by Carol Holding and Jacquelyn Ottman; BrandChannel.com; January 2, 2007
Last summer at a roundtable in New York presented by Women for a Sustainable Future, Gerber’s Jim Thomas, Global Head of Health, Safety & Environment and Business Continuity, presented the results of his company’s Corporate Social Responsibility (CSR) program. Thomas showed how Gerber was improving the health of infants through research and education about early childhood nutrition in a program called, “Start Healthy, Stay Healthy”. In what was for us – a career brand strategist and an environmental marketing consultant – something quite remarkable, he presented evidence of the program’s success by citing statistics tracked by a Landor/BrandEconomics study showing how Gerber’s brand value had doubled since the inception of the program three years earlier.
What was remarkable was not that this corporate CSR veteran was equating the success of his program with its impact on brand since, by now, most large corporations have made the connection between community programs and their brand and business. (In fact, making these connections is a top priority for CSR thought leaders, but that Gerber was trying to quantify that impact. Though Thomas was quick to acknowledge, “Of course, brand valuation is affected by many things beyond CSR,” he still cited a number.
Not since the now much maligned cause-related marketing scandals had we seen an attempt to quantify the impact of linking brand and CSR (even at that, cause programs are still measured on direct sales increases more than impact on brand). Despite the fact that many cause programs are successful for business, brand and the cause – cause supporters point to the program that started it all, American Express’s partnership with Save Our Hunger, and to Liz Claiborne’s advocacy to stop violence against women – cause was tarnished by programs that were either clumsy attempts at white-washing or outright exploitation.
After the cause scandals, many corporations over-reacted and stopped linking their brand to their philanthropic efforts altogether, even when enlisting the brand would have amplified their social contributions. For instance, a Fortune 100 with a top-ranked brand distributed free cell phones to Katrina victims, yet decided to hand out unbranded phones rather than risk criticism that it was exploiting the tragedy to promote its brand. Even more to the point, we maintain that the recipients of the phones would have been comforted, knowing the source of the phone was reliable and, even more, that a brand they knew was there for them!
Corporate resistance to connecting brands with the community served is in many ways counter-intuitive. From Frijof Kapra’s ground-breaking analysis of organizations as biological systems to Peter Senge’s re-definition of the nature of businesses as learning organizations, we now accept that communication is the most critical business process. Communication builds both a protective and healthy culture and enables innovation. Yet the social responsibility culture still resists connection to the corporate brand. Opportunities to engage with society on a broader level through the brand are lost, and with it, the opportunity to lead change. By publicizing its efforts, the cell phone donor might have prompted the citizenry to address one of the most heart-breaking effects of Katrina, losing track of relatives and friends!
Seeing these missed opportunities, many CSR and brand departments are beginning to see that their outcomes would be improved by working together. But they are limited to what they can do by the fact that both are seen as “intangible assets”, and both fight for funding for projects whose results are hard to quantify – not impossible but difficult.
Yet what gets funded is what gets measured. Positive anecdotes abound that confirm that brand and CSR both do better when they are linked, but because of the lack of quantifiable measures, there is no basis on which to allocate long term funding. No matter how significant a CSR program is to the brand, without measurement, it falls into the trap of being looked upon as a short-term promotion – and risks getting cut.
Just as measures have been developed which link brand and CSR individually to stock price, sooner or later the joint impact of brand and CSR to tangible financial value will also be measured so that together, they can be better managed. Think of what cross-measurement has done for production efficiency: linking factory utilization and inventory management to profit (think supply chain management) has led to increased productivity. This linkage maximized the value of tangible assets, the current basis of value. Yet the value of intangibles like brand and CSR could soon be even greater and maximizing their integration could produce great impact on stock price as financial statements evolve to reflect real value.
In 2001, Baruch Lev of the Brookings Institute calculated the true market value of major corporations, including both tangible value listed in annual reports and intangible assets like brand and reputation. Lev’s study concludes that in the 1980’s, financial statements captured at least 75% on average of market value; by 2001, that figure had dropped to 15%. Clearly, measures of intangible assets and their dependencies are growing more important.
The changing nature of value has also been recognized by the U.S. Financial Accounting Standards Board which has announced that it will issue binding disclosure requirements about companies’ intangible assets by 2007. As Laurance Allen, founder of the magazine Value, Tomorrow Markets, Enterprise and Investment says “This will clearly accelerate the integration of intangibles into mainstream financial analysis, directly affecting share price.”
So the question is not if the impact of brand on CSR will be recognized and measured, but when. Even now, major initiatives are underway in corporations large and small, both from companies looking to change their reputation for managing intangibles like Wal-Mart to CSR market leaders like GE and Cisco. Brand valuation firms like Corebrand, Interbrand and Landor are all addressing the issue through primary research, (an option that is only available to the largest brands), and plans are in the works to integrate subscription databases from the brand world and the SRI world to create measures that would allow tracking over time, intra-company and even intra-sector measurement.
In the meantime, there are several things a brand manager can do to build a case for integrating brand and CSR:
– Use existing measures of brand valuation from companies like Interbrand, BrandEconomics and CoreBrand as Gerber did, claiming at least partial credit for improvements via CSR programs tied to brand.
– Add questions about CSR programs and reputation to existing tracking studies.
– Add questions about brand to CSR surveys with communities affected by CSR programs to assess any changes over time in brand perception as well as character traits added to the brand or reinforced through CSR.
– Collect anecdotal evidence from employees working on both CSR and brand to provide qualitative measures and to encourage cross-departmental thinking.
Finally, watch for integrated brand/CSR measures currently in development – it won’t be long before brand and CSR are true partners.