Branding for the environment 3: governance aspect
How does the environment affect brands and their operational environments? This is the second of a series of columns first published in 2007 looking at the issues. Little has changed since then.
The previous columns looked at the circumstances and knowledge surrounding climate change, the impacts and aspects of consumer branding. Here, we are going to look at the supply chain.
To recap, climate change is having severe impacts on most facets of life, consumers are developing varying degrees of awareness and preference for environmentally sound brands but the process is complicated by price premiums and resource scarcity. Regulatory aspects may increase the price but intelligent product design may offset the increases.
Although brand-conscious products are still in a phase similar to the early adoption area of the product lifecycle, there are a number of indicators that demand that these products will grow. These were noted in previous columns. This will be driven by the consumer, but will be supported by legislation.
The organisation does not operate in a vacuum, and enterprises that purchase unrefined raw materials at the one end and sell packaged goods at the other are actually comparatively rare. Business growth has been driven by outsourcing to specialists.
If, though it is more a case of when, environmental accounting becomes standard practice, the organisation will be called to account for all of the components of its product. This statement has been echoed by the similar case of Nike, which although highly aspirational, suffered from the finding that its brand was making use of Asian sweatshop labour.
The implications are twofold. Firstly the organisation can be called to account, and secondly, the production process leaves enough evidence for it to be followed.
By analogy and reason, it will not be enough for the organisation to ‘greenwash’ and claim that it or its brand is environmentally sound. The organisation will have to support its case with the fact that at least some of its various suppliers are also environmentally sound.
The difficulty arises with the basic elements of production. For instance, although plastics are environmentally unsound, they are not a negotiable factor in the means of production of a vast array of products. So in this instance, it is unlikely that plastic will become a bone of contention, however the organisation will be called upon to limit plastics to the bare minimum and provide for recycling.
On the other hand, for instance, paper provides an easy scapegoat, and the organisation will likely be required by necessity, if not legislation, to use recycled paper, environmentally sound inks and possibly to substitute paper with printing directly onto the packaging.
What becomes implicit is the idea of an environmental audit affecting a number of organisations all involved in the manufacture of one brand. As mentioned in a previous column, the cost of products will probably increase with the number of mitigating processes that go into the process. However, the consumer will be penalized for consumption in an environmentally damaging manner, and so may be willing to accept the premium for a product that satisfies the requirements.
On the basis of the premium which the consumer is willing to accept, organisations will have to begin making trade-offs between demand and the expense of sourcing from suppliers who show that they are environmentally sound.
There are many elements of leverage in the scenario. On the one hand, a supplier who fits the bill will be able to claim a premium, but may be able to reduce the premium depending on demand and resource availability. On the other hand, suppliers may be likely to respond to demand from environmentally sound brands, and may reduce their premiums on the basis of being able to drive their business by claiming involvement in the production of noted brands.
At the end, it boils down to the situation where brands will be required to walk the walk, not just talk the talk. If a brand loses volumes in the new paradigm, so will its suppliers. So the brand and suppliers will be required to reinforce one another.