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Thursday, October 22, 2009

Why companies must lead the responsibility parade

Welcome to the new world of branding, where people not only expect brands to taste great, prevent cavities, and remove ring around the collar, but also to benefit the planet and humanity at large. But seriously—in this post I will consider the negative implications faced by companies that act irresponsibly. I would suggest that faced with a potential PR issue, many companies would do well to note a phrase my colleague Mike Gettle likes to use, "If they are going to run you out of town, get out ahead and call it a parade."

Increasingly I believe that being seen as a company that does good things, both  socially and environmentally, is a cost of doing business. It is not a short-term fad, as some have suggested. While people may not pay more for brands that do the right thing, they are willing to abstain from buying brands that do bad things. (Click here to read a post I wrote on this topic.)

Nike found this to be the case when it was revealed that many of their sneakers were being made in Asian sweatshops. When people who bought Nikes learned that their purchases were being subsidized by below-market wages, long work hours and dangerous conditions being endured by workers, including children (click here for story), the resultant outcry and boycott eventually forced Nike to address the issue. (I should note, however, that the horror felt by rich Westerners when confronted by the notion of sweatshop labor was not necessarily shared by everyone,  particularly those who had jobs in sweatshops. Click here for story.)

In contrast to Nike, which initially ignored its problem and suffered as a consequence, the 3M Company appears to have heeded Mike Gettle's advice about getting out in front of the parade. Back in 2000, 3M announced that it was going to stop producing its Scotchgard fabric protector because of environmental concerns about a chemical used to make it, perfluorooctanyl. While the move to discontinue Scotchgard was voluntary, The New York Times reported that the Environmental Protection Agency had been poised to remove it from the market if the company had not taken action.

In acting of its own accord, 3M avoided a lot of negative press coverage and remained in control of its own destiny, something that is far more difficult to do these days, when bloggers can pick up a story and kick the online media spin cycle into motion. Just this past August, Sigg, the maker of metal reusable bottles, faced a flurry of online press coverage after announcing that the liners on its older bottles contained BPA. (Click here for a story reprinted from AdAge.)

While the company had never actually asserted that its bottles were free of BPA, many felt that the company's  communication on this topic had been less than transparent. On September 7, CEO Steve Wasik published an apology in the Huffington Post. Web 2.0 may not have changed the way a company should respond to a crisis (click here for my POV),  but the potential for rapid and widespread damage has increased.

These days public outcry is not just an inconvenience that can easily be ignored. The financial crisis has left people more skeptical than ever about the intentions of big business, and any perceived misdoing could have serious consequences for a brand’s image and revenues. Companies that do not act of their own accord to address issues may eventually face not just consumer pressure but legislation and tax penalties as government finally catches up with consumer sentiment.

Of course, all of this focuses on the negative side of the equation. When a company really does lead the parade, it may not be reacting to a threat. It may be seizing an opportunity. Toyota invested vast amounts of time and money to develop the Prius and has now reaped the rewards not just in terms of direct sales but improved brand equity across its entire product line. To close with another quote, this time from Vince Lombardi, companies need to realize that "The best defense is a good offense."

In the next post I will consider the upside of going green. Meanwhile what do you think? Can companies still hide their misdemeanors in this age of bloggers and 24-hour news coverage? Does new media add an imperative for companies to clean up their act?
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This entry was posted on Thursday, October 22, 2009 and is filed under Brands, Media, Other. You can leave a response.

1 Responses

  1. Tuesday, October 27, 2009

    Phil

    The grand prize for how not to handle bad news has to go to Trafigura and their lawyers Carter-Ruck.

    For those not familiar with the story, Trafigura tried to use legal means to cover up a pollution story.  However, their injunction was Twittered away (apologies for the poor pun) and they eventually abandoned it.

    This link tells how it happened.

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