The Engaged Consumer: Business Challenge & Responsibility

2010, Number 4

NET NOTES from the Women’s Network for a Sustainable Future (WNSF)

CONTENTS

I. Network Presentation

II. Presenters

III. Key Findings

IV. Presentation



I. NETWORK PRESENTATION

This luncheon panel focused on how companies engage consumers. Astute companies–B to B, B to C, across manufacturing and service sectors–look for ways to ‘partner’ with customers, so that together all parties achieve a more sustainable tomorrow. This discussion focused on the emerging art of consumer engagement in sectors from food and consumer products to banking and utilities.****


II. PRESENTERS

MJ Jolda (Moderator): SVP, Marcal

Katie Cleary: Manager, Consumer & Customer Insights, Campbell Soup Co.

Anne Hoskins: SVP, Public Affairs & Sustainability, PSEG

Margaret Kohn: Director, Global Corporate Responsibility, Merck

Val Smith:VP, Corporate Sustainability, Citi

KEY FINDINGS

  • To meet rising consumer awareness of sustainability, companies are collaborating with stakeholders, government entities, NGOs and each other.
  • B-to-B companies that don’t directly engage consumers can work with intermediaries, including NGOs and governments, in order to further sustainability initiatives.
  • In industries where initiating and maintaining sustainable practices is costly, customers are often unwilling to pay extra, expecting manufacturers and service providers to shoulder the costs.
  • In highly regulated industries, companies have limited capacity to implement sustainability. Policy changes to encourage sustainability could enhance companies’ ability to make a difference.
  • A key first step in engaging consumers and stakeholders is to maintain transparency. Engagement depends on trust, and without transparency, trust is difficult to achieve. ** **

III. PRESENTATION


Ann Goodman, Ph.D.: Executive Director and Co-Founder, Women’s Network for a Sustainable Future

Dr. Goodman introduced the topic of WNSF’s final peer learning session of 2010, “The Engaged Consumer: Business Challenge & Responsibility.” This topic was sparked by WNSF’s observations throughout the year–at its three earlier peer learning sessions, two recent Summits in New York and California, and comments on Dr. Goodman’s blog–that companies–whether in the manufacturing sector or service sectors are increasingly responding to growing consumer awareness of sustainability, with questions like: is the product ‘green;’ is it made of recycled, organic or safe materials; does it have a low ‘carbon footprint’ to reduce climate change; was it made in a factory with good conditions for workers; and all other related questions.

Business-to-business companies–those that don’t sell directly to consumers–are working with intermediaries like NGOs and governments to ensure that products sold to the end consumer meet these demands. Service providers, including banks and utility companies help educate consumers about environmental and social issues so that together consumers and companies work toward a more sustainable future. Cutting to the heart of this topic, WNSF’s esteemed panel focused on how companies–B to B, B to C, across manufacturing and service sectors–are working with more engaged consumers–both to accommodate consumer demands but also to accommodate social and environmental needs.


MJ Jolda (Moderator): Senior Vice President, Marcal

One of Marcal’s greatest sustainability goals is to educate consumers about the direct impact choosing products made from recycled materials has on the planet – in Ms. Jolda’s case, quantifying how purchasing household paper goods made from 100 percent recycled paper saves trees. Her marketing efforts are directed at educating the ‘light green’ audience that is concerned about the environment, but that does not necessarily understand how to make a positive impact.

Ms.Jolda’s biggest structural challenge on this front comes from how larger, traditional producers that use virgin fiber in their products invest heavily to convince consumers that softness matters most. The challenge for Marcal is communicating (with far fewer marketing dollars) the ultimate price paid for softness – dead trees – and how choosing household paper goods made from 100 percent recycled paper has far less negative impact on the environment, with comparable performance . Another challenge, Ms. Jolda said, stems from consumers’ widely held misperceptions of their own recycled paper purchasing habits. A recent study by Marcal and Kiwi magazine found a majority of moms believe up to 50 percent of the paper products they purchase for their families are made from recycled paper. The actual figure is two percent. Clearly this is a drastic overestimation, and one that Marcal strives to correct.

Another challenge is impressing on consumers and relevant stakeholders the importance of abstract threats like climate change when they are primarily concerned with paying today’s bills. Marcal engages consumers in a variety of ways, like through a calculator on its website that quickly computes the number of trees families of different sizes save by simply using Marcal’s products. This gives consumers a concrete demonstration of how they impact the environment by joining the company in saving trees.


Katie Cleary: Manager, Consumer & Customer Insights, Campbell Soup Company

Ms. Cleary focused on principles of good corporate citizenship and what those principles mean to consumers. Campbell engages consumers in a private online community where they discuss various topics. Campbell uses this forum for research and incorporates consumers’ recommendations into its business strategy.

When consumers were asked how they would implement sustainability goals if they had their own company, respondents on the forum came up with very reasonable and effective 1-year, 5-year, and 10-year plans. For example, one respondent suggests that in the first year each employee receive one paid day per year to do community service, in the second year two, and by the fifth year, five. Campbell’s also shares its own ideas in this forum and receives great feedback and suggestions.

Campbell has a long-standing history of engaging consumers by giving back to the community. Its “Labels for education” program has been helping schools purchase supplies for more than 37 years. Campbell is a long-time supporter of the of the Stamp Out Hunger Food Drive which invites people to give back to the community by donating food to local food banks with the help of the Letter Carriers Union. The company finds that customers are very generous in giving back to the community.

When it comes to sustainable production, consumers’ expectations are high, Ms. Cleary said. Consumers today assume that manufacturers will take on the responsibilities of producing sustainably and ensuring ethical sourcing, but do not want to pay the extra price; they assume that manufacturers will shoulder these costs. Expectations are only on the rise, so producing sustainably while keeping costs low poses a challenge, Ms. Cleary said.


Anne Hoskins: Senior Vice President, Public Affairs & Sustainability, PSEG

Ms. Hoskins focused on PSEG’s climate change initiatives and how the company partners with and educates policymakers as one way of encouraging consumers to work towards a sustainable future.

As a company with a governmentally regulated utility subsidiary, PSEG must work closely with government officials and agencies to pursue its sustainability agenda. She says that fundamental policy changes must take place in order to advance sustainability in the energy industry. For example, regulatory reforms by the New Jersey Board of Public Utilities a couple of years ago enabled utilities to invest in renewable energy, spurring many new environmental initiatives. On the national front, PSEG lobbied to achieve a price on carbon to make known the environmental costs of different sources of energy. This, Ms. Hoskins said, would help investors make the right decisions about what type of generation to fund and when or whether to close down non-sustainable generation plants. Beyond government, PSEG also communicates with consumers, investors, and employees.

One of the biggest structural challenges, Ms. Hoskins said, is dealing with perceived versus true costs of energy. Renewable energy, whether solar power or offshore wind power, costs more to produce per unit of energy than does conventional fossil generation from coal or natural gas. Customers want clean energy, but customers also want low-cost energy. PSEG takes on the role of educating consumers, politicians, and public entities of the relative costs of different energy sources, beyond just the price tag they see, Ms. Hoskins said. When customers and politicians understand the hidden environmental and public health costs, perhaps they will be willing to pay more for sustainable energy, she said. She added that until there is either a price on carbon or major technological breakthroughs that reduce the costs of producing renewable energy, it will be difficult for the energy industry to shift its production significantly to renewable energy. This is because the resulting utility rates would be too high, and customers would push back.

PSEG partners with customers to find ways to invest in sustainability, for example by auditing electricity usage in homes and businesses to maximize efficiency and by educating customers on solar loan programs. Because PSEG regularly interacts with customers from all parts of New Jersey in their homes, it is able to engage consumers with an ease and familiarity that banks and government do not necessarily have.


Margaret Kohn: Director, Corporate Responsibility, Merck

Ms. Kohn discussed Merck’s partnerships with NGOs and its efforts to increase transparency in order to increase trust and confidence in how it operates among stakeholders.

Merck communicates with many types of stakeholders, including physicians, investors, major social responsibility investors, and NGOs. The company recently presented its new sustainable business model which aims to create shared value for shareholders through increased return on investments while adding social value to society, especially by strengthening healthcare access in areas where it was previously lacking.

Merck partners with NGOs to distribute medicines and vaccines directly to consumers in areas where access is lacking. Some of the people most in need of Merck’s products live in remote rural regions where there is little infrastructure for transportation. Merck partners with organizations including UNICEF, the Carter Center and Care who go to these villages by foot or bike, carrying healthcare products. Its NGO partners have even helped negotiate ceasefires in such conflict-torn nations as Sudan to allow health workers to distribute medical supplies. Merck also partners with NGOs through its nearly 25-year-old Mectizan Donation Project, which helps prevent blindness caused by onchocerciasis in Africa, Latin America and Yemen. These are projects that Merck could not have undertaken alone.

Ms. Kohn explained that Merck also engages in dialogue with NGOs on critical policy issues around pricing and intellectual property protection. While disagreements sometimes arise, these types of discussion are healthy, and constructive, and provide important guidance to Merck.

Pharmaceutical companies in the past have had a reputation of being opaque. This has built up many misperceptions over the years about how these companies price and market their products. As a company that discovers and distributes products that save and improve lives, Merck takes great pride in its work, and demonstrates it by being as transparent as possible. This helps stakeholders understand Merck’s business model.


Val Smith: VP, Corporate Sustainability, Citi

Ms. Smith focused on ways that Citi works with stakeholders and clients to be sustainable.

Citi realizes that it has a responsibility to implement a responsible finance framework that adds value to the economy, to clients, and to society. Ms Smith contributes to this responsible finance platform by creating forums for bankers to become more aware of important activity relating to sustainability and public policy. This helps banks do better business, while being socially responsible. To that end, Citi established a Climate Council in July that covers climate-related issues in its Europe, Middle East, and Africa region. The intent is to engage senior bankers in these regions on climate-related public policy and business opportunities to help them better serve their clients.

Citi also encourages clients to adopt environmental and social best practices. Ms. Smith credited advocacy organizations for their capacity to frame sustainability issues in a way that makes people realize that they are important to key stakeholders. Citi engages clients in industry sectors such as power and energy to ensure that best practices come into play. Before pursuing a particular sustainability effort, Citi examines the issue through a materiality lens and a business relevance lens in order to ensure that it is relevant to business strategy. While sustainability initiatives generally improve the reputation of an organization, Citi sees this as a side benefit, the ultimate goal being to improve business.

The biggest structural challenge that Citi faces in pursuing sustainability is that ultimately the bank is limited by the restrictions of public policy and regulation. Ms. Smith said that to an outsider it may seem that a bank has immense potential to effect change, but ultimately the financial sector must work with the existing market, which is shaped by public policy. For example, one campaign castigated Citibank for financing coal-fired power. The bank finances what the market provides (which in this case includes coal-fired power as well as renewables), and until public policy changes, the market will not change. The challenge is that while Citi seeks to engage customers and corporate clients in sustainability, business is limited by the barriers of public policy.

The Women’s Network for a Sustainable Future is a 501c3 organization. This issue of Net Notes was compiled by Lana Zaman.
Copyright 2008 Women’s Network for a Sustainable Future

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