Why is marketing missing from the sustainability agenda?

Sustainability is here to stay and companies are grappling with how to respond. Yet, as David Whiting argues, marketers are being left out of the loop, with the sustainability agenda too often in the hands of CSR with its different culture and language. He describes a mentality focused on satisfying externally imposed regulations and targets, with companies driven by considerations unrelated to marketing and thus unrelated to customers and their needs and wishes

IN THE 1980s there was a first flowering of what came to be called ‘green marketing’, but it foundered on the rocks of too many unproven claims and ineffective products, which began creating consumer cynicism. Despite initial appearances, we are almost certainly not currently witnessing a repeat of this experience but something much more profound that will have a more revolutionary impact on business and marketing as a profession. Business leaders are discovering that they need to consider a spectrum of issues, which until a few years ago, would have been regarded as either irrelevant or at best peripheral to the main task of increasing shareholder value.

Companies are under pressure from many directions to become more sustainable – from governments, NGOs (non-governmental organisations), investors, customers and end consumers. Employees, too, are focusing attention on sustainability and corporate responsibility. Sustainability has become a compulsory subject on MBA courses – it used to be elective – while children are being educated at school about the subject. The media is filled with stories about climate change, the depletion of rainforests, water shortages, the need to change future energy sources, etc. The weight of scientific opinion gives us no more than ten years in which to make significant reductions in greenhouse gas emissions in order to avoid reaching a critical tipping point.

Research demonstrates clearly that consumers’ attitudes are changing towards sustainability issues while they begin to take faltering steps towards changing their lifestyles. At the same time, however, consumers are confused and frustrated because they want to know what more they can and should do. They want to know that everyone is pulling together (‘I will if you will’) and that the changes they make in their lives are making a real difference, however small – a clear call for a feedback system. Chris Powell, in the spring edition of Market Leader, quite correctly identified the need for a more focused message from government and NGOs on what consumers should do, with legislation to back it up. These conditions will probably come about, but consumers also expect to see business playing its part: companies need to plan for the changing environment – in all its senses.

Despite one or two tentative attempts, such as the carbon labelling on Walker’s crisp packets, there is little to guide consumer choice at point of sale. The BSI, sponsored by Defra and the Carbon Trust, is working on a specification for the universal measurement of greenhouse gas (GHG) emissions for goods and services, but a determination as to how this will be applied and communicated is still some way in the future.

Businesses are beginning to realise that becoming more sustainable can create new sources of competitive advantage, as well as achieving cost savings and stimulating innovation. Companies may well take the view that they cannot afford not to become more sustainable with the risk of public disillusionment, negative media coverage or even boycotts if they fail to take appropriate initiatives. Brand equity could suffer rapidly under such conditions. In addition, trade customers are increasingly putting pressure on suppliers to perform to higher standards in order to protect and build their own brands. Other perceived benefits of becoming more sustainable include the potential for providing a new motivator for employees and the creation of a key recruitment and retention tool. It helps companies to be more proactive in meeting the expectations of analysts, as well as anticipating future legislation and perhaps influencing the government agenda. Above all, some organisations will see that there is a moral obligation to behave in this way.

Who is driving the sustainability agenda?

This is creating a pressing problem for both the marketing profession and for the role of the marketing function in this rapidly evolving world. Companies characteristically locate responsibility for sustainability issues in a CSR (corporate social responsibility) function, which tends to be separate from the commercial functions. CSR is typically immersed in the language of the triple bottom line, reports and standards, and sees its main stakeholders as being city analysts, shareholders, NGOs and Whitehall. Its main objectives are usually concerned with minimising reputational risks and enforcing policies; it is not usually well versed in understanding the marketplace or how to generate and exploit consumer demand, nor does it necessarily speak the language of the consumer.

Marketing is frequently kept out of the loop in both the broader debate and at company level. For instance, a conference sponsored by The Ethical Corporation in March 2007, entitled ‘Climate change: how to get your message across to consumers’, completely omitted marketers from its target audience, an extraordinary oversight, but one that reflects who is managing the sustainability agenda. Nothing has changed a year later – a similarly entitled conference in February 2008 sponsored by the same organisation again omitted marketing from its target disciplines, despite covering a range of issues that should be on every marketer’s agenda.

Marketing should be the ideal function to drive sustainability initiatives as it has the potential to resolve the dilemma created by the increased costs and/or demand for capital that frequently results. It is the function closest to the customer, it is traditionally where guardianship of the brand is sited, it leads and manages most communication activity, and it contains some of the most creative people in an organisation, able to envision and exploit market opportunities. Some companies, such as Unilever, Marks & Spencer and Diageo, are creating better integration by embedding CSR considerations into the marketing process but most companies seem to be lagging behind.

It is not too far-fetched to draw an analogy between what is happening in many organisations’ response to the issue of sustainability and the production orientation so comprehensively derided in Theodore Levitt’s seminal Harvard Business Review paper ‘Marketing Myopia’, nearly 50 years ago. Levitt exhorted companies to view markets from a customer, rather than a production, perspective in order to determine which business they were really in and where the opportunities lay. Yet in the rush to become more sustainable, companies are tending to concentrate on how they can improve their processes to meet externally or internally imposed standards and targets. When this has been achieved, or part achieved, emphasis is then placed on extolling the organisation’s virtues to its various external audiences, including its customers.

In other words, we are also witnessing the other organisational emphasis that modern marketing was supposed to have banished – the sales orientation. Make it (or do it), then tell the world about it – does it sound familiar to any marketer at all versed in the origins of marketing? The current sidelining of marketing is in danger of creating a situation in which a return to a production/sales orientation will not only create misaligned communication with the external world but result in many missed opportunities (figure 1).

Why isn’t sustainability in the marketer’s remit?

What is missing is the strategic marketing process that brings an understanding and interpretation of the external world to bear on the development of competitive advantage that is then reflected in all the elements of the marketing mix. Sustainability issues need to be included in an identical process to other considerations in the marketer’s remit to ensure that the company’s brands are best fitted to achieving its goals.

• Where is the reflection on how the world, and subsequently the marketplace, might look in five or more years’ time? (If ever there was a PEST factor, this is it!)

• Are the potentially very different needs of consumers in years to come being factored into the development of both new and existing products and services?

• How is the marketplace segmenting along new lines, based upon differing attitudes and behaviour in a more sustainable world?

• How do brands need to be positioned in order to compete in a low-carbon economy?

• How should sustainability factors sit in a hierarchy of attributes supporting the positioning?

• Is every element of the marketing mix being taken apart to both reflect likely future realities and to secure new sources of competitive advantage?

• Can the pitfalls so apparent in many of the 1980s initiatives be avoided this time around?

Perhaps above all, can we deal with the elephant in the room for marketers – the need to address the issue of achieving levels of consumption that are more sustainable in the face of a potentially impending crisis. An imminent recession may turn out to be a bump in the road in comparison to the implications of sustainability factors such as climate change.

Marketers must become sufficiently well versed in sustainability issues to begin to fulfil the new demands that should be being made of them. Otherwise, they are in danger of becoming permanently sidelined, no longer a strategic function but simply the implementers of tactical promotional programmes proclaiming some new ‘green’ initiative or other.

Only a handful of the hundreds of articles and papers written about the implications of sustainability for organisations by those working for NGOs, in CSR functions, and by their advisers, that I have read, come close to understanding the true role of marketing – in either the context of sustainability or otherwise. Instead, marketing is either explicitly or implicitly alluded to as fulfilling a tactical role, responsible for short-term profits and ‘selling the good news’ to customers. Marketers live with the misperceptions about their profession all their working lives, but never perhaps has the misapprehension been so unfortunate and so critical.

Marketers must rise to this challenge. They must embrace (or be allowed to embrace), the longer timescales and wider domain that consideration of sustainability requires. They need to learn to work hand-inglove with the CSR function in the same way that they have always been enjoined to with finance and sales. They should become the agents of change within organisations, bridging the gap between the need to meet a range of obligations and restrictions related to the achievement of a sustainable future, while at the same time realising market opportunities arising from these changes in order to increase business value. True integration of sustainability and commercial considerations – which will increasingly become one and the same – can happen only if there is much closer integration of the marketing and CSR functions.

The organic milk case is a classic example of an industry that was fixated by the production, rather than the demand, end of the supply chain. What they saw was a market crisis, when in fact they faced a self-inflicted over-supply crisis and a very healthy market situation. They lacked the marketer’s ability to see that the majority of consumer segments had very different perceptions of the world to themselves. This lack of insight, in turn, led to a reflex action that emphasised the importance of price rather than knowledge and understanding (by both suppliers and consumers). As a case study it demonstrates the vital role that marketing can play in revealing the realities and opportunities of a situation, rather than the myopic views that can result from productionled thinking.

Marketing is central to a sustainability programme

In the rapidly evolving world of sustainability and CSR, there is a grave danger of the pattern revealed above being repeated many times over. We risk forgetting the lessons learned so many years ago by the pioneers in modern marketing and letting a production orientation drive the sustainability agenda.

The danger is enhanced by a too-ready acceptance that those who have worked long and hard to raise business awareness of the implications of sustainability issues, and quite rightly occupy the moral and ethical high ground, have all the answers on how to compete in this changing world.

For marketers this coincides with a period when the profession seems to be at greater risk of being misunderstood than at any time in its history, just when its skill set is so badly needed to deal with the hugely important issues that business faces. Marketing must raise its game in time to meet the challenge or we are going to witness the second coming of marketing myopia with potentially devastating results for both marketers and their employers.

Some ways forward ...

• Develop close working relationships with the CSR function and bring market insights to bear on sustainability strategy development.

• Lead the consideration of how to secure competitive advantage and an appropriate ROI from sustainability initiatives.

• Train marketing personnel to take a more holistic view of the business, looking for potential sources of competitive advantage throughout the supply chain.

• Understand and track developing consumer attitudes and expectations surrounding sustainability issues in your market.

• Assess the implications of a more sustainable world for the positioning of every brand in the portfolio

• Embed sustainability considerations into the development of all marketing programmes and every element of the marketing mix.

[email protected]

Businesses are beginning to realise that becoming more sustainable can create new sources of competitive advantage, as well as achieving cost savings and stimulating innovation ... Other perceived benefits include the potential for providing a new motivator for employees and the creation of a key recruitment and retention tool

Marketing should be the ideal function to drive sustainability initiatives as it has the potential to resolve the dilemma created by the increased costs and/or demand for capital that frequently results

The example of organic milk

An example of contemporary marketing myopia in a sustainability-driven market comes from organic milk. Until 2001 the organic milk industry was very production-focused and dominated by a ‘deep green’ mindset – in other words, the enthusiasts believed that their own motivations would be the same for the population at large. Up until spring 2001 the organic milk market was growing at 50-100% per year and demand exceeded supply. However, unbeknown to the industry at the

time the deep green market was almost saturated and no one had attempted to understand the dynamics of the market as a whole. Almost literally overnight the market went into 100% over-supply as hundreds more farmers came out of organic conversion, incentivised by government grants. As a result, half of the UK’s organically produced milk had to be sold as conventional milk at conventional prices.

OMSCo (the Organic Milk Suppliers Cooperative, which accounts for well over 50% of UK organic milk production) brought in professional marketing advice. Consumer research revealed that the organic ‘dabblers’ who represented the future of the industry were completely unlike the organic enthusiasts who populated the producers and NGOs and had driven early market sales. They had no interest in farmers and the rural economy and little interest in the environment – at that time – or animal welfare. Not surprisingly, it was their health and that of their families that was the prime motivator for purchase. Unfortunately, hitherto all the emphasis, and most of the evidence for claims, related to non-motivating factors. Crucially, it was also found was that very few consumers had any idea as to the price of ordinary milk and certainly not the organic premium.

While their initial response was to say that organic milk was too expensive, on probing it became clear that the issue was not the scale of the price premium (about 50% at that time) but the lack of understanding about the value equation. They wanted to know why organic milk was supposed to be better before they would consider purchase – the typical response was "milk is milk isn’t it?"

We set out to collect the evidence we needed to support claims and to build a compelling and irrefutable proposition that organic milk was worth paying more for because ‘it’s healthier for you’. We developed a new brand identity for OMSCo, built an award-winning website, and launched a £1m PR campaign that ran for five years and featured stories such as higher omega-3 and vitamin E levels, absence of pesticides and GM content, etc. We also had to prove that reducing the price was irrelevant to the need to get consumers to purchase organic milk more frequently, even though almost everyone in the industry and supply chain, in addition to the NGOs, believed that because "the market is in crisis" the only possible course of action was to drop the price.

In fact, annual growth in sales of all organic milk products never dipped below 21% and by 2006 was at 44%; for liquid milk it rose to 65%. Household penetration of organic milk rose from only 8% in 2001 to 24% in 2006, a 200% increase. In London penetration rose to 35%. The industry went back into under-supply again in November 2005, after 4.5 years. We succeeded in adding value to a commoditised category (milk) and created an attractive and profitable new sub-category for retailers. Organic milk went from accounting for only 1% of milk sales in 2001 to 5% by value by the end of 2006.

In the rapidly evolving world of sustainability and CSR ... We risk forgetting the lessons learned so many years ago by the pioneers in modern marketing and letting a production orientation drive the sustainability agenda.

Sustainability: a brief history of the major landmarks

1962 Silent Spring by Rachel Carson published

1976 Body Shop opens

1987 Brundtland Report sets out guiding principles for sustainable development

1988 The Green Consumer Guide published

1992 Rio Earth Summit acknowledges climate change real and human induced

2000 BP proclaims new mission to go 'Beyond Petroleum'

2004 Kyoto Treaty, setting binding GHG emission targets, is ratified

2005 EU ETS (EU Emission Trading Scheme) commences

2006 'An Inconvenient Truth' first screened

2006 Stern Report lays out economic implications of climate change

2006 Marks & Spencer launch 'Look Behind the Label'

2007 Series of IPCC (Intergovernmental Panel on Climate Change) reports lay out the science and implications of climate change

2007 Wal-Mart unveils 'Sustainability 360'

2007 Marks & Spencer announce 'Plan A'