Sustainability and Corporate Responsibility

Sustainability and corporate social responsibility (CSR) have received a great deal of media attention over the past year. Indications are that sustainability will become the most significant social movement of our time. It will permeate every aspect of consumers’ lifestyles, business infrastructures and other societal constituencies— including personal care. Corporations looking to capitalize on this movement have found a desirable target among LOHAS consumers. LOHAS (Lifestyles of Health and Sustainability) refers to an integrated, rapidly growing market for goods and services that appeals to consumers who have a meaningful sense of environmental and social responsibility and incorporate those values into their purchase decisions.

The Natural Marketing Institute (NMI) has tracked the LOHAS consumer since 2002. In 2007, NMI’s LOHAS Consumer Trend Database™ identified 19 percent of the U.S. general population as LOHAS consumers. That’s 40 million adults who are segmented as highly active drivers of ethical consumerism. As NMI tracks this consumer group and its influence on the overall population, some key trends have emerged within the marketplace that have a significant impact on the personal care industry.

FROM PURCHASERS TO PARTICIPANTS

Eighty percent of consumers agree “it is important for companies not just to be profitable, but to be mindful of their impact on the environment and society.” Knowing a company is mindful of that impact translates into consumer action (Figure 1).

NMI’s recent global research also found Americans are willing to pay 20 percent more for products that are made in an environmentally friendly and sustainable way. In fact, Americans are 30 percent more likely than Europeans and 76 percent more likely than Japanese consumers to agree with that statement. Personal care manufacturers that can demonstrate, and communicate, their commitment to producing products in a sustainable manner to consumers have an advantage over those who do not.

Consumers are striving to feel connected to the cause by participating and expressing their values through their purchasing behavior. What began as a “new luxury” mindset has aligned itself with a more environmentally friendly, ethical consumption value.

NMI research has consistently shown consumers are just as concerned about what they put on their bodies as what they put in them. The desire for personal health is now extending to planetary health; consumers exhibit a desire to understand the total lifecycle of the products they purchase. Pre-consumption concerns range from the raw materials themselves (organic, locally grown, etc.) to the transportation of those materials; and whether the brand company practices CSR. From a post-consumption perspective, consumers are looking for biodegradable and recyclable attributes to their packaging.

Effective CSR encompasses more than just good marketing; companies must actively practice and promote their efforts in terms of whether they manufacture their products in a sustainable manner—using renewable power, supporting pollution control, proper waste disposal, recycling efforts, etc. As consumers move beyond purchasing to participation, personal care marketers can create more meaningful connections by facilitating that participation. This creates an active relationship, which, in the long run, fosters brand loyalty.

SHADES OF GREEN

An evolving definition of environmental attitudes is empowering a wider audience of consumer participation. LOHAS consumers are engaging at a more sophisticated level; for example, solar energy, hybrid vehicles; and new users are beginning to recycle, use organic products and energy efficient appliances. Several motivating factors influence one’s shade of green. For most people, it is a concern about future generations and the overall health of the planet, with Gen X and Gen Y being more influenced by their parents. For some, there is guilt about not being green enough; new blogs have started appearing, allowing consumers to post their “green confessions.”

The future of the green corporate movement will require a new level of sophistication as consumers increasingly discern those who are truly proactive versus those who are participating solely for PR purposes. The personal care industry in particular needs to be cognizant of this and strive for authenticity. Consumers want to know the origin of ingredients and the potential impact on the environment from start to post-consumption.

As organizations concentrate on making their messages more engaging and effective, only the most focused, direct-benefit oriented and consistent brands will prevail. Many of Wal-Mart’s recent efforts, for example, have been questioned as “greenwashing,” despite the fact that the chain has the most impact on CPG packaging of any initiative ever undertaken.

An effective CSR strategy demands more. Most corporations employ a myopic view, which is easily disrupted by changes in the market or management. They are not promoting a lasting connection between the activity, the company and the consumer. For example, carbon neutrality is a topic that doesn’t intrinsically connect to consumers. Conversely, a holistic CSR approach involves unique initiatives that make sense for the business and society and results in a symbiotic relationship with customers.

Last year, NMI introduced the LOHAS Index™, a new approach to evaluating corporate sustainability. The index profiles companies’ sustainability performance based on both independent analysts’ perspectives and consumer perception. The index determined which companies are both sustainable and good communicators of their good citizenship.

NMI selected 75 companies on the Russell 3000 that are well-known by consumers. Quantitative consumer research was conducted on their perception of these companies with regard to the community, environment and employees. The consumer data was then aligned with investment analyst data from KLD Research & Analytics Inc. Final scores were calculated using equal weights for each type of data.

While no personal care companies were in the top ten, Johnson & Johnson and the Procter & Gamble Co. ranked 11 and 12, respectively. However, in comparing their actual greenness with their perceived greenness, NMI concluded both of these companies have an unrealized CSR opportunity and need to do a better job at communicating their CSR efforts (which were recognized by KLD) to their consumers.

The majority of American consumers believe sustainability is here to stay. This means businesses need to have long-term plans in place to address sustainability and effective communication to share such efforts with potential consumers. Companies that are first to adapt in their industry will possess an advantage and gain a symbiotic relationship with their customers, which is crucial to success in the marketplace.

Maryellen Molyneaux is president of Natural Marketing Institute (NMI), an international strategic consulting, market research, and business development company specializing in health, wellness and sustainability (www.NMISolutions.com).

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