When building a reputation as an ethical company, actions speak louder than words. Yet in most businesses, these actions are happening behind the scenes through employee, philanthropy and supply chain initiatives. If customers can’t see these actions, there’s minimal impact on perceptions, purchase and loyalty.

If you want your good intentions and efforts to be recognized and appreciated by customers, you have to show them. And we’re not talking cause marketing. Customers give credit for experiencing goodness in the customer experience… in the ways in which they interact with your company every day. And the most powerful and memorable reputation-builders are those ethical experiences that are unique and support your brand promise.

The Fruitful Opportunity Audit below shows at a glance the social-impact initiatives of a handful of players within the hospitality industry. This is an illustrative chart based on available information, so don’t get too hung up on the details. What’s important is to see the overall macro-trends, which in this case shows that Fairmont Hotels and Resorts is doing a very effective job aligning CSR initiatives with their brand promise and integrating them into the customer experience relative to Marriott and Intercontinental Hotels. (click image to see full-size.)

Let’s first back up and discuss the chart structure. The columns represent the locus of initiative; whether it’s primarily targeted to your suppliers, employers, community or customers. The bottom row shows tablestakes initiatives that most businesses are undertaking regardless of industry. These include basic blocking and tackling like CSR reporting, employee volunteerism, sustainability initiatives in energy, water, waste, IT and supply chain, and so on. Note that it also includes philanthropy efforts that are not directly aligned with the category or brand; while these efforts are admirable, they’re not aligned with brand and business. It’s likely that redirecting those funds into more brand-relevant programs will generate more bang for your buck.

The middle row represents activities that are industry-specific. Now we’re getting into actions that are more strategically in line with your business and therefore could be more effective in reputation-building. IHG offers the Innovation Hotel, an educational online tour through a prototype green hotel. It’s not yet a brand builder because none of these hotels (and therefore customer experiences) currently exist in the IHG portfolio, but it’s a great start. Green meetings, combating sex tourism, developing hospitality talent and ensuring diversity among hotel owners are all examples of hospitality-specific CSR.

The top row is where it gets really interesting… this is where you’ll see social-impact initiatives that directly support the brand promise. This specific comparison I’m doing is a bit unfair, as Fairmont Hotels has a more tightly defined value proposition than the master brands of Marriott and IHG. But you’ll see that Fairmont’s done a great job filtering their CSR activities through their brand lens of turning moments into memories through unrivaled presence (a large percentage of their properties are historic landmarks), authentically local experiences, and engaging service. One authentically local CSR initiative is supporting local farmers – the menus always reflect local, organic cuisine, and a unique travel package called “Shop with Chef” enables travelers to tap into the head chef’s knowledge of the local farmer’s market. They have private-label organic, free-trade tea for guests, numerous eco-travel packages, and hybrid cars available for guest use. Fairmont also has the largest number of hotels located in UNESCO World Heritage Sites, national and provincial parks and biosphere reserves of any major North American hotel company, so their partnership with World Heritage Alliance reinforces the brand.

Again, it’s possible that I’m missing some brand-building efforts for Marriott and IHG, yet the challenge is that they have very undifferentiated brand positions for the parent companies. For example, Marriott defines itself as “a leading lodging company.” IHG is “an international hotel company whose goal is to create Great Hotels Guests Love.” There’s not much that’s differentiating about either proposition, which makes it hard to create distinctive programs that are uniquely identified with either brand. Many of their sub-brands, like the luxury JW Marriott brand, have much more tightly defined positions and therefore would be easier to use as a filter and a guide for strategic CSR.

One next step for either of these corporations is to borrow an idea from Starwood and create a brand that is positioned entirely in a social or environmental impact space. Starwood’s Element brand is the company’s green hotel chain. Another example is Joie de Vivre’s Good Hotel which is anchored on doing good for people and planet. Or, take a cue from Fairmont Hotels; revise the vision/mission for a sub-brand to better incorporate strategic CSR and begin building a branded experience to match.

So to summarize: to build the ethical reputation you first need a strong brand position that can serve as a strategic lens for CSR initiatives. Next, think about how to embed social impact into the actual customer experience. Show, and you won’t need to tell. Stand out from your competitors. Be a company worth experiencing, and your customers will applaud you.

To discuss the implications for your own company’s brand and customer experience (along with how to measure shifts in customer perceptions), feel free to contact me at jennifer@fruitfulstrategy.com.

They have worked out how to make it pay. Many of their initiatives help to cut costs or sustain supplies. They allow customers to continue to regard themselves as ethical during difficult times. They also help the companies to improve their public reputations at a time when business is widely held to be responsible for the downturn.

As more companies discover that CSR is not only a risk mitigation tool but also a competitive advantage (and often a source of new revenue) we should see this becoming the new face of capitalism. What is your company doing to align your brand and business with social impact?

That said, I do agree with Kathrin Winkler (of EMC) who wrote in a guest post on Kevin Moss’ (of BP) blog:

“there are other less worthy targets for the (greenwashing) label. There is the slightly naïve company (or, more likely, marketing communications person) who is genuinely proud of positive steps that were taken in their own right, but hasn’t looked at them in the greater context of materiality…. What about the more aggressive companies that push the edge of the envelope, by necessity running up against the untested and controversial, and then getting slapped down for their efforts?… And then there’s the “whitespace” situation in which a company is doing something relevant and material, so gets chastised for something else they haven’t (yet) done, even if it’s far less material.”

I’d add a fourth consideration to Kathrin’s list: the context of each individual industry. So while BP also showed up on the list of top 10 greenwashers, I’m not entirely sure it belongs there. The company is emerging from an entrenched position in an unsustainable category, and it takes time to turn the Titanic without compromising current shareholders. The article says that it spent “a paltry 6.8% of BP’s total revenue on alternative energy,” yet it fails to put that into context of other energy companies which it outspends. Why are we bashing BP as much as Exxon, whose CEO  refuses to even get on board? In an article last year about lawmakers’ criticism of big oil:

“Markey hammered Exxon’s Simon over the company’s investment in renewable energy. “Why is Exxon Mobil resisting the renewable energy revolution?” asked Markey. Simon said Exxon has given $100 million to Stanford to study renewables. “$100 million?” said Markey. “But you made $40 billion last year.”

IMO, criticizing BP is like criticizing the turtle for not being as fast as the hare. It’s still leading all the other turtles. Before we start throwing the greenwashing label around, I think it’s important to consider a) the context of the industry and competitive activities, and b) demonstrated improvements over time. Let’s give some credit where credit’s due, even if companies aren’t yet living up to ideal standards. It’s a journey and we’re nowhere close to the finish line, but I think we’re making progress.

I’d love to generate a discussion on this subject. How do you separate fair from unfair criticism? What’s the real dividing line between a greenwasher and a company with good intentions but just can’t change fast enough to please everyone?

The key to building the socially good brand is a mindshift from silos to systems… from independence to interdependence. There should be a single strategy anchored in customer insight that defines not only what the organization does, but also how it behaves and interacts with all stakeholders. When each department is left to create its own vision of social impact, the result is inefficient and contradictory at best, and self-sabotaging at worst.

Each group has its own strengths and weaknesses when it comes to setting this type of strategy. A CSR department focused on compliance, fair labor and philanthropy doesn’t usually have the skill sets of customer insights and profitable innovation. A marketing or public affairs department can unilaterally decide on a cause-focused direction only at its own peril; customers are increasingly jaded and intolerant of companies who don’t fully walk their talk. Brand managers are often focused on their own products’ brand equity and have little to no influence over corporate alignment with a cause. It’s time to pull it all together, which is admittedly a tall task for most.

Creating the socially good brand is likely the single biggest opportunity for internal and external collaboration for companies today.  Employees and customers want to be part of something bigger. And more importantly, it alleviates the risk of PR fiascos, builds consumer trust through consistent words and actions, and has a positive bottom-line impact even in the downturn.

So how do you shift from fragmented programs to a unified strategy to build a socially good brand? Here’s our top 10 list. If you have more suggestions, comments are very welcome.

1. Ensure executive leadership in recognizing the company’s role in the larger societal ecosystem, committing to conscious capitalism, and being willing to make tough decisions that align actions with rhetoric.
2. Gain buy-in across departments that “singing from the same songbook” will lead to significantly greater impact than one-off programs.
3. Be willing to cut pet projects in favor of a laser focus on initiatives that drive brand and business goals.
4. Develop a deeper understanding of what each group can bring to the party. For example, marketing should be bringing stakeholder insights and competitive analysis to work with CSR pros on identifying the most fruitful way to build brand equity through social impact. Marketing is also great at simplifying messages to be readily understood by stakeholders.
5. Leverage innovative thinkers and departments to come up with your company’s version of GreenWorks or Ecomagination – profitable ways to demonstrate your company’s commitment. This is how we shift perceptions of CSR beyond “BDF” (babies, dolphins, and forests) and create sustainable, meaningful change.
6. Before committing to a cause-related direction, be sure to understand whether your brand has any credibility among your stakeholders. If the answer is no, figure out exactly what actions you need to take in order to gain credibility, and create an evolution strategy to get there. Or switch to a cause that is more believable for your organization.
7. Understand the customer touchpoints that drive purchase and loyalty, and find ways to ensure that your customers fully experience your social commitment. While you’re at it, look for ways that your customer experience might be sending mixed signals and contradicting your public rhetoric.
8. Don’t demand from suppliers what you’re not willing to do yourself. If you want suppliers to adhere to codes of conduct, create one for your own company that ensures realistic expectations and outlines ways to collaborate rather than dictate. Nike is setting a good example here.
9. Establish metrics across the business, not only for internal initiatives like carbon footprint but also for customer perceptions and attitudes. How are you closing the gaps between customer expectations and their beliefs about your brand? (And do you even know what those gaps are?)
10. Collaborate with customers. The more you engage them in honest and transparent dialogue, the more trust can be built. You can even solicit their feedback on what metrics they’d like to see instead of unilaterally deciding what to measure.

What are the roadblocks within your company to building a socially good brand? Or, what has really worked within your company to make this happen?

I have to respectfully disagree with Diane’s assessment. Instead of missing the point, they actually do an effective job pointing out the roadblocks to corporate adoption of CSR principles. I applaud the Financial Times for daring to report that what customers say is important is often quite different than their actual shopping behavior.

But shoppers are not wicked, either. They are hard-pressed people on ever-tighter budgets. They have an eye for a bargain. You can price your ethically produced T-shirt at a level that allows you to feel a lot better about yourself and, who knows, even put out a press release telling the world what you are doing. Some customers will like it. But don’t be surprised if your competitors’ stores seem a lot busier than yours.

Anyone in marketing understands this to be true across any category, especially ones that are tied to issues of morality. A study I have yet to see (and I’d love to conduct it if there are any sponsors interested in this undertaking) is one that identifies the correlation of social good to actual purchase behavior. I bet it’s a lot lower than all these studies trumpeting self-reported data. Who wants to tell a researcher that they don’t care about saving the planet?

And because businesses are no different than their customers, we witness execs who publicly declare the importance of sustainability and fair labor practices while simultaneously making decisions that sabotage those good intentions. FT uses the example of Sir Terry Leahy to make this point:

We need to cut through the well-meaning waffle. One business leader who usually does is Sir Terry Leahy, the chief executive of the UK’s leading retailer, Tesco. In an article for the Daily Telegraph last week, Sir Terry let off steam about what he sees as the growing risk of over-reaction by governments and regulators in the current crisis. We risk losing sight of a few fundamentals: “free trade in competitive markets, enabling individuals to pursue their own interests, and all within a clear framework of law,” he wrote. Do-gooders, whether they mean to or not, are likely to do bad.

Yes, he went on to say, the role of something called “green consumption” could also play a powerful role for good, in cutting the use of carbon.

But it is obvious where Sir Terry’s priorities lie. In a lecture in the same week he told suppliers that they would be coming under increasing pressure to cut the prices they charge Tesco this year. How worried is Sir Terry by the thought that his suppliers may be forced into finding cheaper and potentially less environmentally friendly ways of producing their goods? Not very, would be my guess.

The Economist continues this theme by noting that “many companies pretend that their sustainability strategy runs deeper than it really does.”

It has become almost obligatory for executives to claim that CSR is “connected to the core” of corporate strategy, or that it has become “part of the DNA”. In truth, even ardent advocates of sustainability struggle to identify more than a handful of examples. More often the activities that go under the sustainability banner are a hotch-potch of pet projects at best tenuously related to the core business. The coming shake-out will help to remove some of this froth.

Contrast this with Nike’s efforts to address the root cause of supplier’s unethical behavior. Ethisphere reports:

When the American Management Association commissioned its 2007 survey linking ethics to business success, it found that the top driver of unethical behavior was the pressure to meet unrealistic business objectives. That pressure, in turn, contributed to many other problems, such as poorer quality, more accidents and increased overtime.

The article is worth reading to see how Nike is working to change its own behavior (like refraining from making design changes after the order is placed) and helping make the business case for suppliers to change theirs. It all comes down to actions, not rhetoric. As FT notes, “As the wise CSR practitioners know, it is how you do business that counts. All the rest is just hot air.”

Bottom line, we have consumers and execs who both have a tendency to say one thing and do another. Neither article is missing the point by highlighting this truth. The exceptions — the segment of ‘conscious consumers’ and the small group of businesses who are truly walking their talk — are the ones who will change capitalism as we know it. The question is not whether CSR is “hot air” or not… it’s whether businesses want to lead or follow a trend that has gained too much momentum to ignore.

Specifically, while 63% rate brand strength and reputation as critical to success, CSR falls to the bottom of the pack with only 20% perceiving it as critical.

These findings suggest that business leaders are not seeing CSR as a strategic way to strengthen their brand and reputation. Interesting.

As I talk to people about Fruitful’s mission to align business strategy with social impact, most people immediately think of philanthropy. Few see social impact as a strategic growth platform integral to the brand and business. I believe that will change given consumers’ lack of trust in “business as usual” and the increase of businesses that perceive no conflict between the desires of shareholders and society at large.

GE is a great example of a company that has so tightly aligned CSR with their brand that it’s hard to tease the two apart. “Ecomagination is a business initiative to help meet customer demand for more energy-efficient products and to drive reliable growth for GE; growth that delivers for investors long-term.”

Eventually, the 80% of business will follow the 20% of leaders like Immelt who value the business-critical role of CSR (or as I’ve redefined it, corporate social opportunity.) As Immelt once said, We’re not in the business of hobbies. We’re in the business of making things that are economically justifiable.”

Are you relegating social impact to philanthropy or feel-good programs? Then it’s time to shift your thinking about social impact from hobby to win-win competitive advantage. Yes, you may have to cut some pet projects to reallocate CSR resources to better support and align with your brand and business goals. You’ll find that it will pay off.