This article first appeared in Marketing Week on 2 July 2015.
Brands that take an ethical stance not only in their business but also their innovations will drive brand value and attract conscientious consumers, who are increasingly taking an interest in brands’ ethical positioning ahead of price, quality and overall reputation.
Innovation and ethical business practices are two of the biggest contributors to positive brand perceptions. But how many companies combine the two, ensuring that their innovations – whether developing new products, launching a startup or transforming the business model – are themselves ethical?
Those that do are consciously driving brand value through their corporate social responsibility strategies. Consumers are becoming more conscious of what they consume and taking into consideration the ethical side of businesses ahead of price, quality and overall reputation. As a result, when there is a lot of choice and competition in the marketplace, the importance of brand values determines whether a person will use one service over another.
Ikea is one brand whose innovation processes are driven by sustainability commitments. For example, 76% of the cotton that it uses comes from sustainable sources, more than 700,000 solar panels have been installed on Ikea buildings worldwide and the group is committed to owning and operating 224 wind turbines.
Magnus Holst, global manager of the Ikea Family loyalty scheme, says: “Consumers have a much wider view on brands today, compared to five or 10 years ago. Today, they expect not only great products and services, but a company’s brand values are equally as important. Many consumers today actively choose brands they want to be identified with, regardless of their product or service offer.”
Holst explains that these values need to be behind all company processes, including the development of new products. He says: “This needs to be integrated in a natural way, though. Not forced or faked, but connecting to and expanding on the brand’s core values. And proved through consistency over time.”
Meeting business goals without people becoming cynical is another factor that many should be wary about. Holst stresses trust is an important factor.
“For me, it is about being open and communicating in a natural way while demonstrating how our social goals help us to deliver our business goals, and vice versa,” he says. “Trust can only be earned by meeting consumer expectations, and this includes a great product or service offer that aligns with inspiring and honest communication.”
CARING, SHARING AND DARING
Nick Giles and Michael Hayman, authors of the book ‘Mission: How the Best in Business Break Through’, have also identified a rapid change in consumption towards sustainable startup businesses, particularly in the food industry.
The authors, who are co-founders of campaigning firm Seven Hills, bring together the insights of the entrepreneurs who have built businesses such as Whole Foods, Airbnb and Ella’s Kitchen. They explain how companies win by defining their purpose clearly, campaigning for their place in the market, and achieving momentum.
Giles says: “[Ella’s Kitchen] is a brand that has come from an idea in the founder’s mind and he then launched a business that is now the number one baby food brand in the UK, turning over tens of millions of pounds a year.”
Paul Lindley, the founder of Ella’s Kitchen believed that being a caring brand could be at the heart of achieving commercial results that go hand-in-hand with social outcomes (see case study, bottom).
Hayman says that in the current commercial environment there are three new core “sectors” rapidly developing from the rise of mission-based startups: ‘caring’, where companies are setting out to improve people’s lives; ‘sharing’ businesses that connect people and information; and ‘daring’, the companies that refuse to accept no for an answer.
He explains that the companies within these categories are at the leading edge of what technology has made possible. The founders or innovators forming these companies believe they can change the world and the way people live their lives for the better.
Hayman adds: “They have added a distinctive flavour of social purpose to the disruptive mentality inherited from the first generation of commercial campaigners. Take an industry as fundamental as food. It is no secret that existing forms of food production are becoming unsustainable as the global population continues to climb.”
The key innovations in the food sector therefore are those that require less natural resources being devoted to rearing the livestock that account for meat, dairy and egg production, he adds.
INVOLVING OTHERS IN INNOVATION
Despite being widely felt, innovation often happens in hermetically sealed departments, isolated from business colleagues or customers. However, involving others can be a powerful way of ensuring innovation is governed by the ethics of the business.
Roger Miners, European CMO at corporate investment provider Allianz Global Investors, says: “You have to ensure you bring people along with you; make them feel part of the process of innovation and change. Show them that as a business you truly live the values you are promoting and that the story you’re telling is really yours.”
Allianz recently launched new corporate imagery to support its brand positioning ‘Understand. Act.’, which aims to do a better job of reflecting the cultural diversity of both staff and clients. Miners believes in order to meet both social and business goals you have to make people feel part of the innovation process.
He explains: “We have been clear from the start that everyone in our firm is part of this journey. In fact, the design for our new main corporate imagery was sparked by the staff photography competition we ran for our global inclusion and diversity day in 2014.
“Seeing all the different images from across the globe gave us extraordinary insight into the world in which our employees operate. So we took that idea of lots of different insights from across our business a stage further and developed a portfolio of images for both our corporate identity and for strategy-specific applications. We wanted to appeal not only to our clients and future clients, but also to our colleagues around the globe.”
In the financial services industry there is clearly plenty of scope for ethical innovation to be a business differentiator, given the obviously unsustainable practices of global banks in recent years.
For example, Triodos Bank prides itself in being an ethical bank and 100% transparent. Chief executive Peter Blom is also chair of the Global Alliance for Banking on Values, which in March launched a new investment fund called SFRE (pronounced Sapphire). It is intended to provide $1bn (£635m) of long-term investment capital to the growing segment of banks with a social purpose.
Huw Davies, head of personal banking, sales and marketing at Triodos Bank, says it lends money only to ethical firms. “We are a values-based business bank taking deposits from our savers and using them to lend to projects and organisations that are working for positive change such as global energy,” he explains. “It is a business with clear values that reflect in what we do and how we do it. Transparency is important, especially about how we use money.”
He adds: “We do not have CSR built in. Our core business model is that we are a sustainable business.”
Not many companies can claim the same, but those that can share one thing in common. They ensure ethics are behind all their innovations.
CASE STUDY: ELLA’S KITCHEN
Former children’s TV executive Paul Lindley founded Ella’s Kitchen in 2006, with the aim of launching a company that changed children’s relationship with food.
He explains: “The idea that a business can be a force for social good is not an add-on in any business, it’s a core part of business principle.”
Lindley believes being a caring brand is at the heart of achieving commercial results that go hand in hand with social outcomes; the company’s strapline from the start has been ‘Good in every sense’.
Ella’s Kitchen is the UK’s best selling baby food provider. Lindley says that from day one the brand was a campaign, not a company.
“I had the idea of Ella’s Kitchen as a brand before I had a clue what products we would sell, what the packaging would look like,” he says.
Lindley identifies that people buy things to improve their lives either functionally or emotionally. If you combine the two, then you have customers who are both brand advocates and people who are passionate about what they are trying to do.
Prior to launching his own business, Lindley had worked at children’s TV channel Nickelodeon for nine years. While there, he learned how brands are able to engage children to change their behaviour and to get parents onside.
He says: “I had also learned about the UK’s rising childhood obesity problem, and how television was being blamed for it. I could see that a third of our kids were overweight and 20% of them were obese, and it was getting worse.
“I thought the biggest way we can affect and reverse those statistics and children’s diets was with a business, and through creating trust that comes with a business built on values. That was my driving force. I came to realise that business was the best way to create societal change.”
Two years ago, Lindley sold the business to American food company Hain Celestial, becoming CEO of its new global infant, toddler and kids division, which includes Ella’s Kitchen.