COP26: Better business is now business critical
As COP26 approaches the end of its second week, doing ‘better business’ has arguably reached fever pitch – with pressure coming from all angles: consumers, investors, politicians and key opinion leaders.
Businesses know that they need to take immediate action, yet many remain in limbo. Unsure of which initiatives to commit to, concerned that the resulting implications may alienate current loyal consumers, and worried that publicising their good deeds could backfire.
Take Iceland’s palm oil initiative. In 2016 the supermarket vowed to remove all palm oil from 450 of its own label products by the end of 2018. This was a significant feat to accomplish and one that the grocer only just fell short of – with 17 of the 450 products narrowly missing the deadline. However, the decision not to announce this and instead remove their brand name from those 17 products led to significant media backlash. An error of judgement that made a significant dent in the goodwill they had accrued through the initiative.
Who’s going to pay for it all?
The elephant in the room is that at present many businesses are being left to foot the bill of being better and pay all of the consequences if they don’t.
While some consumers are prepared to pay a premium for more sustainable options, many aren’t. In fact, Deutsche Bank found that a 5% increase in the price of a sustainable product would cause half of consumers to revert back to the unsustainable alternative. In the face of rising living costs, the reality is that many consumers simply can’t afford to pay a premium for a more environmentally friendly alternative.
Similarly, while most investors say that they are prepared to ‘take a hit’ on short-term profits for the benefit of people and planet, in reality this hit has a relatively low threshold: most investors said they wouldn’t be willing to take losses exceeding 1% in the pursuit of ESG goals in a recent survey by PwC.
The result is that businesses are being squeezed from both sides – an uncomfortable truth that even the most creative of established enterprises are having to come to terms with.
New rules of engagement
The reality is that in this brave new world, everyone is going to need to re-calibrate their expectations. If COP26 has taught us anything, it’s that we can’t preserve the proverbial cake for future generations while eating it now. And that applies to everyone.
Fortunately we see some good examples of this realisation in action. On the same day that BP reported a US$16.8 billion quarterly loss, they outlined a detailed plan to increase their renewable energy investment tenfold. In a big win for sustainability, the company’s share price jumped by more than 7%.
So what does this mean for businesses going forward?
We’ve set out three rules of engagement based on a review of the businesses at the forefront of committing to be better:
1 / Be clear on what reasonable change looks like
No one is perfect – we have to use the resources that we have to do the best we can. This applies as much to businesses as it does to people. Being clear on what reasonable change looks like for your business, based not only on the change you can effect but also what matters most to your customers, can provide the focus you need to take action.
Burberry have understood this in their recent commitment to changing how they source leather, cashmere, and wool. Rather than trying to ‘do it all’, Burberry are doing what works for them.
2 / Be transparent about your imperfections to drive trust
Sustainable claims can be manipulated and many brands have – whether rightly or wrongly – been accused of greenwashing. In this context transparency and authenticity are more important than ever. Brands such as Innocent are well aware of this, claiming outwardly that “We’re not perfect by any means. We make mistakes, reflect on our experiences and try again”.
Ganni’s open recognition that it can’t be perfect but that it is trying is another example of a brand holding itself accountable in the public sphere.
3 / Help your customers to be better too
Togetherness is key in this fight – meaning less finger pointing and more co-creation. Businesses that foster a sense of collaboration with consumers to tackle key issues will build stronger relationships and act as a fulcrum for change which communities may otherwise lack.
Selfridges, for example, are opening a pop up shop this Christmas season for ‘pre-loved’ toys. Consumers get a bargain, Selfridges still make money and crucially the strain on landfill is reduced.
Want to find out more about what really matters to your customers and how to bring them along with you on your sustainability journey? Get in touch.