Thursday, February 18, 2010

The good company

What makes a company good? And by 'good' I mean good for everyone, the world, the whole box and dice. Talk to some economists and they would say the only responsibility a company has is to its shareholders. Make sure the shareholders get as much cash as possible and let the individual make the decision. Talk to others and they'll say a company can be good only by being a good corporate citizen. This is more ill-defined, but generally one would say this means ethical business practices, giving back to the community, lowering carbon emissions and the like.

I've been put on this train of thought because of an article written by Umair Haque on the HBR blog. The Great to Good Manifesto largely explains this phenomena and picks out Pepsi's latest 'Refresh' campaign as a key example.

While the scale of this good company principle varies immensely, especially from industry to industry, it would seem that at least in the FMCG and bulky-goods industries, the more holistic style of good company is rising.

Examples of how these FMCG companies are becoming good companies seem to be coming through more and more frequently. Using the criteria of ethical business, giving back to the community and lowering carbon emmissions we see that industries are increasingly seeing the commercial benefits of being good companies.

From an ethical point of view green is the new black and companies far and wide are both promoting their green credentials and giving customers the option of greening their products (a la carbon offsets for flights and car-hire). In the FMCG market one of the highest profile decisions has been Cadbury's decision to become Fairtrade certified in its Dairy Milk branded chocolate. You can read more about their efforts on the Cadbury Fairtrade blog.

By far the hottest good thing companies are doing at the moment is giving back to the community. The idea of integrating good corporate citizenry and marketing promotions is really taking off. You can debate whether this is opportunistic or not until the cows come home, but there is a clear trend towards customer purchasing decisions being made based on a company's propensity to 'give-back'.

FMCG organisations are going on the 'give-back' offensive across the board and it has started in the tween and teen market. Social networking is increasingly giving tweens the power to decide en-mass and their role in purchasing decisions cannot be under-stated.

Examples of the tween community offensive include the Pepsi Refresh campaign, Best-Buy's @15 community, and closer to home Starburst has teamed up with Camp Quality.

A third good company criteria is the company's carbon reduction actions. This strategy, partly driven by legislation and probably more focused at the adult community, is more prominent in essential FMCG goods and shareholder information. Woolworths in Australia has committed to reducing CO2 emissions through improvements in store operations (example: refrigeration) and logistics. In the UK Tesco now identifies the carbon footprint of its milk products on the product label.

What is a good company? It would seem the days of measuring how good a company is solely by shareholder return are numbered. If the promotions by Pepsi, Best-Buy and Starburst are anything to go by the holistic good company is on the rise.

1 comment:

lindsaylobe said...

Hi Alex
A very thoughtful posting about being a good corporate citizen which I think leads to enhanced brand recognition commensurate with improved shareholder returns.

Stakeholders and customers recognition of a company’s values and enhanced reputation will ultimately yield improved returns to shareholders.My preference has always been for descriptive provisions by way of guiding principles to be included within corporate governance structures to give effect to corporate social responsibility. Otherwise I think we are in danger of thinking of ethics and environmental sustainability as something only very highly trained people are capable of thinking about.

CSR needs to stay in the mainstream of shareholder and stakeholder concerns, acknowledged at every level in the community.

Best wishes