Why product strategy is key to innovation and new markets

Want to be a leader in sustainability? Start focusing on your product or service. 

 You're in business because your product or service delivers what your customers need. And a sustainable product strategy gives your customers the opportunity to reduce their impact through the purchase and use of sustainable products. That said, making the transition away from traditional products takes patience, perseverance and organizational buy-in.

Perhaps your organization's corporate sustainability evolution began with reporting and tracking metrics such as safety incidents or environmental violations. From there, you saw opportunities to drive operational efficiency and cut costs through initiatives like reducing fuel consumption by switching to electric or hybrid vehicles. A sustainable product strategy is a logical next step in the organizational evolution of corporate sustainability programs and has the potential to provide a huge upside.

A recent survey found that 32 percent of CFOs anticipate that over the next few years, about five percent of annual revenue growth will come from products and services that reduce environmental and social impacts. For instance, Dow Chemical's investment in sustainable product development to help customers address environmental challenges is projected to be a $350 billion market opportunity. While companies might see entering this market as a risk, we see it as an area of opportunity that is not as difficult as some might think.

For example, ThyssenKrupp Elevator Americas (TKE) understands that its industry is full of products that require regular maintenance and updating to keep riders safe and comply with regulations. The constant use of its products causes significant wear and tear. Therefore, TKE developed a suite of products called Modernization that allow building owners to choose the parts they need to repair their existing elevators without purchasing an entirely new elevator.

Furthermore, these Modernization products are more efficient, reliable and durable, so they can extend the elevator's life over a longer period of time with less maintenance. TKE has also developed a line of sustainable products that lowers energy costs, reduces power consumption by eliminating the use of a motor generator, and captures and reuses energy through advanced regenerative drive technology. Again, these products extend the elevator's life but they also reduce travel time for riders, reduce noise inside the cab and increase the overall ride quality.

Making a leap from operational efficiencies to sustainable product design requires a change in the way you view your company's products and services. It is an opportunity to see what you already do in a new light but also see the potential for further innovation and leadership. There are two distinct paths that you could take if you decide to make this leap from traditional to sustainable products and services.

1. Recognize the sustainability attributes inherent within current products and services.
Many companies do not see the sustainable attributes of their products. This is often due to being too close to those goods or having an outdated perspective. Once a company looks at its own products with an eye for where the environmental and social benefits are, it's often surprised at what it finds.

The Davey Tree Expert Co., a professional tree care and landscaping company (and a BrownFlynn client), is early in its sustainability journey and has been focused on operational efficiencies. Initially, Davey was hesitant to promote its products and services as sustainable -- even though a large part of its business is based on the preservation of trees and vegetation - because it was afraid of greenwashing. The best way to ensure environmental claims are trustworthy is to use research and analysis like a lifecycle assessment (LCA) to back it up.

A number of companies out there are highlighting the sustainable attributes of current products. A great example is Salesforce, which came out with its first sustainability report earlier this year, proclaiming that its cloud computing platform produced less carbon than a traditional client server IT environment by 95 percent. Salesforce's aim here is to show customers that using its platform will help them reduce energy consumption and achieve sustainability goals.

2. Redesigning with sustainability in mind
Redesigning products using sustainability as a lens for development is evident of true leadership in this space. Nike's Considered Design initiative enabled the company to recycle 82 million plastic bottles into high-performance sportswear and increase the use of environmentally preferred materials by 20 percent. The initiative resulted in additional operational efficiency success such as reducing waste by 19 percent in its footwear business, and achieving a 95 percent reduction in volatile compounds. These activities have never been seen before in the footwear category, showing how sustainability is a tool for innovation and differentiation in the marketplace.

Making the decision to move from traditional products and services to thinking and designing in a more sustainable way will help companies secure a place in the market for years to come. A sustainable product strategy boosts reputation and credibility amongst peers and customers. It opens up doors for new customers and opportunities not yet realized. To become a truly sustainable enterprise, offering a sustainable product or service is the final evolution.

Sara Kennedy is an analyst with BrownFlynn, working on sustainability strategies that drive business value.

Read more from Sara Kennedy.

Marissa Beechuck is an associate consultant and marketing manager for BrownFlynn, serving clients in a number of industries while managing the firm’s brand and social media presence.

Read more from Marissa Beechuk

Why product strategy is key to innovation and new markets

Want to be a leader in sustainability? Start focusing on your product or service. 

 You're in business because your product or service delivers what your customers need. And a sustainable product strategy gives your customers the opportunity to reduce their impact through the purchase and use of sustainable products. That said, making the transition away from traditional products takes patience, perseverance and organizational buy-in.

Perhaps your organization's corporate sustainability evolution began with reporting and tracking metrics such as safety incidents or environmental violations. From there, you saw opportunities to drive operational efficiency and cut costs through initiatives like reducing fuel consumption by switching to electric or hybrid vehicles. A sustainable product strategy is a logical next step in the organizational evolution of corporate sustainability programs and has the potential to provide a huge upside.

A recent survey found that 32 percent of CFOs anticipate that over the next few years, about five percent of annual revenue growth will come from products and services that reduce environmental and social impacts. For instance, Dow Chemical's investment in sustainable product development to help customers address environmental challenges is projected to be a $350 billion market opportunity. While companies might see entering this market as a risk, we see it as an area of opportunity that is not as difficult as some might think.

For example, ThyssenKrupp Elevator Americas (TKE) understands that its industry is full of products that require regular maintenance and updating to keep riders safe and comply with regulations. The constant use of its products causes significant wear and tear. Therefore, TKE developed a suite of products called Modernization that allow building owners to choose the parts they need to repair their existing elevators without purchasing an entirely new elevator.

Furthermore, these Modernization products are more efficient, reliable and durable, so they can extend the elevator's life over a longer period of time with less maintenance. TKE has also developed a line of sustainable products that lowers energy costs, reduces power consumption by eliminating the use of a motor generator, and captures and reuses energy through advanced regenerative drive technology. Again, these products extend the elevator's life but they also reduce travel time for riders, reduce noise inside the cab and increase the overall ride quality.

Making a leap from operational efficiencies to sustainable product design requires a change in the way you view your company's products and services. It is an opportunity to see what you already do in a new light but also see the potential for further innovation and leadership. There are two distinct paths that you could take if you decide to make this leap from traditional to sustainable products and services.

1. Recognize the sustainability attributes inherent within current products and services.
Many companies do not see the sustainable attributes of their products. This is often due to being too close to those goods or having an outdated perspective. Once a company looks at its own products with an eye for where the environmental and social benefits are, it's often surprised at what it finds.

The Davey Tree Expert Co., a professional tree care and landscaping company (and a BrownFlynn client), is early in its sustainability journey and has been focused on operational efficiencies. Initially, Davey was hesitant to promote its products and services as sustainable -- even though a large part of its business is based on the preservation of trees and vegetation - because it was afraid of greenwashing. The best way to ensure environmental claims are trustworthy is to use research and analysis like a lifecycle assessment (LCA) to back it up.

A number of companies out there are highlighting the sustainable attributes of current products. A great example is Salesforce, which came out with its first sustainability report earlier this year, proclaiming that its cloud computing platform produced less carbon than a traditional client server IT environment by 95 percent. Salesforce's aim here is to show customers that using its platform will help them reduce energy consumption and achieve sustainability goals.

2. Redesigning with sustainability in mind
Redesigning products using sustainability as a lens for development is evident of true leadership in this space. Nike's Considered Design initiative enabled the company to recycle 82 million plastic bottles into high-performance sportswear and increase the use of environmentally preferred materials by 20 percent. The initiative resulted in additional operational efficiency success such as reducing waste by 19 percent in its footwear business, and achieving a 95 percent reduction in volatile compounds. These activities have never been seen before in the footwear category, showing how sustainability is a tool for innovation and differentiation in the marketplace.

Making the decision to move from traditional products and services to thinking and designing in a more sustainable way will help companies secure a place in the market for years to come. A sustainable product strategy boosts reputation and credibility amongst peers and customers. It opens up doors for new customers and opportunities not yet realized. To become a truly sustainable enterprise, offering a sustainable product or service is the final evolution.

Sara Kennedy is an analyst with BrownFlynn, working on sustainability strategies that drive business value.

Read more from Sara Kennedy.

Marissa Beechuck is an associate consultant and marketing manager for BrownFlynn, serving clients in a number of industries while managing the firm’s brand and social media presence.

Why CEOs Don't Want Executive Coaching

A recent study by the Stanford Business School found that nearly two-thirds of CEOs don't receive executive coaching or leadership development. And almost half of senior executives in general aren't receiving any, either. Paradoxically, nearly 100 percent said they would like coaching to enhance their development, as both Bloomberg BusinessWeek and Forbes reported in recent articles.

So, why do CEOs and other senior leaders say they want coaching but don't seek it?
I think the answer lies in what they've learned to think coaching provides, in contrast to what they think they need. Both views create a gap between desire and action. Ironically, that gap is unwittingly supported by most coaching programs, themselves. 

That is, most omit or misconstrue the core coaching element that CEOs need to grow their skills and effectiveness: Increased self-awareness, honest self-knowledge, about one's motives, personality capacities and values. The consequences of this absence play out in ways that diminish the relevance of coaching in the eyes of most senior leaders.

Self-awareness is crucial to leadership and it can be heightened through coaching. To explain why and how, consider the obvious but insufficient explanation for the paradox that CEOs want coaching but don't pursue it. Stephen Miles, CEO of the Miles Group, that partnered with Stanford on the study, pointed out that to CEOs, "coaching is somehow "remedial" as opposed to something that enhances high performance, similar to how an elite athlete uses a coach." Moreover, CEO's say they're most interested in such skills as conflict management and communication. Yet they put the need for compassion, relationship and persuasion skills far down on their list. They think of the latter as "soft skills," ancillary at best.

Both views reflect CEOs' perceptions. But those, in turn, reflect the failure of coaching programs to show that the infrastructure of successful leadership vision and behavior is heightened self-awareness about one's motives, values, and personality traits. That's especially true within today's challenging, fluid environment. Because of this failure, coaching programs unknowingly collude with CEOs' view that self-awareness is either irrelevant to leadership or of minor importance.

The higher up you go in companies, the more you're dealing with psychological and relational issues. Successful CEO leadership requires astuteness about others: their emotional and strategic personal drivers; their self-interest, overt and covert. These relationship competencies rest on a foundation of self-knowledge, self-awareness. And you can't know the truth about another without knowing it about yourself. 

Self-knowledge and the relational competencies they're linked with are central to a CEO's ability to formulate, articulate and lead a strategic vision for a motivated, energized organization. Self-knowledge builds clarity about objectives; it fine-tunes one's understanding the perspectives, values, aims and personality traits of others. When that's lacking, you often see discord and conflict among members of the senior management team; or between some of its members and the CEO.

Power and Empathy
Being able to see, understand and deal effectively with others' perspectives is key to successful leadership (as well as personal life). That capacity, part of self-awareness, is empathy. Two recent studies show its crucial role. One looked at the impact of power in an organization upon behavior; the other, its impact upon brain activity. Both studies found that increased power reduces empathy. 

One study, conducted by Adam D. Galinsky and colleagues at Northwestern's Kellogg School of Management, found that increased power tends to make one more self-centered and self-assured, but not in a good way: The researchers found that power makes one "prone to dismiss or, at the very least, misunderstand the viewpoints of those who lack authority." High-power individuals "anchor too heavily on their own perspectives and demonstrate a diminished ability to correctly perceive others' perspectives," according to Galinsky and his team, adding that, "As power increases, power-holders are more likely to assume that others' insights match their own."

The other recent study, by Canadian researchers, found the same thing by looking at brain activity when people have power. They found that increased power diminishes the ability to be empathic and compassionate because power appears to affect the "mirror system" of the brain, through which one is "wired" to experience what another person is experiencing. Researchers found that even the smallest bit of power shuts down that part of the brain and the ability to empathize with others.

These are highly important findings, because empathy, compassion and overall self-awareness are qualities of a developed, mature mind. One that's resilient to stress, able to manage internal conflicts, experiences interconnection with others, and maintains well-being. And, that therefore stimulates broad perspectives for understanding the problems and unpredictable challenges facing CEOs.

Much research shows that such capacities are essential personal strengths; certainly important to effective senior leadership. Moreover, studies find that you can grow them with conscious effort. The emotionally detached, un-empathic person, unaware of his or her personal motives or truths is not going to be very effective as a CEO or senior leader. We see examples of the consequences from time-to-time, when a CEO resigns or is fired. 

Building Self-Awareness
Self-awareness builds from honest self-appraisal about emotional strengths and vulnerabilities; your values and attitudes, personality traits and unresolved conflicts. You're a total person, not just a set of skills performing a role. 

One of Google's earliest executives, Chade-Meng Tan, teaches a popular course for Google employees that helps build such qualities. It's demonstrated positive benefits for success and wellbeing. And much research confirms that self-examination is critical for leaders' positive development. For example, Scott Keller, a director at McKinsey & Company, described the importance of overcoming self-interest and delusion in the Harvard Business Review. He emphasized the need for openness to personal growth and development, because "deep down, (leaders) do not believe that it is they who need to change..." and that "the real bottleneck...is knowing what to change at a personal level." Self-awareness also expands the capacity to know what not to pursue, not just what to go after, as Greg McKeown, CEO of THIS, Inc., described regarding what he learned from an Apple executive.

Coaching can provide several ways to enhance self-awareness. Here are a few I've found helpful to C-level and other senior executives.

Learn From Your Personal Time-Line: Describe key turning points in both your career and personal life, with an eye to what shaped your values, attitudes and behavior; how your career decisions and experiences have affected your personal development. Identify the consequences, both positive and negative. What does this knowledge point you towards, in terms of reclaiming and growing dormant or neglected parts of yourself?

The Capacities-Gap Exercise: List what you believe are your most positive personal strengths, qualities and personality capacities. Describe how each one has become stunted, blocked or deformed in their expression, in daily life. It happens to everyone. For each gap, describe what steps you could commit to taking, to enlarge those capacities and reduce the gaps in your role as a leader as well as in your overall life.

Identify Your Personal Vulnerabilities: All of us tend to develop a "cover story" along the course of our lives - what I called the narrower, "false" self in a previous post - beneath which is our "secret plot" - the real story, including our emotional blind spots, fears and pockets of dysfunctional behavior that can become hidden drivers of our lives. How can you rectify and grow through them?

Needless to say, effective leadership must also include necessary skills, vision and perspectives. For example, sustainable practices for long-term success, as business executive and sustainability thought-leader John Friedman regularly writes about, here.
Another is the movement towards joining business success with addressing social needs, as Richard Branson has described, where "taking care of people and the planet are at the very core of all businesses everywhere in the world." Adding that our current world of transparency and social media demands that "business reinvents itself and becomes a force for good in the world," he's leading a new effort in that direction, called The B Team.

Self-awareness and the growth it supports, combined with such business perspectives and practices, can and should be the heart of executive coaching and leadership programs.

Douglas LaBier, Ph.D., a business psychologist and psychotherapist, is director of the Center for Progressive Development in Washington, D.C. and writes the blog ProgressiveImpact.org. You may contact him at dlabier@CenterProgressive.org.

New Insights into the Correlation Between CSR and Brand Strength, SB’13

Posted by Cynthia Figge

Cynthia Figge’s SB’13 Plenary speech “New Insights into the Correlation Between CSR and Brand Strength”  

Hello! I’m so grateful to be meeting with all of you, and celebrating my 7^th year at SB sinceWhy are we all here? Because we believe that a company that invests in sustainability increases its brand value, right? I’m going to unveil some research that proves the relationship between brand and CSR is even more profound than we thought — around the world, across industry type, and company size.

Even more exciting, last year, that correlation more than doubled in strength.
My company, CSRHub, the world’s largest aggregator of global CSR information, ran five years of our data against the data of Brand Finance, the global brand analyst headquartered in London.

With our overlapping datasets, we analyzed over 1,000 companies, and  for 2012 we got a .28 correlation between brand strength and CSR. This seemed extraordinary.

So we tested the data. My co-founder at CSRHub is a self-admitted geek with degrees in physics and astronomy, and a Harvard MBA (where we met) and he knows his regression. He looked at F values. He split the data in two groups. Tested the combined effect of outliers. He tested for spurious relationships. He ran regressions with third factors such as enterprise value and market cap. Over all these trials, the correlation holds. 28% of brand strength is related to CSR performance.

Let’s dig in and discover which CSR factors may be driving brand strength.

We looked at each of the twelve factors in CSRHub’s model. This chart is ranked by the four categories employees, environment, community and governance. Look closely at the subcategories in light blue. One of the highest correlations is between brand and Environment Policy and Reporting. This is not at all surprising given the environmental crisis – and companies tend to communicate about this in their sustainability reports. They also tend to communicate about products and leadership ethics, the two bottom blue stripes.  But the highest correlated subcategories are all employee issues. Employee engagement and word of mouth seem to be extremely important in creating brand value.

Most astonishing to us was our analysis over time. When we looked back over five years of data, this is what we found:

Brand strength to CSR correlation has suddenly strengthened in the last year, doubling in 2012 over 2011. The relationship stayed relatively constant over the previous 4 years. Then in 2012 that correlation more than doubled.

Why? Perhaps we are reaching critical mass. Consumers are more aware of sustainability. It’s been in the press more. More sustainability websites like CSRHub are out there. NGOs are talking more about the role of corporations in their success. My son just graduated from college and he takes sustainability as a driver of business success for granted.
Why is this important?

You’re the one audience that really gets the implications of this data. CSRHub and Brand Finance have proved a deep link between CSR and brand strength. There is DRAMATIC ROI for sustainability. And that ROI is increasing rapidly. My take is that more companies see sustainability as the breakthrough platform for strategic advantage.  After strategic sustainability consulting for 17 years I believe we may be at the edge of big shift.

Cynthia Figge is a forerunner, thought leader and speaker on the corporate sustainability movement. As the co-founder and COO of CSRHub, Cynthia’s team provides free corporate sustainability ratings on over 7,300 publicly-traded and private companies worldwide. In addition to CSRHub, Cynthia is the co-founder of EKOS International, one of the first consultancies to integrate sustainability and corporate strategy. She has crafted corporate sustainability strategies for a host of major organizations, including BNSF, Boeing, Coca-Cola, Dow Jones, and REI. Cynthia also serves as an advisor to SNS Future in Review, Board Director of Compassionate Action Network, and served as President of the Board of Sustainable Seattle. She has an MBA from Harvard Business School. Prior speaking engagements in corporate responsibility have included SRI Basecamp, Future in Review, Sustainable Brands, and SRI in the Rockies.

The 10 Trends Shaping the Global Ad Business

Sir Martin SorrellInfluencer

Founder and CEO of WPP

As we plan for the future of our business, looking across the 110 countries in which we operate, we try to identify the trends that we think are shaping the global marketing services industry. Here’s our top ten: 

1. Power is shifting South, East and South EastNew York is still very much the centre of the world, but power (economic, political and social) is becoming more widely distributed, marching South, East and South East: to Latin America, India, China, Russia, Africa and the Middle East, and Central and Eastern Europe.

Although growth rates in these markets have slowed, the underlying trends persist as economic development lifts countless millions into lives of greater prosperity, aspiration and consumption.

2. Supply exceeds demand – except in talentDespite the events that followed the collapse of Lehman Brothers in 2008, manufacturing production still generally outstrips consumer demand. This is good news for marketing companies, because manufacturers need to invest in branding in order to differentiate their products from the competition.

Meanwhile, the war for talent, particularly in traditional Western companies, has only just begun. The squeeze is coming from two directions: declining birth rates and smaller family sizes; and the relentless rise of the web and associated digital technologies.

Simply, there will be fewer entrants to the jobs market and, when they do enter it, young people expect to work for tech-focused, more networked, less bureaucratic companies. It is hard now; it will be harder in 20 years.

3. Disintermediation (and a post-digital world)An ugly word, with even uglier consequences for those who fail to manage it. It’s the name of the game for web giants like Apple, Google and Amazon, which have removed large chunks of the supply chain (think music retailers, business directories and bookshops) in order to deliver goods and services to consumers more simply and at lower cost.

Take our “frienemy” Google: our biggest trading partner (as the largest recipient of our clients’ media investment) and one of our main rivals, too. It’s a formidable competitor that has grown very big indeed by – some say – eating everyone else’s lunch, but marketing services businesses have a crucial advantage.

Google (like Facebook, Twitter, LinkedIn and others) is not a neutral intermediary, but a media owner. Google sells Google, Facebook sells Facebook and Twitter sells Twitter.

We, however, are independent, meaning we can give disinterested, platform-agnostic advice to clients. You wouldn’t hand your media plan to News Corporation or Viacom and let them tell you where to spend your advertising dollars and pounds, so why hand it to Google and co?

Taking a broader view of our increasingly tech-based world, words like “digital”, “programmatic” and “data” will soon feel out-dated and obsolete as, enmeshed with so many aspects of our daily lives, network-based technologies, automation and the large-scale analysis of information become the norm.

The internet has been a tremendous net positive for the advertising and communications services business, allowing us to reach consumers more efficiently, more usefully and often more creatively on behalf of clients. But it won’t be long before those clients stop asking our agencies for a “digital” marketing strategy (many already have). It will simply be an inherent part of what we’re expected to offer.

4. Changing power dynamics in retailFor the last 20 years or so the big retailers like Walmart, Tesco and Carrefour have had a lot more power than manufacturers because they deal directly with consumers who are accustomed to visiting their stores.

This won’t change overnight, but manufacturers can now have direct relationships with consumers via the web and e-commerce platforms in particular. Amazon is the example we all think of in the West, but watch out for Alibaba, the Chinese behemoth due to list on the New York Stock Exchange later this summer in what could be the largest IPO in corporate history (and heading a capitalisation of around $200 billion).

5. The growing reputation of internal communications

Once an unloved adjunct to the HR department, internal comms has moved up the food chain and enlightened leaders now see it as critical to business success.

One of the biggest challenges facing any chairman or CEO is how to communicate strategic and structural change within their own organisations. The prestige has traditionally been attached to external communications, but getting internal constituencies on board is at least as important, and arguably more than half of our business.

6. Global and local on the up, regional downThe way our clients structure and organise their businesses is changing. Globalisation continues apace, making the need for a strong corporate centre even more important.
Increasingly, though, what CEOs want is a nimble, much more networked centre, with direct connections to local markets. This hands greater responsibility and accountability to local managers, and puts pressure on regional management layers that act as a buffer, preventing information from flowing and things from happening.

7. Finance and procurement have too much clout, but this will changeSome companies seem to think they can cost-cut their way to growth. This misconception is a post-Lehman phenomenon: corporates still bear the mental scars of the crash, and conservatism rules.

But there’s hope: the accountants will only hold sway over the chief marketing officers in the short-term. There’s a limit to how much you can cut, but top-line growth (driven by investment in marketing) is infinite, at least until you reach 100% market share.

8. Bigger government
Governments are becoming ever more important – as regulators, investors and clients. Following the global financial crisis and ensuing recession, governments have had to step in and assert themselves – just as they did during and after the Great Depression in the 1930s and 1940s. And they’re not going to retreat any time soon.

Administrations need to communicate public policy to citizens, drive health initiatives, recruit people, promote their countries abroad, encourage tourism and foreign investment, and build their digital government capabilities. All of which require the services of our industry.

9. Sustainability is no longer “soft”The days when companies regarded sustainability as a bit of window-dressing (or, worse, a profit-sapping distraction) are, happily, long gone. Today’s business leaders understand that social responsibility goes hand-in-hand with sustained growth and profitability.

Business needs permission from society to operate, and virtually every CEO recognises that you ignore stakeholders at your peril – if you’re trying to build brands for the long term.

10. Merger flops won’t put others offDespite the failure of one or two recent high-profile mega-mergers, we expect consolidation to continue – among clients, media owners and marketing services agencies. Bigger companies will have the advantages of scale, technology and investment, while those that remain small will have flexibility and a more entrepreneurial spirit on their side.

FMCG and pharmaceuticals (driven by companies like 3G and Valeant) are where we anticipate the greatest consolidation, while our own industry is likely to see some activity – with IPG and Havas the subject of constant takeover rumours. At WPP we’ll continue to play our part by focusing on small- and medium-sized strategic acquisitions (31 so far this year, and counting). 

Posted by:Sir Martin Sorrell

Why product strategy is key to innovation and new markets

Want to be a leader in sustainability? Start focusing on your product or service. 

 You're in business because your product or service delivers what your customers need. And a sustainable product strategy gives your customers the opportunity to reduce their impact through the purchase and use of sustainable products. That said, making the transition away from traditional products takes patience, perseverance and organizational buy-in.

Perhaps your organization's corporate sustainability evolution began with reporting and tracking metrics such as safety incidents or environmental violations. From there, you saw opportunities to drive operational efficiency and cut costs through initiatives like reducing fuel consumption by switching to electric or hybrid vehicles. A sustainable product strategy is a logical next step in the organizational evolution of corporate sustainability programs and has the potential to provide a huge upside.

A recent survey found that 32 percent of CFOs anticipate that over the next few years, about five percent of annual revenue growth will come from products and services that reduce environmental and social impacts. For instance, Dow Chemical's investment in sustainable product development to help customers address environmental challenges is projected to be a $350 billion market opportunity. While companies might see entering this market as a risk, we see it as an area of opportunity that is not as difficult as some might think.

For example, ThyssenKrupp Elevator Americas (TKE) understands that its industry is full of products that require regular maintenance and updating to keep riders safe and comply with regulations. The constant use of its products causes significant wear and tear. Therefore, TKE developed a suite of products called Modernization that allow building owners to choose the parts they need to repair their existing elevators without purchasing an entirely new elevator.

Furthermore, these Modernization products are more efficient, reliable and durable, so they can extend the elevator's life over a longer period of time with less maintenance. TKE has also developed a line of sustainable products that lowers energy costs, reduces power consumption by eliminating the use of a motor generator, and captures and reuses energy through advanced regenerative drive technology. Again, these products extend the elevator's life but they also reduce travel time for riders, reduce noise inside the cab and increase the overall ride quality.

Making a leap from operational efficiencies to sustainable product design requires a change in the way you view your company's products and services. It is an opportunity to see what you already do in a new light but also see the potential for further innovation and leadership. There are two distinct paths that you could take if you decide to make this leap from traditional to sustainable products and services.

1. Recognize the sustainability attributes inherent within current products and services.
Many companies do not see the sustainable attributes of their products. This is often due to being too close to those goods or having an outdated perspective. Once a company looks at its own products with an eye for where the environmental and social benefits are, it's often surprised at what it finds.

The Davey Tree Expert Co., a professional tree care and landscaping company (and a BrownFlynn client), is early in its sustainability journey and has been focused on operational efficiencies. Initially, Davey was hesitant to promote its products and services as sustainable -- even though a large part of its business is based on the preservation of trees and vegetation - because it was afraid of greenwashing. The best way to ensure environmental claims are trustworthy is to use research and analysis like a lifecycle assessment (LCA) to back it up.

A number of companies out there are highlighting the sustainable attributes of current products. A great example is Salesforce, which came out with its first sustainability report earlier this year, proclaiming that its cloud computing platform produced less carbon than a traditional client server IT environment by 95 percent. Salesforce's aim here is to show customers that using its platform will help them reduce energy consumption and achieve sustainability goals.

2. Redesigning with sustainability in mind
Redesigning products using sustainability as a lens for development is evident of true leadership in this space. Nike's Considered Design initiative enabled the company to recycle 82 million plastic bottles into high-performance sportswear and increase the use of environmentally preferred materials by 20 percent. The initiative resulted in additional operational efficiency success such as reducing waste by 19 percent in its footwear business, and achieving a 95 percent reduction in volatile compounds. These activities have never been seen before in the footwear category, showing how sustainability is a tool for innovation and differentiation in the marketplace.

Making the decision to move from traditional products and services to thinking and designing in a more sustainable way will help companies secure a place in the market for years to come. A sustainable product strategy boosts reputation and credibility amongst peers and customers. It opens up doors for new customers and opportunities not yet realized. To become a truly sustainable enterprise, offering a sustainable product or service is the final evolution.

Sara Kennedy is an analyst with BrownFlynn, working on sustainability strategies that drive business value.

Read more from Sara Kennedy.

Marissa Beechuck is an associate consultant and marketing manager for BrownFlynn, serving clients in a number of industries while managing the firm’s brand and social media presence.

New Insights into the Correlation Between CSR and Brand Strength, SB’13

Posted by Cynthia Figge

Cynthia Figge’s SB’13 Plenary speech “New Insights into the Correlation Between CSR and Brand Strength”  

Hello! I’m so grateful to be meeting with all of you, and celebrating my 7^th year at SB sinceWhy are we all here? Because we believe that a company that invests in sustainability increases its brand value, right? I’m going to unveil some research that proves the relationship between brand and CSR is even more profound than we thought — around the world, across industry type, and company size.

Even more exciting, last year, that correlation more than doubled in strength.
My company, CSRHub, the world’s largest aggregator of global CSR information, ran five years of our data against the data of Brand Finance, the global brand analyst headquartered in London.

With our overlapping datasets, we analyzed over 1,000 companies, and  for 2012 we got a .28 correlation between brand strength and CSR. This seemed extraordinary.
So we tested the data. My co-founder at CSRHub is a self-admitted geek with degrees in physics and astronomy, and a Harvard MBA (where we met) and he knows his regression. He looked at F values. He split the data in two groups. Tested the combined effect of outliers. He tested for spurious relationships. He ran regressions with third factors such as enterprise value and market cap. Over all these trials, the correlation holds. 28% of brand strength is related to CSR performance.

Let’s dig in and discover which CSR factors may be driving brand strength.

We looked at each of the twelve factors in CSRHub’s model. This chart is ranked by the four categories employees, environment, community and governance. Look closely at the subcategories in light blue. One of the highest correlations is between brand and Environment Policy and Reporting. This is not at all surprising given the environmental crisis – and companies tend to communicate about this in their sustainability reports. They also tend to communicate about products and leadership ethics, the two bottom blue stripes.  But the highest correlated subcategories are all employee issues. Employee engagement and word of mouth seem to be extremely important in creating brand value.

Most astonishing to us was our analysis over time. When we looked back over five years of data, this is what we found:

Brand strength to CSR correlation has suddenly strengthened in the last year, doubling in 2012 over 2011. The relationship stayed relatively constant over the previous 4 years. Then in 2012 that correlation more than doubled.

Why? Perhaps we are reaching critical mass. Consumers are more aware of sustainability. It’s been in the press more. More sustainability websites like CSRHub are out there. NGOs are talking more about the role of corporations in their success. My son just graduated from college and he takes sustainability as a driver of business success for granted.
Why is this important?

You’re the one audience that really gets the implications of this data. CSRHub and Brand Finance have proved a deep link between CSR and brand strength. There is DRAMATIC ROI for sustainability. And that ROI is increasing rapidly. My take is that more companies see sustainability as the breakthrough platform for strategic advantage.  After strategic sustainability consulting for 17 years I believe we may be at the edge of big shift.

Cynthia Figge is a forerunner, thought leader and speaker on the corporate sustainability movement. As the co-founder and COO of CSRHub, Cynthia’s team provides free corporate sustainability ratings on over 7,300 publicly-traded and private companies worldwide. In addition to CSRHub, Cynthia is the co-founder of EKOS International, one of the first consultancies to integrate sustainability and corporate strategy. She has crafted corporate sustainability strategies for a host of major organizations, including BNSF, Boeing, Coca-Cola, Dow Jones, and REI. Cynthia also serves as an advisor to SNS Future in Review, Board Director of Compassionate Action Network, and served as President of the Board of Sustainable Seattle. She has an MBA from Harvard Business School. Prior speaking engagements in corporate responsibility have included SRI Basecamp, Future in Review, Sustainable Brands, and SRI in the Rockies.

Why product strategy is key to innovation and new markets

Want to be a leader in sustainability? Start focusing on your product or service. 

 You're in business because your product or service delivers what your customers need. And a sustainable product strategy gives your customers the opportunity to reduce their impact through the purchase and use of sustainable products. That said, making the transition away from traditional products takes patience, perseverance and organizational buy-in.

Perhaps your organization's corporate sustainability evolution began with reporting and tracking metrics such as safety incidents or environmental violations. From there, you saw opportunities to drive operational efficiency and cut costs through initiatives like reducing fuel consumption by switching to electric or hybrid vehicles. A sustainable product strategy is a logical next step in the organizational evolution of corporate sustainability programs and has the potential to provide a huge upside.

A recent survey found that 32 percent of CFOs anticipate that over the next few years, about five percent of annual revenue growth will come from products and services that reduce environmental and social impacts. For instance, Dow Chemical's investment in sustainable product development to help customers address environmental challenges is projected to be a $350 billion market opportunity. While companies might see entering this market as a risk, we see it as an area of opportunity that is not as difficult as some might think.

For example, ThyssenKrupp Elevator Americas (TKE) understands that its industry is full of products that require regular maintenance and updating to keep riders safe and comply with regulations. The constant use of its products causes significant wear and tear. Therefore, TKE developed a suite of products called Modernization that allow building owners to choose the parts they need to repair their existing elevators without purchasing an entirely new elevator.

Furthermore, these Modernization products are more efficient, reliable and durable, so they can extend the elevator's life over a longer period of time with less maintenance. TKE has also developed a line of sustainable products that lowers energy costs, reduces power consumption by eliminating the use of a motor generator, and captures and reuses energy through advanced regenerative drive technology. Again, these products extend the elevator's life but they also reduce travel time for riders, reduce noise inside the cab and increase the overall ride quality.

Making a leap from operational efficiencies to sustainable product design requires a change in the way you view your company's products and services. It is an opportunity to see what you already do in a new light but also see the potential for further innovation and leadership. There are two distinct paths that you could take if you decide to make this leap from traditional to sustainable products and services.

1. Recognize the sustainability attributes inherent within current products and services.
Many companies do not see the sustainable attributes of their products. This is often due to being too close to those goods or having an outdated perspective. Once a company looks at its own products with an eye for where the environmental and social benefits are, it's often surprised at what it finds.

The Davey Tree Expert Co., a professional tree care and landscaping company (and a BrownFlynn client), is early in its sustainability journey and has been focused on operational efficiencies. Initially, Davey was hesitant to promote its products and services as sustainable -- even though a large part of its business is based on the preservation of trees and vegetation - because it was afraid of greenwashing. The best way to ensure environmental claims are trustworthy is to use research and analysis like a lifecycle assessment (LCA) to back it up.

A number of companies out there are highlighting the sustainable attributes of current products. A great example is Salesforce, which came out with its first sustainability report earlier this year, proclaiming that its cloud computing platform produced less carbon than a traditional client server IT environment by 95 percent. Salesforce's aim here is to show customers that using its platform will help them reduce energy consumption and achieve sustainability goals.

2. Redesigning with sustainability in mind
Redesigning products using sustainability as a lens for development is evident of true leadership in this space. Nike's Considered Design initiative enabled the company to recycle 82 million plastic bottles into high-performance sportswear and increase the use of environmentally preferred materials by 20 percent. The initiative resulted in additional operational efficiency success such as reducing waste by 19 percent in its footwear business, and achieving a 95 percent reduction in volatile compounds. These activities have never been seen before in the footwear category, showing how sustainability is a tool for innovation and differentiation in the marketplace.

Making the decision to move from traditional products and services to thinking and designing in a more sustainable way will help companies secure a place in the market for years to come. A sustainable product strategy boosts reputation and credibility amongst peers and customers. It opens up doors for new customers and opportunities not yet realized. To become a truly sustainable enterprise, offering a sustainable product or service is the final evolution.

Sara Kennedy is an analyst with BrownFlynn, working on sustainability strategies that drive business value.

Marissa Beechuck is an associate consultant and marketing manager for BrownFlynn, serving clients in a number of industries while managing the firm’s brand and social media presence.

Correlation Between CSR and Brand Strength

Posted by Cynthia Figge

Cynthia Figge’s SB’13 Plenary speech “New Insights into the Correlation Between CSR and Brand Strength”  

Hello! I’m so grateful to be meeting with all of you, and celebrating my 7^th year at SB sinceWhy are we all here? Because we believe that a company that invests in sustainability increases its brand value, right? I’m going to unveil some research that proves the relationship between brand and CSR is even more profound than we thought — around the world, across industry type, and company size.

Even more exciting, last year, that correlation more than doubled in strength.
My company, CSRHub, the world’s largest aggregator of global CSR information, ran five years of our data against the data of Brand Finance, the global brand analyst headquartered in London.

With our overlapping datasets, we analyzed over 1,000 companies, and  for 2012 we got a .28 correlation between brand strength and CSR. This seemed extraordinary.

So we tested the data. My co-founder at CSRHub is a self-admitted geek with degrees in physics and astronomy, and a Harvard MBA (where we met) and he knows his regression. He looked at F values. He split the data in two groups. Tested the combined effect of outliers. He tested for spurious relationships. He ran regressions with third factors such as enterprise value and market cap. Over all these trials, the correlation holds. 28% of brand strength is related to CSR performance.

Let’s dig in and discover which CSR factors may be driving brand strength.

 
We looked at each of the twelve factors in CSRHub’s model. This chart is ranked by the four categories employees, environment, community and governance. Look closely at the subcategories in light blue. One of the highest correlations is between brand and Environment Policy and Reporting. This is not at all surprising given the environmental crisis – and companies tend to communicate about this in their sustainability reports. They also tend to communicate about products and leadership ethics, the two bottom blue stripes.  But the highest correlated subcategories are all employee issues. Employee engagement and word of mouth seem to be extremely important in creating brand value.

Most astonishing to us was our analysis over time. When we looked back over five years of data, this is what we found:

 
Brand strength to CSR correlation has suddenly strengthened in the last year, doubling in 2012 over 2011. The relationship stayed relatively constant over the previous 4 years. Then in 2012 that correlation more than doubled.

Why? Perhaps we are reaching critical mass. Consumers are more aware of sustainability. It’s been in the press more. More sustainability websites like CSRHub are out there. NGOs are talking more about the role of corporations in their success. My son just graduated from college and he takes sustainability as a driver of business success for granted.
Why is this important?

 
You’re the one audience that really gets the implications of this data. CSRHub and Brand Finance have proved a deep link between CSR and brand strength. There is DRAMATIC ROI for sustainability. And that ROI is increasing rapidly. My take is that more companies see sustainability as the breakthrough platform for strategic advantage.  After strategic sustainability consulting for 17 years I believe we may be at the edge of big shift.

Cynthia Figge is a forerunner, thought leader and speaker on the corporate sustainability movement. As the co-founder and COO of CSRHub, Cynthia’s team provides free corporate sustainability ratings on over 7,300 publicly-traded and private companies worldwide. In addition to CSRHub, Cynthia is the co-founder of EKOS International, one of the first consultancies to integrate sustainability and corporate strategy. She has crafted corporate sustainability strategies for a host of major organizations, including BNSF, Boeing, Coca-Cola, Dow Jones, and REI. Cynthia also serves as an advisor to SNS Future in Review, Board Director of Compassionate Action Network, and served as President of the Board of Sustainable Seattle. She has an MBA from Harvard Business School. Prior speaking engagements in corporate responsibility have included SRI Basecamp, Future in Review, Sustainable Brands, and SRI in the Rockies.

Sustainable food chains make business sense and consumers happy

AGRI-FOOD SUSTAINABILITY: Sustainable food chains make business sense and consumers happy

Customers want food they can trust and expect retailers to do the ethical and environmental thinking for them

Responsible supermarkets are now making moves to ensure the sustainability of all of the fish they sell. Photograph: Graeme Robertson

In a year when horsemeat contamination and food waste have made the headlines, consumers are more conscious about the operation of the food system. Everyone wants food they can trust, but today's shoppers increasingly want more than that, and expect retailers to embed ethical and environmental sustainability in all of their products.

This was one of the messages that came out of a recent progress report by Sainsbury's, two years into its 20x20 sustainability commitments programme.

"Customers want us to act for them and ask the question and take the actions they would expect," said Justin King, chief executive ofSainsbury's, speaking at the launch of the report on 20 November.

"We can help them by taking on that responsibility and solving complex problems for them. Ultimately, the power of 24 million customers shopping with us will always mean we can make a big difference more quickly."

This mainstreaming of sustainability is a response to customers no longer seeing the issue as a bonus feature, sold under a label, such asFairtrade, with a price premium to match. Ethical and environmental sustainability is increasingly seen as fundamental, and consumers expect supermarkets to make it easy for them to live by those principles.

"When surveyed, most shoppers say that, on key ethical food issues, they want their supermarket to make those choices for them, before the product even reaches the shelf," says Kath Dalmeny, policy director of the charity Sustain, which campaigns for better food and farming.

Indeed, shoppers express surprise when they discover their trusted supermarket is selling endangered fish, for example. As Dalmeny says: "The more responsible of the major supermarkets are now making principled and cost-effective moves to ensure the sustainability of all of the fish they sell, to reduce the environmental footprint of products, and to pay fair prices to farmers in poor countries."

One of Sainsbury's commitments under the 20x20 plan, for instance, is for all of its fish to be independently certified as sustainable. It is also about to launch its own set of standards, run by an independent body, covering all of the 35 key raw materials in its supply chain that may not be fully covered by existing standards, such as Fairtrade, the Rainforest Alliance and the Marine Stewardship Council (MSC).

"MSC and Fairtrade are great and we want to be able to say our standards are independently audited across these 35 or so raw materials," said King.

This trend towards embedding sustainability is being seen in other sectors, too. Unilever, for example, introduced a Sustainable Living Planin November 2010, which it describes as "a driver of everything we do so that each time a consumer chooses one of our products, it improves their life, their community and the world we all share".

"Environmental sustainability is starting to be seen as more than an optional extra," says Duncan Williamson, food policy manager at WWF UK. "There are increasing numbers of businesses who are seeing the environment as core to their future business models."

Businesses also see sustainability as a way of engaging with their customers, and the issue of tackling waste lends itself well to this. Food waste is something consumers are increasingly conscious of and want to act on. In early November, the Waste & Resources Action Programme (Wrap) revealed that, since 2007, the UK has reduced avoidable household food waste by 21%.

Many consumers clearly care about this and it may seem counterintuitive for a supermarket to encourage consumers to waste less if it means they'll buy less. But, according to Alice Ellison, environment policy adviser at the British Retail Consortium, this is an important way of creating value. That means selling affordable food, "but also making sure we can make the most of it", she says.

Ellison cites a range of steps taken by retailers to reduce household food waste, from providing clear storage advice and recipe ideas to offering more portion sizes and designing packaging that extends a product's shelf life. "These have helped to drive significant reductions in the amount of food and drink we throw away," she notes.

According to Sainsbury's 20x20 update, the supermarket's Make Your Roast Go Further campaign, in January 2013, was one of its most successful of the year. This substantiates King's argument that there is a business rationale in helping consumers waste less.

"Helping customers spend less by buying and consuming everything they buy is in our long-term interest, if we help you do that better than our competitors … It's not good for us to have someone looking at a bag of salad in the bin thinking 'I was tempted to buy that at Sainsbury's, but I wasted it'."

Brand owners have realised that embedding sustainability into their supply chains and brand propositions is important to their survival, as well as giving customers what they want. The supply and demand sides are coming together under the sustainability agenda, and that's why it makes sense to embrace it.

"It's not just about CSR [corporate social responsibility]," says Williamson. "It's about resilience, and their medium- and long-term future. Companies are recognising that the core elements of the food system – water, land, ecosystem services and oil – are becoming scarcer and will cost more. A sustainable food system will need responsible business."

Posted by Bruce MacDonald