How consumers and marketers are more responsible for the other end of the supply chain than they’d like to think
by N. Craig Smith and Elin Williams
© SCOPE Magazine, Winter 2011
Fact 1: On May 26, 2010, Apple overtook Microsoft as the world’s largest technology company (by market capitalization).
Fact 2: On May 28, 2010, workers began fitting “suicide nets” at Foxconn’s electronics factory in southern China, after at least twelve employees jumped to their deaths in just five months.
Once upon a golden age of business (which may be just a little bit mythical) marketing departments were down the corridor from the factory floor. And most of the consumers were just down the railroad, probably in the same country—if not the same state. The supply chain was geographically short and morally uncomplicated.
For marketers in this golden age, it was a simple life of supporting the sales team in their quest to persuade the consumer to buy whatever the factory made. Of course, it wasn’t necessarily an easy life. In new-fangled business schools, clever men were beginning to construct elaborate theories of marketing, with sophisticated definitions not so different from the one used by the American Marketing Association today: “The activity, set of institutions and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners and society at large.”
By the 1960s, however, the clever men (and growing numbers of clever women) began to notice that the value provided by marketers for customers wasn’t always positive. Professors of business ethics, along with other commentators, pointed out myriad ways in which marketing could harm the consumers it was supposed to serve: from conning them into buying goods they didn’t want to persuading their kids to eat more junk food than was healthy.
Meanwhile, globalization meant that supply chains were getting geographically longer and, as a result, that “society at large” was getting larger. In recent years, business ethicists realized it was time to ask new questions. Of course, we couldn’t ignore the harm done to consumers by marketing. But we also had to turn our attention to the harm done by consumers through marketing. Hence the two facts with which we opened.
The events are most obviously linked by a chain of supply: the Foxconn factory produces iPhones, arguably the main ingredient in Apple’s recipe for success. But we believe that they are also linked by an intangible but very real line of responsibility, running from the consumer through the marketer to workers on the other side of the world. So you don’t have an iPhone? No matter. Foxconn also manufactures iPods, along with devices for Dell, Hewlett-Packard, Motorola, Nokia, and Sony. Are you still off the hook?
You can’t preserve your innocence by foregoing electronic gadgetry either. You still have to eat and wear clothes. Perhaps you could try buying only fresh food from local, organic farmers’ markets and never dining out. But dressing well at a reasonable price and to high ethical standards is a greater challenge. The speed, flexibility, and low prices demanded by today’s fashion business of its suppliers are often passed on to the suppliers’ suppliers until they finally reach a sweatshop in a developing nation.
This phenomenon is perhaps most obvious in the expansion of European-based “fast fashion” chains such as H&M. Arguably their success is the result of a global collusion between marketers, consumers, and journalists, who have persuaded each other that cut-price catwalk copies are essential ingredients of modern life. But modern death is only just up the supply chain. In March 2010, a knitwear factory in Bangladesh burned down, killing 21 workers. The doors had been locked to prevent theft and the building was filled with highly-flammable synthetic yarns. The fire started as they worked through the night fulfilling orders. Among the factory’s clients was H&M.
Fortunately, such fatal incidents are rare. But global supply chains are notoriously hard to police; low pay, long hours, poor conditions, and child labor are endemic in today’s fashion business. Whether you are the marketer who chooses the $20 hand-beaded kids’ blouse for the billboard ad or the mom who buys it for her daughter’s birthday, the little girl who sewed on those tiny beads in an Indian sweatshop is on your conscience.
To use the business jargon, the demands of marketers and consumers downstream affect the lives of manufacturing workers upstream. But the jargon is misleading. The metaphor of upstream and downstream implies a one-way interaction, which simply doesn’t match the social reality. Or the responsibility.
Indeed, that responsibility spreads far beyond the supply chain, once environmental issues are taken into account. The idea that a gas-guzzling SUV is the right vehicle for the school run is an example of collusion between consumers and marketers that results in damage to the entire planet.
Fact 3: In 2008, Starbucks was the world’s biggest buyer of fair-trade coffee.
Fact 4: In 2008, only 5% of the coffee purchased by Starbucks was fair-trade certified.
Around the same time that business ethicists were waking up to the combined responsibilities of the marketer and the consumer, companies discovered Corporate Social Responsibility, known today as CSR. Marketers were delighted. In their ever more sophisticated world of branding, and within a zeitgeist of increasingly individualized consumption, they seized the opportunity. By promoting the social and environmental good of their products, no matter how tenuous the logic, they would assuage their customers’ consciences—and sell more.
As a recent paper in the Journal of Business Ethics put it, “CSR is one of the most commonly used arguments for constructing brands with a differentiated personality which satisfy consumers’ self-definitional needs.” The trouble was, the brands didn’t always match the upstream realities in a supply chain with values as mixed as its metaphors.
Inevitably, there was a backlash. Accusations of window-dressing and “greenwashing” abounded. There were even ironic awards for the least credible companies. According to one study, there were four times as many consumer boycotts in Western democracies in 1999 than in 1994. It is probably no accident that these years coincided with the rise of the world wide web. The Internet provides the perfect vehicle both for questioning corporate messages and for orchestrating action against offending companies.
Marketers reacted in the only way they knew: with communications campaigns. When Walmart was facing criticism for working conditions in supplier factories and in its stores, for its impact on the high streets of local communities, and for its poor environmental record, the company launched a major public relations campaign that presented Walmart as a good corporate citizen in the communities where it operated.
However, this didn’t put an end to the criticism. Nor should it have. PR campaigns do not solve fundamental structural problems. Marketers must find a solution that fully addresses supply chain issues—at least if they want to embed CSR in their brand values in a credible way. In short, they must start to take a “stakeholder” approach that encourages a new type of responsible consumerism. Crucially, this new approach requires marketing professionals to look up the supply chain to manufacturing and shipping, down it to the sales force and the consumer, and outside it altogether to the communities on its borders and to the environment as a whole.
Broadly speaking, stakeholder marketing involves the design, implementation, and evaluation of marketing initiatives that will maximize benefits to all stakeholders: customers, employees, shareholders, suppliers (all the way up the supply chain), as well as the environment, society in general, and related non-profit organizations and their beneficiaries. Stakeholder management theory has been around since the 1980s, but (in contrast to CSR) marketers have been slow to seize the opportunities it offers. And stakeholder marketing is largely absent from the academic literature, which still seems to take its cue from Ted Levitt’s seminal paper on “marketing myopia” of 1960. It is almost as if his exhortation to focus on the customer has become a lesson too well learned by theoreticians and practitioners alike over the intervening half-century.
Yet we believe that marketing, more than any other business discipline, is uniquely positioned to help both companies and stakeholders achieve and benefit from a more symbiotic relationship between business and society. Marketing’s privileged relationship with the mind of the consumer, combined with its sophisticated research and communication techniques, makes it the key link in CSR’s supply chain. That’s not to say that manufacturing, finance, purchasing or logistics professionals have no part to play. It’s just that marketers are probably best placed to take the lead. They have always been “boundary spanners”, working at the interface between corporations, customers, and competitors. Spanning a few additional boundaries shouldn’t be hard for them.
Fact 5: In September 2010, a consortium led by British supermarket chain Waitrose was awarded a £200,000 ($320,000) grant from the UK government’s aid agency to train Kenyan bean farmers in sustainable agricultural methods.
Fact 6: Kenya’s delicate green beans have to be air-freighted into British supermarkets—a form of transport that emits more greenhouse gases per food-mile than any other.
Of course, we’re not suggesting that forging a new role for marketing, one that addresses the needs of each and every stakeholder, is possible, let alone easy. The pair of facts above serves to underline the complexity of the situation. But in practical terms, established techniques can help marketers succeed where others have failed: for example, by mapping key secondary stakeholders (media, government, consumer groups, competitors, NGOs), as well as more obvious primary stakeholders (customers, shareholders, employees, local communities).
Realistically, marketers cannot serve all of the stakeholders that they identify. But in mapping the relationships between them, they will discover that some are more important to their business than they at first imagined. The Kenyan bean producers mentioned above, for example, suddenly become much more salient when their relationships with government aid agencies (and by extension the media) are revealed. Even if a company’s stakeholder map does not lead to any startling new discoveries, the mapping exercise puts the company in a better position to make tough choices. Perhaps in this example the environmental issues raised by air freighting will have to take a back seat to the needs of agricultural communities in the developing world, at least for the foreseeable future.
Once African farmers are identified as important stakeholders, market research techniques can be used to explore their expectations and issues—and subsequently to measure the impact of any stakeholder initiatives implemented. Marketing skills could also be used to engage the farmers, and even to reach out to less friendly stakeholders, such as the activists who may have exposed the company’s poor sourcing practices. Finally, marketers have the communication skills required to embed a stakeholder-centric attitude in the rest of the organization.
With support from the right quarters, in particular from the CEO, this new approach could cascade from the marketing department throughout the entire company—perhaps even persuading the accountants to implement the much-discussed but comparatively little-practiced “triple bottom line”, which takes into account “people” and “planet”, as well as “profit”. In any event, stakeholder marketing could well lead to benefits for that good old-fashioned single bottom line; “doing well by doing good”, as it’s commonly put.
Looking up the supply chain, there is no doubt that innovative fair trade schemes will be a key component of the new stakeholder marketing. FINE, the international federation of fair-trade networks, defines fair trade as “a trading partnership, based on dialog, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers.” It’s a loose definition, crying out for innovation and creativity.
Once the province of NGOs who sought to challenge multinationals, fair trade has now been embraced by large corporations like Unilever. According to the company’s website: “Consumers around the world want reassurance that the products they buy are ethically sourced and protect the earth’s natural resources. A growing number are choosing to buy brands such as Rainforest Alliance Certified Lipton tea [and] Ben & Jerry’s Fairtrade ice cream.”
In fact, it seems that Ben (Cohen) and Jerry (Greenfield) were an important influence on Unilever’s new Sustainable Living Plan. Sold to the multinational a full decade ago, their values-driven brand has not only survived but has been increasing its use of fair-trade ingredients. Greenfield, though no longer a manager, remains an advisor and brand ambassador and says that Unilever executives have been remarkably proactive in learning from their model. Indeed the ambitious new initiative has fifty concrete targets within three broad objectives: to help more than a billion people improve their health and well-being; to halve the environmental impact of Unilever products; and to enhance the livelihoods of hundreds of thousands of people in the supply chain.
This is clearly a move in the right direction. As customers, we depend on marketing professionals not only to tell us about better corporate behavior but also to encourage it to happen. Significantly, two of the most senior executives at Unilever have their pay tied to meeting the fifty targets of the Sustainable Living Plan: the CEO and the Marketing and Communications Officer.
Moreover, we believe that marketers have the skills and the connections to go one step further and contribute to a whole new phenomenon that reaches far beyond their companies: “responsible consumerism”. If you like, it’s a different kind of CSR: “Consumer” Social Responsibility. Yes, it’s time to travel back down the supply chain and return to that consumer conscience of yours. Did you really think you could escape it?
Fact 7: In October 2010, the world celebrated as 33 Chilean copper miners emerged from the underground depths where they had been trapped for over two months.
Fact 8: Since 2000, an average of 34 people are reported to have died in Chilean mining accidents every year.
There has, of course, been much talk over recent decades about “ethical consumerism”. Broadly speaking, this refers to the purchasing of products and services that have been produced, marketed, and distributed ethically. In practice, it means giving preference to goods and services made and delivered with minimal harm to humans, animals, and the natural environment… or boycotting those that aren’t.
There have been abundant surveys about ethical consumerism. For example, in 2009 TIME magazine reported that almost 50 percent of Americans said protection of the environment should take priority over economic growth; 78 percent of those polled said they would be willing to pay an extra $2,000 for more fuel-efficient cars. But these statistics were not reflected in real-world sales figures. As we have learned from opinion polls down the ages, wishful thinking, self-delusion, and the desire to please pollsters are all natural human behaviors. To be fair, recessionary forces are currently pushing consumers into particularly price-sensitive decisions; long-term savings and reduced environmental impact inevitably take second place to short-term cost control. And perhaps that’s the responsible course of action for many individual consumers in the circumstances.
Indeed “responsible consumerism” might be a better, more broadly-applicable label than “ethical consumerism”. By adopting a new name (an old marketing trick, as it happens), perhaps ethical consumerism can be seen less as a niche phenomenon and more as a mainstream reality. For too long scholars and practitioners alike have tended to see “ethical” consumers as a discrete, small market segment waiting to be captured. In reality, human beings are not that simple. Consumers are not rational actors who will respond consistently to responsible supply chain practices and related marketing communications. We know (alas, from personal experience) that the feel-good purchase of organic local produce today can give way to the temptation of a fast-fashion or high-tech bargain tomorrow. The high price of the former can even be used to justify the sweatshop price tag of the latter.
By broadening the discussion from ethical to responsible consumerism, marketers and those who do academic research into marketing also become less exclusive. “Responsibility”, unlike “ethics”, does not sound as if it is uniquely reserved for some liberal or intellectual elite. As Jerry Greenfield recently put it, “Nobody wants to buy something that was made by exploiting somebody else.” Responsibility is a concept for everyone: from the teenager shopping over the Internet to the grandparent in the neighborhood store, from the janitor in the basement to the CEO in the corner office.
Of course, that CEO has a special part to play. There is no doubt that responsible consumerism has to be co-created by corporations and led by people at the top. But the marketing director and team have essential roles too, in educating, empowering and transforming existing consumption habits—and thus influencing colleagues in production, logistics, purchasing, and finance… and so on, all the way up the supply chain.
Indeed, if it’s true that many forms of social and environmental harm scattered along the supply chains of multinational corporations are triggered by marketing decisions in the first place, then it can also be argued that marketers have a moral duty to change existing practices, wherever they occur. Marketers must move center stage in the debate on CSR—albeit with a chorus of NGOs, consumer groups, scientists, governmental bodies, and others behind them—if responsible consumerism is to become a mainstream phenomenon.
Ultimately, however, your conscience will be the most important factor in making responsible consumerism work. With responsibility comes complexity and uncertainty (such as whether or not to drink your favorite Starbucks skinny latte for fear that it isn’t fair trade), but with the help of marketing professionals concerned about all stakeholders, you can be steered through the moral mazes to the right choice. And if there is no right choice—as those pesky green beans seem to demonstrate—at least you’ll be able to make a reasoned decision based on your own values and the correct information.
Asking just how green a green bean has to be is just the beginning, though. Another question for consumers, marketers, and academics is how far along the supply chain consumer conscience has to stretch. We believe that the more responsible consumers become and the more stakeholder-oriented marketers get, the farther we can go—right to the raw materials. But first we have to break out of the old vicious circles and into new virtuous circles somewhere downstream. It is possible for marketers and consumers to collude in doing the right thing as well as the wrong, if only they can ask honest questions of each other and of the supply chains in which they form links.
One thing is sure. Your iPhone (substitute your own model as appropriate) connects you to many more people than there are in your contacts list. Via its copper circuitry you are not only connected to factory workers in China, but also to miners in Chile, as well as to marketing staff in California. Just by having the imagination to make these connections, you and your conscience are taking a step in the right direction.
N. Craig Smith is the INSEAD Chaired Professor of Ethics and Social Responsibility at INSEAD, the leading international business school with campuses in France, Singapore, and Abu Dhabi. Elin Williams is a freelance writer based in Oxford. The article is based on two academic papers: “Marketing’s Consequences: Stakeholder Marketing and Supply Chain Corporate Social Responsibility Issues”, published in Business Ethics Quarterly in October 2010 and co-authored by Smith with Guido Palazzo and C.B. Bhattacharya; and “The New Marketing Myopia”, published in the Journal of Public Policy and Marketing in spring 2010 and co-authored by Smith with Minette E. Drumwright and Mary C. Gentile.
For more on Craig Smith, visit http://www.insead.edu/facultyresearch/faculty/profiles/scraig/