not all of them, and strive to minimize or mitigate them. Companies should try to become the most responsible version of themselves, without making claims that can’t be backed up. So far, sustainability has been principally about the “E”, the environmental footprint, water and waste management. But sustainability is not just environmentalism. Supporting social issues, the “S” is becoming increasingly urgent after the tsunami that is and has been overwhelming global supply chains ever since the pandemic. Metrics such as appropriate behavior in subcontracting or sourcing, fiscal contribution or CEO compensation, promotion of talent diversity and sensitivity in communication should also become an everyday concern.
Integrating ESGs into the corporate strategy is easier said than done. It is expensive in terms of time and resources; it generates an effect on the bottom line as it often requires a redesign of the supply chain and trade-offs at each and every level of the entire value chain: how to combine the need for speed and remote sourcing? How to pay higher salaries while keeping operational costs and retail prices low? How to digitalize processes for efficiency without reducing the workforce? How to go for sustainable packaging while maintaining the brand’s luxury visual identity? Give customers incentives to shop by discounting or try to maintain the value created by artisans? In industries such as fashion, how to slow down when over production is the most profitable path? The equation is problematic, not often in favor of sustainability as the perception of value, the retail price and the product cost are different components. The key factor would be scale companies that can scale sustainable products and processes will succeed.
As Sarah Kaplan pointed out in her best-selling book, paradoxes and trade-offs, rather than being confusing or problematic, can actually be the source of organizational resilience and transformation. Every business model has some trade-offs embedded, and one way to generate value and innovation is to make them explicit and visible. Not all trade-offs can be solved, but at the same time they cannot be hidden. Companies should become aware that serious ESG initiatives will demand higher upstream integration, new processes, new narratives and above all a new leadership. Consumers are not shopping in line with their new values yet, but they will in just a matter of time, according to most opinion leaders as they are becoming increasingly discerning, experienced and sophisticated. Covid-19 has accelerated society’s expectations of brands. During and after the pandemic, companies who have prioritized their customers and employees have been doing better than others. And there is a clear sign that the volume of reporting from large companies has steadily increased each year since 2011, and the contents of the reports dramatically expanded over time4. The wave won’t stop.
What is the Branded Supply Chain in branding sustainability?
With reference to this broad flow of discussion, we want to focus on one issue in particular: how to build an accountable and relevant brand narrative incorporating the supply chain as a character and protagonist of the story. We see brand as a platform capable of disclosing supply chain voices and stories in a way that builds value and relevance for all stakeholders.
Making the supply chain branded, therefore aligned to the brand promise, accountable and transparent is a proactive rather than reactive approach to necessities in terms of ESG compliance. Our vision is that most companies, particularly in fast-moving consumer goods, have not yet realized the enormous potential in terms of differentiation and brand reputation building linked to a broader, transparent and honest narrative of their “behind the scenes”. For instance, we believe that a fair final price for products should sooner or later become part of any sustainability strategy, and the brand narrative can be a powerful support by disclosing cost breakdowns to customers, in explaining how supply chains work and how value is created, distributed and preserved. Beyond the green sea of sameness, it’s important that brands start to talk about the unique way they’re operating and find their focus. We suggest that narrating the effect that a brand has on the world should not be technical and jargon-heavy, but rather simple, playful and inspiring: companies should give customers and employees a relevant and memorable story. Remembering that if words are how we think, engaging stories are how we link.
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