chapter 16 book definitions

Sustainable value innovation

This strategy entails reshaping the industry through the creation of differential value for consumers. It involves making contributions to society in the form of both reduced costs and reduced environmental impact. Firms that engage in this strategy do not aim to outperform the competition in an existing industry. Rather, they seek to create a new market space.

Include all significant stakeholder groups in the auditing process

Failure to include all stakeholder groups is perhaps the biggest misstep marketers can make when evaluating their CSR programs. The wide variety of stakeholder interests makes it challenging, but imperative, for a firm to get feedback from each stakeholder group. For example, if a CSR program is having a positive philanthropic impact in the community at the expense of stockholder return, the long-term viability of the program, and of the firm, may be at risk.

Environmental cost leadership

Green products sometimes cost more to produce than traditional products. Thus a leadership strategy that also seeks to lower costs may be the only way for a company to pay for its ecological investments and generate a profit for its other stakeholders. Green and organic grocery stores, such as Whole Foods, have been able to demand a price premium for their products. This, in turn, has allowed these organizations to recover the additional costs of selling only fresh, organic products to consumers.

Environmental regulations

are the laws designed to protect the natural environment against undue harm by individuals and organizations. Regulations range from the 1972 Clean Water Act, which was designed to reduce industrial pollution in U.S. waters, to the Clean Air Act, which places limits on the emission of greenhouse gases. Environmental regulations, though they may limit firms in some regard, provide marketers with opportunities. For example, when the 1992 Energy Policy Act limited the amount of water showerheads could deliver, firms like Teledyne Technologies developed a new line of products, the Shower Massage showerheads. The showerheads met the new standard and captured sales and profit for the firm.

Ethics

are the moral standards expected by a society. Marketers are responsible for a number of choices with an ethical dimension and will be held accountable for making the right decision. The ethical decision-making framework provides a systematic tool for thinking about and making ethical decisions. Marketers who take the time to identify the ethical issue at hand and consider how their decision will affect each of the firm's stakeholders are far more likely to make the right decision and successfully resolve the problem.

sustainability

as a commitment to a lifestyle that meets the needs of the present without compromising the ability of future generations to meet their own needs. Marketers looking to enhance the sustainability of their firm's goods and services need to form a partnership with customers, suppliers, and communities to increase the likelihood that the firm makes socially responsible marketing decisions.

Sustainable tourism

is the practice of recreational traveling in a way that maximizes the social and economic benefits to the local community and minimizes the negative impact on cultural heritage and the environment.

Consumerism

A new generation of consumers concerned with sustainability has begun to demand more from companies and marketers than just low prices. These consumers also seek a higher meaning in the products they purchase. Consumerism is a movement, made up of citizens and government entities, that focuses on protecting consumers and promoting their interests.

Global environmentalism and sustainability

As globalization brings the world closer together, marketers must develop strategies that fit with expectations in both domestic and international markets. The strategic choice to become environmentally conscious and sustainable has proven to be profitable; it also is a good public relations decision, not just in the U.S. but across the globe. For example, the UK retailer Marks & Spencer spent $323 million over five years on sustainability strategies; it reported, just two years into implementing the initiatives, that its investment had already paid for itself. In addition to saving on its energy costs, the company's initiative appealed to customers seeking to purchase more sustainable products.

Integration of CSR into corporate policy at all levels and in all divisions of the firm.

CSR policies and procedures are most useful when they are written down, well understood, and endorsed by affected employees. These range in scope: A broad policy might be a strategic decision about the treatment of foreign workers. A smaller initiative might be procedures that require employees to shut off the lights before leaving work or installation of sensors to turn off lights when no movement is detected. illustrates how the CSR policy at Toyota guides decisions across the firm and throughout the world.

Use both quantitative and qualitative measurements.

Companies must undertake quantitative measures as part of their audit. Such measures include return on investment (ROI) and any changes in employee turnover and brand image associated with the CSR program. For example: Jain Irrigation is a global drip-irrigation-equipment supplier headquartered in India. Jain's drip-irrigation technology conserves water in a water-stressed environment and supplies it in a controlled fashion, which helps increase agricultural yields. The company offers farmers microfinance loans to help them purchase its equipment. It then provides technical advice to help farmers increase productivity and buys their output at guaranteed prices. Jain's CSR measures show that for a typical investment of $500 per hectare, farmers increased their gross income per hectare by anywhere from $500 to $6,000, depending on their crops. The added value created for its customers enabled Jain to boost its revenue while retaining its profit margins. Marketers should also do qualitative research in an attempt to measure what consumers and employees know about the organization's CSR efforts. Research involving Procter & Gamble, General Mills, Timberland, and others revealed that many of their stakeholders had only a limited understanding of the companies' corporate social responsibility initiatives. Stakeholders of those companies often questioned the motivation for engaging in CSR activities. Such qualitative research highlights the necessity of communicating the firm's CSR initiatives and the rationale for those initiatives. Such communication will help make the initiatives more effective and will maximize their benefits. Companies also can use this research to refine and improve the CSR program.

environmental marketing

Environmental marketing (also called green marketing) activities can be divided into three levels: tactical greening, quasi-strategic greening, and strategic greening

Economic dimension

For-profit firms have a responsibility to their stakeholders to be profitable. Without profits, a business cannot survive. A failed business hurts employees, investors, and communities. In addition, it can no longer engage in any type of philanthropy, which has economic consequences for the causes the company supported. Publicly traded firms have a unique responsibility to investors. These shareholders have invested in the firm with the expectation that they'll receive high share prices and dividends in return. Over 50 percent of Americans invest in the stock market in the U.S. alone, many through the 401(k) retirement-savings plans offered by their employers. That level of stock market participation makes the economic dimension critical not just to the firm's success but to the overall economic wealth of the country as well.

The impact of social media on corporate social responsibility

In the end, corporate social responsibility, sustainability, and environmentalism, whether they are implemented domestically or globally, are about communication. Marketing professionals need to listen, consider what they hear, and respond appropriately to the widest group of stakeholders possible. Social media provide an effective means for communicating with an enthusiastic group of consumers. Social media allow people to organize, collaborate, and accomplish shared goals in ways that would have been unimaginable several decades ago. In response, companies have evolved from a reactive state, in which they responded to customer feedback about their CSR-related strategies, to a proactive approach. In the proactive approach, companies make their CSR activities known to customers through the various online tools at their disposal. For example: M&M's parent company Mars Inc. uses Facebook to promote the firm's initiatives around sustainable cocoa production by telling the stories through the same M&M's characters it uses to promote the brand. GE used YouTube to share a video featuring a catchy techno soundtrack for its Brilliant Machines campaign. With more than 300,000 views, GE's marketing message of industrial transportation with reduced environmental impact reached a wide audience. Patagonia uses Instagram where it has amassed over two million followers to feature a collection of videos, slideshows and photographs dedicated to environmental and social responsibility focused on activism and impact with impressive finesse. Social media play an increasingly important role in how companies shape their CSR policies and present themselves as good corporate citizens to consumers and other stakeholders.

Global challenges and opportunities

Management consulting firm McKinsey surveyed nearly 2,000 executives from around the world for their opinions about sustainability. Half of the executives considered sustainability very or extremely important in new product development, reputation building, and overall corporate strategy. However, implementing sustainability efforts on a global scale comes with its own unique set of challenges. Political barriers in some countries can limit the availability of or increase prices on sustainable goods for consumers. One political barrier, for example, is a lack of political will on the part of leaders to enact sustainability-focused legislation. Elections, changes in consumer sentiment, and other external factors can increase or decrease such political barriers. On the bright side, marketers who actively scan the global environment can find foreign governments and policies that provide new opportunities for marketing sustainable products to global customers. For example, a ban on incandescent light bulbs that took effect in the European Union made compact fluorescent light bulb (CFL) and light-emitting diode (LED) technologies standard across Europe. This political shift, driven by regulation and innovation, opened up new opportunities for marketers to sell green products to European consumers.

Legal dimension

Marketers have a responsibility to understand and obey the laws and regulations of the communities in which they do business. They must follow local, state, and federal laws. Beyond this, U.S. companies are also subject to the laws and regulations of the foreign countries in which they do business. CSR programs often begin as a way of reducing the likelihood of legal problems and public relations disasters, either at home or abroad. The past two decades are littered with examples of firms—Enron, Arthur Andersen, and WorldCom, to name a few—whose failure to obey laws and regulations led to their demise. Such examples prove that the short-term benefits from the economic dimension will be erased if the firm eschews responsibility in the legal dimension. Despite years of economic success, the failure of these companies to obey the law hurt every stakeholder group: Thousands of employees lost their jobs; customers and suppliers lost an important business partner; and shareholders lost virtually their entire investment. Marketers must take a broad view of the legal dimension and its relationship to ethics. In the years leading up to the recession that began in late 2007, many firms marketed products that, though legal at the time, were highly questionable ethically. This was especially the case in financial industries, ranging from banking to real estate. After the recession hit, outraged consumers demanded action. The result was new laws and regulations, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. They have altered the legal dimension for firms: Because of Dodd-Frank, real estate transactions involve more steps, stricter due diligence, and longer time frames than they did previously. These additional complexities can delay or reduce the revenue a firm might generate from the transaction. In addition, bank marketers face new pricing restrictions on debit cards and other bank services. Such new restrictions could require banks to raise fees in other areas (e.g., through the elimination of free checking accounts) to maintain revenue and profit.

Eco-Efficiency

Marketers seeking to reduce costs and the environmental impact of their activities typically pursue an eco-efficiency strategy. This strategy involves identifying environmentally friendly practices that also create cost savings and drive efficiencies throughout the organization. Transportation companies like J.B. Hunt, for example, look for ways to increase fuel efficiency. Fuel efficiency both saves the firm money and decreases the environmental impact of the company's services.

Good stakeholder management.

Marketers should seek significant interaction with the stakeholders who influence the decisions and behavior of the company. For example, Toyota might meet with investors, environmentalists, regulators, and customers to gather ideas for ensuring that the plastic resources used in manufacturing will be discarded in an environmentally friendly way. It might even implement a closed-loop supply chain for that purpose. The company could also work with the community to understand the impact of water usage by its manufacturing plant on surrounding areas.

Philanthropic dimension

Marketers understand that giving back to the community is not only the right thing to do but also a great way to get the firm's name, product, or promotion out to consumers at a reasonable cost.

Beyond-Compliance Leadership

Most marketers who adopt a beyond-compliance leadership strategy focus on communicating to stakeholders the company's attempts to go beyond others in adopting environmentally friendly practices. Marketers who select this strategy want to show customers that the company does more than the competition to implement an environmental strategy. Unlike an eco-efficiency strategy, companies that employ a beyond-compliance leadership strategy typically care more about differentiating themselves from competitors than about keeping costs low. The Pepsi Refresh Project discussed earlier in this chapter provides an example of this strategy at work in the marketplace.

Analytics for Auditing a Corporate Social Responsibility Program

Once an organization has developed a corporate social responsibility program, the focus shifts to how well it is working. This can be done by means of an audit that uses analytics to measure the success of the program. For example, UPS enlists an independent auditing firm to evaluate its progress on energy use and carbon emissions reductions; the auditing firm reports both the cost savings and the resource savings. Its sustainability report includes its total CO2 emissions, the carbon emissions per mile driven by its fleet, the ground packages delivered per gallon of fuel used, and the number of miles driven by its alternative-fuel delivery vehicles. With such data, UPS can monitor its performance from year to year and also can benchmark its performance to that of other firms. Those who are responsible for a company's CSR program should consider the following crucial points as they measure the program's effectiveness:

Ethical dimension

The ethical challenges facing marketers come from many different places. Inevitably, they involve more gray areas than the legal dimension.

Good corporate leadership.

The firm's leaders play a vital role in guiding their organization's business practices toward social responsibility. Success requires them to demonstrate a unique array of skills and competencies. The emphasis in business thinking has shifted from process to people.6 Today, leaders try to thoughtfully balance the four dimensions of CSR and communicate their intentions accordingly. Those who are able to do so generally succeed at implementing socially responsible behaviors.

Social media and global sustainability

The global arena also provides a good opportunity for using social media to highlight and support CSR initiatives. In Japan, for example, over 80 percent of firms use social media and digital technology tools to engage with customers on the sustainability of their goods and services. The Global Sustainable Tourism Council (GSTC), a global coalition formed under the umbrella of the United Nations, made a significant commitment to social media in an effort to achieve its goal of promoting best practices in sustainable tourism around the world.

Developing a successful corporate social responsibility program

The marketing department is typically responsible for developing an organization's corporate social responsibility program. The process begins when a firm incorporates into its marketing strategy a focus on fulfilling economic, legal, ethical, and philanthropic dimensions. This focus is often expressed through a formal corporate social responsibility statement.

Rationalizing Global sustainability

The way marketers justify sustainable marketing varies in different parts of the world. For example, U.S. marketers rationalize sustainability strategies using economics or bottom-line terms and arguments. Companies owned by members of the European Union rely more heavily on language related to the idea of citizenship, corporate accountability, or moral commitment. That's not to say that European companies value sustainability to the exclusion of financial elements. Rather, they project a commitment to sustainability in addition to their commitment to financial success. Regardless of the justification, sustainable and environmental strategies tend to work best when firms can maximize the benefits for all stakeholders concerned.

Social media- based corporate social responsibility initiatives

To capitalize on the opportunity social media provide, marketers must be consistent in their social media presence. The companies leading the way in merging CSR and social media include some of the largest and most successful firms in the world: IBM's Smarter Planet, for example, is a website devoted to communicating the firm's sustainability initiatives. It uses compelling storytelling that showcases its work in communities and cities around the world.GE's Ecomagination Challenge is a $200 million experiment in which businesses, venture capital firms, entrepreneurs, innovators, and students develop clean energy ideas and submit them for funding.Target uses social media to further its long-standing commitment to schools and education. Target partnered with Search Institute, a nonprofit organization devoted to improving the lives of children, to develop the "Turn Summer Play into Summer Learning" series on its Facebook page. The campaign provided parents with fun weekly tips about how to keep their child's mind active during the summer as well as supporting research into how summer learning positively impacts child development. The series illustrated Target's commitment to education and promoted the brand in a positive way to consumers. In addition, it allowed Target to connect with parents, including many current and future Target consumers. Marketers should try to make each digital communication (tweet, Facebook post, etc.) something of value to their digital community.

Sustainability Vision

To get stakeholders to agree to sustainability initiatives, marketers must communicate a sustainability vision. That vision should highlight the importance of the organization's sustainability efforts and the potential benefits for each stakeholder. A sustainability vision begins by communicating how the company's industry and specific organization work within the larger social and natural world. It should answer important questions: How is the world enriched or diminished by our goods or services? What is our major impact on society? How does our overall business strategy reflect that impact?

Sustainable Marketing

Today more than ever, marketers recognize that adopting sustainable strategies has become an essential element of a firm's CSR efforts. Expanding the idea of social responsibility beyond moral and ethical dimensions to sustainability contributes to long-term competitive advantage. The concept of sustainability first came to international attention in the 1987 United Nations report "Our Common Future." The report laid the groundwork for a modern understanding of sustainability

Benefits of an environmental marketing strategy

extend to virtually all of a firm's stakeholders when the strategy is effectively integrated with the firm's general marketing plan. For example, the online retail and auction site eBay makes it easy for people all over the world to exchange and reuse goods rather than throwing them away, thereby lengthening the life cycle of the products. The company also introduced an eBay Classifieds section that allows individuals to buy and sell used household appliances, furniture, and other hard-to-ship items within their local community. The Classifieds section eliminates the need for shipping and packaging and keeps functional items out of landfills. Such efforts have allowed eBay to help the environment while earning a significant profit and employing thousands of workers throughout the world. With many consumers committed to "going green," environmentally focused organizations often benefit from favorable public opinion and loyal customers. Dell has received favorable feedback in response to its commitment to use 50 percent recycled paper for printed marketing materials. Through this commitment, Dell hopes to avoid using approximately 35,000 tons of virgin fiber annually.In addition, Dell's office printers now default to double-sided printing. Finally, the company has initiated a modification of its packaging policy that is designed to cut the size of its product packaging and increase the amount of recycled content inside. All of these small marketing decisions add real value in the minds of environmentally conscious consumers and, ultimately, contribute favorably to the bottom line.

Eco-Branding

focuses on creating a credible green brand. For this strategy to be effective, consumers must recognize a noticeable benefit from their purchase. For example, the Chevy Volt electric car provides an immediate and sizable savings on monthly gasoline purchases. The eco-branding strategy tends to succeed in industries in which significant barriers to imitation exist. To achieve differentiation as part of an eco-branding strategy, the environmental improvement, such as the technology involved in developing a desirable electric car, should be difficult to imitate.

Stakeholder responsibility

focuses on the obligations an organization has to its stakeholders, those who can affect or are affected by a firm's actions. Stakeholder responsibility is the driving consideration across the four dimensions of corporate social responsibility: economic, legal, ethical, and philanthropic.

Tactical greening

involves implementing limited change within a single area of the organization, such as purchasing or advertising. Tactical activities represent relatively small actions aimed at instituting environmentally friendly practices within an organization. For example, JCPenney might decide to stop doing business with suppliers that do not meet the company's environmental or recycling requirements.

green market

is a group of sustainability-oriented customers and the businesses that serve them. More and more, marketers face scrutiny from the green market related to whether they conduct business in an environmentally responsible way.

Environmentalism

is a movement of citizens, government agencies, and the business community that advocates the preservation, restoration, and improvement of the natural environment. Its mission affects firms large and small and cuts across numerous industries and geographic locations. For example: 96 percent of European consumers say that protecting the environment is important to them.32 Increasingly, Chinese consumers purchase products based on concerns about climate change. In the U.S., 80 percent of customers claim to act on environmental concerns.In response to these trends, Walmart, the world's largest retailer, ran a global ad campaign designed to highlight its sustainability efforts; it sought to raise awareness about the environment and the product choices consumers could make. In addition, Walmart initiated a $30 million project, the first of its kind, focused on lifestyle and environmental improvements. Walmart employees who chose to participate in the voluntary program learned in company-sponsored workshops about the benefits of carpooling to work, discontinuing cigarette smoking, and turning off the television when not watching it. They also learned about the importance of embracing environmental sustainability, reducing carbon emissions, and consuming healthy and environmentally friendly (green) food. About 50 percent of Walmart's employees worldwide opted to participate in the program.

Corporate philanthropy

is the act of organizations voluntarily donating some of their profits or resources to charitable causes. In recent years, companies have looked for innovative ways to engage in corporate philanthropy. For example, Pepsi marketers experimented with a program that combined philanthropy and social media in its Pepsi Refresh Project. Instead of spending millions of dollars on traditional advertising, the beverage maker set out to award grants to "people, businesses and non-profits with ideas that will have a positive impact."4 Consumers were engaged through social media and could vote for up to 10 of their favorite ideas every day. The Pepsi Refresh Project searched for 1,000 ideas to fund every month and allowed the company to positively affect society. At the same time, the campaign engaged potential customers and enhanced the image of the firm.

Corporate volunteerism

is the policy or practice of employees volunteering their time or talents for charitable, educational, or other worthwhile activities, especially in the community. Volunteer projects, such as FedEx delivering emergency medicine to disaster areas or Aetna tackling the health ailments of underserved communities, achieve maximum impact when they draw on a company's strengths. For example, two-thirds of Raytheon's employees are engineers who use their skills to help students in local communities through programs such as Stand and Deliver and MATH Nights.Companies like those recognized in the Civic 50 contribute a remarkable amount of time and resources to improve the communities they serve.

Sustainable marketing

is the process of creating, communicating, and delivering value to customers in a way that recognizes and incorporates the concept of sustainability. One of the easiest ways for marketers to engage in sustainable marketing is to seek ways to cut costs, using sustainable practices as a guideline. Firms can choose from a wide range of strategies and ideas, from developing different packaging to using less energy. For example, General Mills has dramatically reduced its energy consumption over the past decade

Corporate social responsibility (CSR)

refers to an organization's obligation to maximize its positive impact and minimize its negative impact on society. CSR has been shown to benefit companies in many ways, including by improving employee retention as well as the company's brand image.Within many organizations, the marketing department is primarily responsible for the ideas and strategies that comprise a CSR program, making this topic an important part of your marketing education. However, to succeed, a CSR focus must be adopted and enacted by all of the functional areas within a firm. Accountants who offer free tax preparation to low-income or elderly citizens and managers who work with students to develop future business leaders in the community also have a CSR focus.

Strategic greening

requires a holistic approach that integrates and coordinates all of the firm's activities on environmental issues across every functional area. It represents a fundamental shift in the way the firm markets its products. For example, Nestlé has reformulated certain products to decrease their environmental impact without affecting their taste, nutrition, or consumer appeal. Beyond this, the company has begun training farmers on good environmental stewardship and funding scientific research into producing sustainable cocoa and coffee. Such moves contribute to Nestlé's bottom line in many ways; because of its research efforts, the company now harvests from trees that produce more than regular, existing trees

Quasi-strategic greening

usually involves more substantive changes in marketing actions as well as broad-based coordination among nonmarketing activities. For example, a firm might redesign its logo or overhaul a product's packaging to emphasize the firm's commitment to greenness. Telecommunications provider Sprint engaged in quasi-strategic greening when it began using 100 percent recycled materials in all its branded packaging. In addition, it now uses soy inks and environmentally friendly adhesives and coatings. The new packaging is also 60 percent smaller in volume and 50 percent lighter in weight than the old packaging, which has saved Sprint money