Archive for 2008

Financial crisis tests sustainability commitment

I remember July 2001 well. It was the month someone pressed the dimmer switch on the high tech marketing business I co-owned. For the first six months of the year, our business soared. It was the best financial stretch in our eight years as a firm.

In July, it was as if the previous half year became an instant, distant memory. We’d become a victim of the tech implosion that followed the dotcom bubble burst. Virtually all of our clients slashed their marketing budgets in unison when it became apparent their revenues were falling far short of annual targets.

The summer outlook turned bleak. And then came 9/11. Suddenly any hope for a soft landing for the economy and our firm vanished. The next two and half years became little more than an exercise in survival. But eventually we got through it. And happily, by 2006 we had nearly grown back to our pre-recession peak.

I left my firm and high tech two years ago to work with companies on the sustainability path. Even so, memories of 2001 and after are still fresh. As bad as things became then, this moment is even more worrisome. Are we in for the Big One: the Category 5 hurricane, the 9.0 earthquake?

My rational voice reminds me my worst fears never materialize. They didn’t a half dozen years ago. My insecure voice replies, “Yes, but maybe this time they will.” And so it goes, back and forth.

You may have a method for keeping fears and insecurities at bay. Mine is to move outside myself, to become more aware of the needs of others. I have the good fortune of health, home, family, friends and financial savings. As this recession tightens its grip, more Americans are losing their jobs, homes and nest eggs. And it appears things will get worse before they get better.

A turn of events like this tests our commitments to sustainability. Are sustainability values only to be embraced during economic prosperity? The answer is obvious. There’s no escape clause from sustainable business practices when recessions hit. It’s true we may have less money to invest in environmental initiatives, employee benefits or community programs. But we can still make a difference through our time, ideas and creativity.

I’ve seen enough from the unrestrained capitalism of the last 25 years to conclude this: Humans acting in their own self-interest in free market economies do not produce a massive trickle-down flow of goodwill to those less fortunate. Nor do they automatically protect and preserve our natural resources. If they did, we’d have no need for a sustainability movement.

A recession teaches us the invisible hand of the market isn’t a helping hand. It’s incapable of caring about anyone or anything. A commitment to sustainability asks us to do the caring. Now would be a good time to renew our vows.

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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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Post-Katrina: Putting the human back in marketing

As I get ready for my summer vacation in the Northwest, my thoughts are in the South, specifically New Orleans and the Gulf Coast. That area is about to mark the third anniversary of Hurricane Katrina. No doubt residents fortunate enough to have homes and jobs and politicians and government officials charged with the region’s recovery will cite the many signs of progress. Others, with equal claim, will point to the vast stretches that have yet to recover, looking virtually as they did when the floodwaters receded.

My reflection is of a different sort. I only experienced the storm and its catastrophic aftermath through the media. A year after Katrina hit, I traveled along the Gulf Coast and into New Orleans. I needed to see with my own eyes what had happened. I returned to New Orleans a few months later as part of a volunteer crew that gutted and cleaned homes for a week. Needless to say, what I saw with my own eyes has left a lasting impression.

I realize now that Katrina is as responsible as anything for the shift I made in my work. I had spent 20 years in high tech marketing and was running the PR and advertising agency I co-founded in 1993 when all hell broke loose in New Orleans and the Gulf Coast. The storm and a tragically flawed response at all levels of government laid bare for the entire world to see the outrageous inequities and injustices that remain in our land of the free and home of the brave.

By coincidence, I departed my previous business and the high tech industry a year after Katrina hit. I had decided I needed to shift what I knew how to do — branding, marketing, communications — in support of businesses and organizations whose values and actions are making the world a better place. When I formed a new firm to work at the crossroads of sustainability and marketing, I wasn’t seeing sustainability through the single lens of saving the environment. As much as we humans have disregarded and damaged our natural world, we have caused no less harm to each other. Katrina was simply the most recent evidence.

Efforts to create a sustainable future must treat the Earth and all of its inhabitants as one. Sustainability isn’t saving the old growth in the Pacific Northwest forests and ignoring the rights of all humans to have their basic needs met and to live in peace. By this standard, green marketing falls short. Its preoccupation with promoting eco-friendly products is often little more than dressing up unsustainable consumption in a different color. Even more significantly, green marketing doesn’t go far enough to address the broader human and social dimensions of sustainability. If you’re a retailer touting your green product lines while paying employees low wages and no benefits, you fail the sustainability test.

Management guru Peter Drucker said the function of marketing is to create and keep a customer. In this post-Katrina world, maybe it’s worth remembering that customers are humans first. Forget that, and one day marketers will have no customers to keep.

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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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