Posts Tagged ‘triple bottom line’
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?
Painful choices along the path of sustainability
Imagine for a moment you’re an executive for a fertilizer company. And let’s say you have a genuine commitment to the triple bottom line: people, planet, profit. Worldwide demand for fertilizer is off the charts, so that’s good for your company’s finances (profits). You sell a terrific product that dramatically increases crop yields, making a meaningful contribution to the world’s food supply (people) and to increased biofuel production (planet).
End of story, right? Well, not exactly. A New York Times article on the worldwide fertilizer shortage gets at some of the potentially agonizing tradeoffs in following a commitment to sustainability.
First, the good (taken from the article):
“Putting fertilizer on the ground on a one-acre plot can, in typical cases, raise an extra ton of output,” said Jeffrey D. Sachs, the Columbia University economist who has focused on eradicating poverty. “That’s the difference between life and death.”
And now the bad:
Environmental groups fear increased use, particularly of nitrogen fertilizer made using fossil fuels. Because plants do not absorb all the nitrogen, much of it leaches into streams and groundwater. That runoff has long been recognized as a major pollution problem, and it is growing. A barometer of the pollution is the rising number of dead zones where rivers meet the sea. In the Gulf of Mexico, for instance, nitrogen runoff from fields in the Corn Belt washes downstream and feeds plant life in the gulf. The algae blooms suck oxygen from the water, killing other marine life. More than 400 dead zones have been identified, from the coasts of China to the Chesapeake Bay, and the primary reason is agricultural runoff, said Robert J. Diaz, a professor at the Virginia Institute of Marine Science.
You’re the fertilizer executive. With one hand you’re helping to eradicate poverty, plus you’re creating good jobs in your company because your product is in such high demand. With the other, you’re helping to destroy marine life and adding to greenhouse gas emissions because of the fossil fuels required to make a usable form of nitrogen.
My in-laws and their ancestors have been farming in Oregon since the 1850s. I remember my mother-in-law saying awhile back that it wasn’t until chemical fertilizers came along in the 1950s and 60s that they were able to move out of pure survival mode. For them, it meant the difference between a family farm that remains in operation today and one that would have long ago been plowed under.
I believer her, and I still wish the runoff from agriculture wouldn’t find its way into the murky Willamette River running through my hometown of Portland.
I understand why the financial bottom line rules in business. Who really wants to confront the choice of feeding the poor or destroying ecosystems?
Oregon law gives teeth to business sustainability
Oregon has opened its doors to a new kind of corporation. In a bill passed by the Oregon Legislature in 2007, businesses can state in their Oregon articles of incorporation they will operate with equal regard for environmental, social and shareholder impact. It appears Oregon is the first state to adopt such a law. And according to The Oregonian:
It’s not an empty gesture. One of the principles of business law is that corporations must act in the best interests of their shareholders. Some courts have narrowly interpreted that to mean companies must act only to maximize profits, even if the action runs roughshod over wider community interests.
It will be fascinating to see where this little publicized change in Oregon’s corporate governance laws will lead. Last spring, I heard a presentation from the founders of B Corporation, an organization whose aim is the widespread formation of corporations acting on behalf of all stakeholders (environmental, community, employee, supplier), not just shareholders. Oregon’s new law gives legal teeth to efforts such as this. According to Oregon Lawyers for a Sustainable Future, which drafted the legislation (HB 2826),
The statute makes it clear that anyone forming an Oregon corporation can include a provision in the
articles authorizing or directing the corporation to be operated in a sustainable manner. Moreover, any
existing Oregon corporation can take that step by amending its articles of incorporation, which will
then govern operations after the date of the amendment.
Under such a provision, corporate officers will be directed or authorized to make decisions that adhere to a triple bottom line (people, planet, profits). How this will all play out is anyone’s guess. Ideally, we will see businesses throughout Oregon adopting the triple-bottom-line standard for governance. And perhaps even a rush of out-of-state companies that want to incorporate here so they can legally act out of concern for more than maximizing shareholder return. But how long might it be before powerful investment groups challenge Oregon’s amended corporate code in the courts? Or an individual company is sued by shareholders for failing to act in their best interests while making decisions that benefit other stakeholders? Conversely, will the adoption of these sustainability provisions leave businesses vulnerable to lawsuits from other stakeholders who claim the business is failing its environmental and social responsibilities?
Legal issues aside, I’m anxious to see how companies that adopt these new governance provisions actually behave. Will their conduct be measurably different from shareholder-centric companies? When push comes to shove, will they make decisions that reduce short-term corporate profits or shareholder return out of an obligation to the environmental or social common good?
The Oregon lawyer group behind HB 2826 acknowledges “profitability is built into the DNA of a corporation.” The question for Oregon, and the rest of the country, is whether the truly sustainable corporation is even genetically possible. Thanks to the Oregon Legislature, we’re about to find out.