Archive for the ‘Business & Economics’ Category

Imperfect triple bottom line far better than alternative

Sustainable Industries magazine asks the question: “Is triple-bottom-line accounting really possible?” From their reporting, the answer appears to be not yet. The article quotes a San Francisco attorney:

“The notion of triple-bottom-line accounting assumes or incorporates the idea in the nomenclature that there’s a standard…The reality is, there isn’t.”

He is referring to the absence of a unit of measure that works across each of the three dimensions of economic, social and environmental accountability. Right now, environmental or social investments or decisions tend to be evaluated by the one measurement businesspeople best understand: financial ROI. In other words, the one bottom line that has always been with us. As a result, decisions that would appear to benefit the environment or community, but hurt profitability, are too easily dismissed. As in, we can’t afford to do the right thing.

I believe we are making the notion of the triple bottom line (TBL) too complex. And that’s preventing businesses from embracing its simple principle, which is to strike a balance among the sometimes competing interests of making money, protecting the environment and supporting our communities.

As Sustainable Industries observes, financial accounting over the course of many years has “established standardized, legal frameworks for what to measure, how to measure it, how to report it and how to interpret it.” The environmental and social components of the TBL are far from reaching that status. And yet, businesses can’t let that stop them from at least trying to find balance in their decision making, even when social or environmental outcomes may be difficult to measure and value.

Consider today’s financial crisis. Fingers are pointing in every direction, and there is indeed plenty of blame to go around: greedy investors, lenders and home buyers, lax regulators, gutless politicians, to name a few. But I can’t imagine we’d be in this mess if business was guided by the triple bottom line, even as it’s loosely understood today:

  1. Would mortgage lenders concerned for their customers and communities ever have offered $400,000 loans to people with no proof of income or assets?
  2. Would Wall St. investors ever have purchased these so-called subprime loans and packaged them for sale as low-risk securities if they were thinking of more than just maximizing profit?
  3. Would government ever have let investors acquire and trade trillions of dollars of these securities without public scrutiny if they actually felt obligated to protect the individual taxpayer?

We’re seeing now, in the prospect of a $700 billion taxpayer bailout, what this country’s obsession with making money has cost us. The financial bottom line alone is like the presidency without Congress and the Supreme Court: There are no checks and balances. The only brakes on economic excesses are wrenching recessions, if not depressions, after which we’re back to business as usual. How quickly did we move from the dotcom bubble to the housing bubble?

To return to the question the magazine asked: Maybe triple-bottom-line accounting isn’t possible. But there’s no excuse any longer for pretending our unfettered pursuit of profit is the answer.

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Rethinking sustainability in a world of ‘murketing’

Several months have passed since Rob Walker’s book, “Buying In,” hit bookstores. Having now read it, I suggest you get your hands on a copy. I recommend it specifically to marketers or anyone else trying to make sense of where marketing is headed and what the consumption behaviors of today’s Americans are telling us.

If you’re looking for wisdom on sustainability, this book may do more to discourage than enlighten. But I believe Walker has given us plenty to ponder when it comes to sustainability, even though it’s not a central topic in his book.

Walker, author of the “Consumed” column in the New York Times Magazine, attempts to decode what he calls “the secret dialogue between what we buy and who we are.” The publisher accurately describes the book as “Part marketing primer, part work of cultural anthropology.” Walker makes a convincing argument, backed by strong reporting and research, that Americans—far from being immune to marketing, as most of us think of ourselves—are in fact “embracing brands more than ever before.” And marketing, while certainly not alone in explaining our enthrall with brands, is doing more than ever to encourage it. Walker writes:

The modern relationship between consumer and consumed—what I’m calling murketing—is defined not by rejection (of commercial persuasion) at all, but rather by frank complicity.

Walker’s term “murketing” blends murky and marketing to describe the blurring of lines between branding channels and everyday life. Marketers, usually referred to by Walker as “commercial persuaders,” are using increasingly sophisticated and unconventional tactics to brand products and companies. Indeed, there seems to be no limits anymore to where and how we might be delivered a commercial message, as Walker illustrates in his explanation of the word of mouth tactics used by new breed marketing agencies such as BzzAgent.

But Walker doesn’t paint a picture of Americans as innocent victims of shameless commercial persuaders. On the contrary, he uncovers numerous examples to show we are often the ones providing a brand with meaning, sometimes far different from the one intended by its owner. And once we endow a brand with meaning that works for us, we become its biggest champions. Walker’s stories of how a factory worker boot made by Timberland became part of the “global hip-hop uniform” is just one of many great examples.

Today’s youth, the most commercially exposed generation ever, may be more aware than any other group when they’re being pitched. But Walker says they are also “most amenable to using brand to fashion meaning for themselves, to announce who they are and what they stand for.” Brands are just a form of useful raw material for expressing identity and creativity. Perhaps because of the ubiquity and familiarity of our commercial culture, Americans return to it over and over to resolve what Walker calls “the fundamental tension of modern life”—how to reconcile our desire to feel like individuals while also feeling part of something bigger than ourselves.

If youth are indeed “a proxy for the future,” Walker’s findings don’t offer much hope that we’ll see a mass movement toward a less materialistic society anytime soon. He describes a cloudy, cluttered marketplace that “makes it dizzingly difficult to walk your talk” when it comes to simplifying life or buying with environmental and ethical considerations always in mind. And perhaps more significantly, commercial objects are what so many Americans use to project the meaning of our lives, according to Walker. “Meaning and value are things we give to symbols, not things we get from them,” Walker writes.

From a sustainability standpoint, what does it mean that material, branded objects are becoming more, not less, important in the collective lives of Americans? I think it asks for a fundamental change in strategy in how we confront consumerism. Attempts to educate everyone to consume less or differently have had marginal success. And that’s unlikely to change if, as Walker argues, Americans use the commercial marketplace to set ourselves apart from the crowd and to participate in something bigger. We must recognize how difficult it will be in the near-term to supplant this central role of commercial goods in our lives, especially when marketers are hell-bent on keeping consumption our top priority.

So if demand for material goods is unlikely to slacken, maybe we need to make the goods themselves our primary focus. If producers make and sell only sustainable products, customers won’t have to think twice about how a product is made. Sustainability will be embedded. That places the onus on manufacturers and those who market their products to take responsibility for the environmental and social impact of what they sell.

I don’t want to let individuals off the hook for what and how much we consume. But pleas to consume less will keep falling on deaf ears as long as the things we buy are how we tell ourselves we matter. Maybe the key to sustainability is how we confront meaning, not consumption.

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Why marketing dashboards don’t measure up

I get invitations to attend workshops all the time. Usually, I gloss over them. But I stopped on one the other day called “Marketing Metrics and Dashboards 2.0.” Not exactly a topic I’ve been dying to learn about. But it got me thinking: There must be a business opportunity for someone willing and able to show how best to integrate “triple bottom line” metrics into marketing.

Marketing dashboards have come into vogue in recent years, although they are not in broad use because they are complex and expensive to create and maintain. They seem to have found a niche primarily among large companies whose marketing departments are under scrutiny by CEOs and CFOs to demonstrate their expenditures are adding to the bottom line — the profit bottom line, that is. The marketing firm that is leading the workshop focuses on helping its clients “determine the financial return from marketing investments.” Their tagline is: “Measure What You Should, Not Just What You Can.” 

That begs the question: What “should” marketers be measuring? In recent years, marketers have been under increasing pressure to prove a positive financial impact from their programs. Dashboards are touted as one mechanism for doing so. I’m all for marketing carrying its weight financially. I also believe the possibilities, if not the responsibilities, of marketing go well beyond its impact on sales and profits. 

Companies committed to sustainable business practices recognize their success can’t be achieved simply by maximizing profits. They understand that profits gained at the expense of the environment or stakeholders, such as employees, suppliers and communities, are to be avoided and indeed are not a measurement of success at all. The triple-bottom-line approach of balancing profits with people and planet acts as a check on ill-gotten financial returns.

Which brings us back to marketing measurements. I would expect companies professing a commitment to the environment and the fair treatment of all stakeholders would also ensure this commitment is reflected in how they conduct and evaluate marketing. If marketing is held to a standard of financial ROI only — even as difficult as that is to measure — there will be no incentive for marketers to sweat the social and environmental impacts (positive or negative) of their work.

Marketers can perform a vital sustainability function by understanding, monitoring and influencing how their employers or clients create and manage their supply chains, conduct fair trade practices, manufacture their products, dispose of their waste, deliver their services and encourage recycling and reuse. This should be what it means to take responsibility for what you’re marketing.

Companies fixated on the financial bottom line are telling marketers to ignore this function and putting them in position to build customer demand for unsustainable products and services. But marketers are not simply victims here. They have a choice: keep playing the game, try changing the rules in favor of sustainability or look for a new employer or client.

A marketing program devoted to sustainability would adopt and track metrics that demonstrate how and how well marketing is contributing to the financial health of its employer or client, the well-being of people the company interacts with and the protection of the environment. I know this is asking a tremendous amount from marketers, not least of which is to define the non-financial metrics to be used.

At this point, I’d be happy getting more people in business to agree the value of marketing shouldn’t be measured in dollars and cents alone. Anybody building a triple-bottom-line dashboard?

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What might sustainable, local firms do with $49 mil?

In my vision of sustainable communities, I picture a thriving economy built around locally owned, independent businesses that embrace the triple bottom line: people, planet and profits. So it is that I have little patience for economic development practices prevalent in Oregon and around the country that emphasize national business recruitment over local business development. 

I believe we should be doing much more to take care of the businesses that are already here putting down roots, hiring local residents, keeping their profits local and multiplying as they circulate in the local economy and being run by owners who are active in their communities — because they live here, too.

Editors at The Oregonian lost an opportunity to underscore that point in an editorial on Saturday about last week’s announcement of the Hynix semiconductor plant closure in Eugene. The decision puts 1,100 people out of work, many of them paid well above the average Eugene wage. Hynix, like any number of tech companies wooed by Oregon officials in the past several decades, was given large state and local tax credit incentives to locate in Eugene some 13 years ago. 

Although the Hynix plant closure is an opportunity to question the wisdom of showering national or international businesses with tax breaks to locate in Oregon, The Oregonian editors say forget about it:

 

 

It’s not productive to second-guess the state’s wooing of Hynix and its use of tax incentives, as some in the Legislature have begun to do. A 2003 study by University of Oregon economics students Melinda Rowan and Jennifer Witt found that the $49 million in tax breaks and road enhancements used to lure Hynix resulted in a positive impact in taxes, wages and system development charges of more than $275 million over the first five years of its operation. Had the state not offered its incentives, Hynix wouldn’t have built its plant, employed 1,100 people and paid taxes.

Their argument against re-examining the Hynix recruitment strategy is hardly convincing. The editors conclude Hynix would not have come here without the $49 million incentive package, so the positive impact in taxes, wages and whatever system development charges would not have been realized. But that’s assuming the $49 million in incentives were not spent at all. 

What might have happened had the state and city pledged that same $49 million in 1995 for support of locally owned, independent businesses? Hynix received the equivalent of $44,500 for each of its current 1,100 employees from state and local government. What might 1,100 locally owned, independent businesses in the Eugene area been able to do with $44,500 each? Or what might 110 of the best locally owned, independent businesses in Eugene been able to do with $445,000 each?

We’ll never know the answer, but I’m not aware of any state or local economic development group even asking those questions. Businesses based and owned in Oregon are getting the short end of the economic development stick. They can only dream of government officials coming to them and saying, “We believe in you and want you to thrive in Oregon. Here’s a half-million dollar package to help you grow your business.” 

Can you imagine what a select group of Oregon’s most innovative, most environmentally and socially committed business owners and their employees could and would do to reward the citizens of this state for making a meaningful public investment in their businesses? Not all of them would succeed, of course, but I’m certain enough would to add at least the equivalent of 1,100 quality jobs. 

And most important of all, those successful locally owned, independent and sustainable businesses would keep repaying Oregon’s investment long after the 13-year life span of Hynix in Eugene.

 

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Greening junk mail? Start with junk being marketed

A group calling itself the Green Marketing Coalition is trying to produce best-practices guidelines for the direct mail business. That would be the “junk mail” business to most of us. “So far the coalition’s guidelines are long on earnestness and short on truly new ideas,” the New York Times concludes. The paper quotes one head of a nonprofit dedicated to protecting forests:

 

“It’s hard to argue against any well-intentioned effort to use more recycled paper, but the idea of greening junk mail is still a bit like putting lipstick on a pig.”

Ouch. I suppose the direct mail business earned that swipe. I hate junk mail as much as the next person. But not all direct mail is junk. It’s the rare individual who never responds to a single direct mailer. A generally acceptable response rate to a mailer is about 2%. That means most mailers are not junk to 2% of us. Believe it or not, that’s usually enough of a response for businesses or other organizations, including nonprofits, to keep stuffing our mail boxes. 

The Green Marketing Coalition, which got its start in Seattle, is made up of both direct marketing businesses and their corporate clients. Their guidelines are aimed at reducing the environmental impact of direct mail. It’s easy to scoff at their efforts, like the nonprofit executive director quoted here. Many believe direct mail is fundamentally unsustainable, given its waste of paper and the energy used in the production, distribution and disposal of materials that so frequently get ignored by its target audience.

But direct mail continues to be used because it can be, and often is, an effective marketing tool. We probably all know admirable environmental nonprofits that are among the legions of direct mail marketers. As a former co-owner of a marketing agency that offered direct marketing among its services, I would urge organizations to move completely to electronic mail as soon as possible. Although most of us hate junk email as much as junk paper mail, at least it’s more eco-friendly. 

One reason companies don’t resort to email exclusively is the anti-SPAM laws that restrict the use of commercial email to opt-in subscribers only. Traditional postal mail has no such restrictions. It’s easy to buy a postal mail list and send away. The environmentally responsible thing to do is use postal mail only when there is no alternative, such as when you’re just starting to create an opt-in email list or your target audience doesn’t have email access. Those are not problems for most major companies or organizations today.

If direct marketers really wanted to make a difference, they wouldn’t promote products or services that are not sustainably made or delivered. Period. The junk goods and services purchased as a result of successful direct mail do far greater environmental harm than junk mail itself. 

I don’t think you’ll be hearing that conversation among members of the Green Marketing Coalition anytime soon.

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Putting sustainability values ahead of market signals

At the risk of over-simplifying, I see most businesses falling into one of two camps when deciding whether and how to “go green.” I’ll call one the market camp and the other the values camp

The market camp consists of businesses whose green decisions are driven by whether there is market opportunity or customer demand for green(er) products or services. These businesses tend to be product focused. In other words, if green can sell, then they’ll produce it. Otherwise, forget it. They can’t stay in business producing things few customers want.

Businesses in the values camp decide to go green because they believe it is the right thing to do environmentally and socially. They tend to be operations focused. In other words, green operations are capable of only producing green products and services. If they find themselves to be ahead of mainstream marketplace demand, so be it. Financial success can’t come at the expense of environmental or social damage.

So how might businesses in these two camps react to results of a national survey on green issues recently conducted by an ad agency in Knoxville, Tenn.? 

Among other things, the survey found that many people remain confused about what “green” is and the “green market” is far from mature.

 

(H)alf (49%) of respondents said a company’s environmental record is important in their purchasing decisions. But that number dropped to 21% when consumers were asked if this had actually driven them to choose one product over another. And only 7% could name the product they purchased.

 

 

Not only that, the study found that about 26% of Americans (mostly affluent, white, middle-aged males) fall into a demographic called the “Never Greens.” These are skeptics who either “don’t care or are not interested” in sustainable or green products.

The market camp, which represents the majority of businesses, will probably look at this data as reason to become more conservative in deciding whether or how fast to go green. When so few buying decisions appear to be made on the basis of a company’s environmental record and such a large percentage of Americans couldn’t care less about green products, where’s the market or financial incentive to produce green?

I’d wager the values camp will remain undaunted by these findings. They will continue business as usual because the option of not being green doesn’t exist for them. They will focus on the minority of potential customers who today make buying decisions based on the environmental practices of a company and the sustainability of their products and services. And they will do what they can to educate others about the importance of sustainable consumption habits.

So do you and your organization fall into one of these camps, or someplace in between? For me, a perfect world consists only of the values camp, although as a business owner and marketer I certainly understand the importance of listening to the market. Unfortunately, the market has failed to send adequate signals to businesses to behave and produce sustainably. As a result, we’ve depended far too long on fossil fuels, depleted far too much of the earth’s resources and produced far too many good and services for a minority of affluent humans who already have too much.

As the survey reveals, most people aren’t guided by sustainability principles in their buying habits. Businesses in the values camp don’t take that as a signal to relax. They see it as a reason to re-double their commitment to sustainability. And that gives me hope.

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