Why brands are becoming political
In this long read, Crowd's Joey Zeelen considers how big business sustainability goals will impact consumers and political parties...
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In recent years, we've seen more and more multinational corporations committing to make their organisations fully sustainable, while the geo-political trend (Trump et al.) is attempting to backtrack on the Paris Agreement on climate change. I find myself questioning why this progressive takeover of the private sector is happening right now? And how does this affect the consumer zeitgeist? When it comes to sustainability, are 'progressive' consumers still best led by governments and politicians or are they perhaps better off shifting their gaze to the corporate world?
To understand why corporations are making the sustainable switch, we need to go back three years to the desert 50 kilometres south of Dubai, where a giant solar panel project called DEWA left a tremendous mark on modern history.
There in UAE – a state paradoxically largely known for its oil reserves – a company called First Solar managed to produce renewable electricity at 5.84 USD cents per kilowatt hour. For the first time in history, thanks to this unsubsidised solar park project, it was possible to produce renewable energy for less than natural resources. Since then, projects in China, Australia, Chile, California, Italy and Jordan have followed suit, after reaching the same energy tipping point.
The simple laws of manufacturing economics are that the more you manufacture with a renewable resource, the cheaper products will become versus the more you deplete fossil materials, the more expensive products will become. The crossing of the fossil and renewable energy cost curves in Dubai opened the financial floodgates for corporations and financial institutions around the world. It sparked a revolution that according to Deutsche Bank 'will make solar energy cheaper than fossil energy in 80% of the world in only a few years'.
By the end of this year, all Google's offices and data centres will be powered entirely by renewable energy (from 44% to 100% in one year). The internet giant is the world's biggest corporate buyer of renewable electricity. "We are convinced this is good for business, this is not about greenwashing," says Marc Oman, EU energy lead at Google. "This is about locking in prices for us in the long-term. Increasingly, renewable energy is the lowest cost option. Our founders are convinced climate change is a real, immediate threat, so we have to do our part."
Another example is Unilever; CEO Paul Polman is even known as 'the Bono of the corporate world'. The company produces 97% less waste from its own production compared to 2008. Unilever is also aiming to reduce its water usage and CO2 emission by 50% compared to 2008 levels. In total it's saving around $200 million a year due to less logistical, packaging and energy costs. And because investing in sustainability strengthens Unilever's business plan, its targets are anchored into all layers of the company, even employees have to hit yearly sustainability targets.
And then there is the mighty IKEA that plants a tree for every one it cuts down. 50% of its furniture is sustainable right now and in three years this will be 100%. Last year IKEA had an annual revenue of close to €30 billion and it's investing €2.5 billion a year in the development of renewable energy and resolving climate issues. IKEA chairman, Peter Agnefjäll, told The Financial Times that since the end of 2015, the company has continued to invest €600 million a year in the further development of wind and solar energy, and another €400 million in helping regions that are hit hardest by global warming. Incredibly, this $1 billion comes on top of the €1.5 billion that IKEA has been investing in renewable energy annually since 2009!
Obviously, this is all good publicity but it also makes perfect business sense. Since renewable production has decreased so substantially in price in the last few years, investing in renewable energy means short-term and long-term growth. Getting involved in sustainability will give corporations a leap over their future competitors that fail to do so now. Take these short-term and long-term business cases and mix them up with an incredibly unstable political climate (which means energy uncertainty) and a lot of consumer expectancy (from the latest Ubiquity Global CSR Study we know that 9/10 consumers expect companies to operate responsibly and address environmental issues) and it seems obvious that more companies will join the sustainability cause in the immediate future.
Now back to our original question: where does this leave the 'progressive' consumer? Strangely, but surely, I think that the contrast between the exponential growth of sustainable businesses and the eroding landscape of climate politics will account for a real paradigm shift for consumers. I expect the more 'progressive' consumers are let down by governments with short-term solutions for long-term problems, the more they'll put trust in corporations to lead them forward. Consequently, in the forthcoming years, brands are going to be increasingly taking over responsibility for the future of the world in which consumers live in. This will have major implications on the relationship between consumers and companies in terms of trust, loyalty and salience, and ultimately, it will drive sales.
Filed in: Trends