As social and environmental responsibility becomes a high priority for consumers and investors alike, companies are learning the hard way that all the good deeds in the world won't help the bottom line if the public doesn't hear the news.
What is the difference between Whole Foods and Nike? Pairing the healthy living empire with the athletic gear Goliath is an unlikely matchup, but from a corporate social responsibility perspective, these two companies are not as far apart as one might expect.
Even though Whole Foods has crafted a thoroughly green identity while Nike suffers from past allegations of sweatshop labor use, a new study from the
Natural Marketing Institute suggests the vast gulf in public perception of these two companies is more a result of their communications strategies than of their corporate behavior. Similarly, many companies suffer not from a negative public perception, but from a lack of recognition of their CSR activities. Investors may give a company like Intel high marks, but the public just doesn't share the view.
"There's a wide range of disconnects ... from what a company is doing in terms of its CSR and those that actually make it into consumer consciousness," says Steve French, a managing partner at NMI. "They have not gotten out the word on what they are doing."
NMI has just released a comprehensive new report that takes a look at what can be a troublesome gap between corporate social responsibility and the way it affects a company's value, from the consumer as well as the investor side.
As part of its LOHAS --
Lifestyles of Health and Sustainability -- Index, NMI charted the rankings of 75 of the most-recognizable companies on the
Russell 3000 stock index. Of these, 50 companies ranked high enough on either or both scales to make the final list. The difference between public perception of the companies and analysts' ratings revealed which companies are doing good and communicating well, which companies are doing good but not communicating it, and which companies are doing more communicating than acting.
Perched at the top of the list are Microsoft -- which holds a commanding 20 percent lead over any other company -- Whole Foods Markets and Kellogg's. Microsoft presents an interesting case, because although the company ranks highly on all seven criteria looked at by analysts to determine social responsibility standings, the report's authors say the company may be getting a major perception boost from the philanthropic work of the Bill and Melinda Gates Foundation.
Whole Foods, French said, has indubitably earned its place at the top of the list. "They very consistently align their philosophies and guiding principles with a place for consumers to align their personal beliefs and ethics to this wonderful shopping experience."
French offered two examples of the way that Whole Foods walks their talk: their increased purchase of local products, which is coupled with very prominent signs displaying the origin of local goods; and the animal compassion standards they have set for meat and poultry products. "It's almost a manifesto of different standards and how we should be approaching the issue," French said.
The lower levels of the LOHAS report provide perhaps the most educational case studies. HJ Heinz, for instance, which placed a respectable 19 on the list, actually received the highest analyst ranking out of all 2,925 companies on the Russell 3000 Index. But Heinz's consumer ranking is flat-lined at zero, which the report's authors attribute to ineffective communications about its CSR programs.
Intel, too, ranked highly with analysts, just behind Heinz with a score of +13. But Intel ranked #39, one step above Wal-Mart. Part of Intel's low score stems from the fact that it's not a stand-alone product, that it exists as a "brand within a brand," but French said Intel typifies some of the pitfalls companies face when communicating their programs.
"Sometimes the companies just aren't pushing their methods, period, or maybe they're not hitting the right consumer buttons," French said. "They may be talking about their carbon offsets and consumers may not get what that means, so they should be saying it in a way that consumers understand, like they're taking a certain number of cars off the road."
The flip side of Heinz's situation are companies like Home Depot and Disney, which rank fifth and sixth, respectively. Both companies are ranked significantly higher by consumers than analysts -- in other words, these companies are successful at communicating good news to their customers, even if they're not backing their talk up with action.
Similarly, General Electric sits at the middle position on the list, at number 25. The report notes that although its "Ecomagination" campaign has been effective in highlighting the company's goals of reducing emissions and improving the environment, but that analysts rated GE at -1 on the environmental scale.
These kinds of high-profile but limited-scope campaigns can make companies vulnerable to charges of greenwashing, that they are playing up limited successes while continuing with business as usual. But French is quick to downplay the greenwashing notion, pointing out that these companies are at the top of a very large heap of about 3,000 companies, plus the thousands more companies not included among the Russell 3000.
But consumer perception is all it takes to make a greenwashing charge stick. Two prominent companies offer a case in point. Wal-Mart, the company that environmental groups love to hate, ranks 40th on the list, due in large part to a -10 score from analysts for its environmental performance, which ties it for last place among all 75 companies studied for the LOHAS report. But the company's prolific communications team has successfully convinced some consumers that the company is at least trying to improve its performance: consumers scored Wal-Mart eleven points higher than analysts at +1.
Starbucks, on the other hand, owes its number-nine standing in large part to its investor score of +10, one of the highest on the list. Perhaps due to the perception that Starbucks shops put local coffee houses out of business, consumers gave the company only a +2: despite the company's extensive outreach about its CSR programs, consumers haven't heard the message.
There are some very compelling reasons that companies want to make sure that not only are they taking CSR and environmental sustainability seriously, but also that the public takes heed of their good deeds. The Natural Marketing Institute conducts a consumer trends study every year, which consistently finds that companies that are mindful of their impact on the environment reap rewards from the marketplace. Their customers are both more loyal and most likely to tell friends and family about the products, and are less concerned with price than with the belief that their dollars are spent on sustainable products.
In addition to the fundamental step of increasing CSR programs and embracing environmental sustainability, French said it's important for companies to learn how to get their customers to hear their message. "It's bringing it back to 'we saved x-million trees, or we took this number of cars off the road.' It's always back to that message."
Matthew Wheeland is the managing editor of GreenBiz.
