Three Thoughts on Apple and Insanely Great Brand Leadership

[This piece originally appeared on Sustainable Brands.]

It’s hard to think about brand leadership without thinking about Apple, now neck-and-neck with ExxonMobil as the world’s biggest company by market cap.

Last week, Apple was top of mind for many of us, with two major pieces of reporting: the UK release of Adam Lashinsky’s book, Inside Apple, which describes in part-admiring, part-unmerciful detail Apple’s tough organizational culture, and the New York Times’s excellent investigation into conditions in Apple’s supplier factories in China.

This last piece spurred CEO Tim Cook

Signed, Sealed… Delivered? Behind Certifications and Beyond Labels

Drawing on over 85 expert interviews, Signed, Sealed… Delivered? explores the value and challenges that businesses find in using certification and labeling as tools to improve economic, environmental and social outcomes across global value chains.

Certification, labeling and the standards-setting organizations behind them have been pioneers in building a more sustainable economy. For businesses, they provide a credible, consensus-set reference point for collective action, access to expertise and networks, and can spur demand for certified or labeled goods. But the very traits — governance and inclusiveness — that make consensus-based standards so useful as credible mechanisms for collective action also pose challenges for businesses seeking to move quickly and to differentiate themselves in the marketplace. And like any tool, certification and labeling have limits — including limits to scale.

Watch the summary video (put together by the brilliant Geoff Kendall) or download the full report from SustainAbility here.

Questioning and evolving the eco-label

[This blog originally appeared on Guardian Sustainable Business.]

In the last fifty years, the value of internationally traded goods has increased from less than a fifth to more than half of world GDP. A couple of years ago, a shipping container followed by the BBC went twice round the world in a year, stopping at Scotland, Shanghai, Brazil and Los Angeles along the way. Whereas a century ago we might have known where, how and who produced the things we eat, wear and use, in so many instances today all we know is what we’re told. And how can we be sure that what we’re told can be trusted?

Cliff Burrows, president of Starbucks, acknowledges that trust is critical as we seek to move to more sustainable business models: “Customers have demonstrated that they are more likely to buy products and services from companies they trust.”

Enter the eco-label: an independently verified, on-pack label that tells the consumer a product was produced (think Fairtrade or organic) or can be consumed (think nutritional labels or Energy Star) in a more sustainable way. It’s a powerful idea that combines sustainability standards-setting and branding, underpinned by the credibility of an independent body.

But 33 years after Germany’s Blue Angel, the world’s first eco-label appeared, the time is ripe for asking: How well has the eco-label lived up to its ambitions? And how does the model need to evolve to accelerate more sustainable modes of consumption as 7 billion of us, and counting, bump up against the limits of the planet’s natural resources?

Certainly, many eco-labels have done a great deal to raise awareness and to create trust, to change what we expect from certain product categories, and to build capacity and create a common framework around sustainability. Consider the success of the Fairtrade movement in the UK, where sales of products topped £1bn in 2010 and the 15th annual Fairtrade Fortnight is now drawing to a close.

But as Burrows notes, the eco-label model may have become too successful: “A wide array of certification programs has been developed, creating confusion among customers and undue burden on farmers. The industry needs to better understand what is meaningful to customers and works best for producers.”

And it’s not just the food and beverage industry that is affected. As of today, the Ecolabel Index lists 377 schemes in 211 countries and 25 industry sectors, from Italy’s 100% Green Electricity to New Zealand’s Zque natural wool label. In January alone, we saw announcements on a new label for wind energy, another front-of-pack nutritional label, and a certification process for conflict minerals.

More worryingly, it’s unclear how much impact eco-labels have really had. WWF’s 2010 review noted “insufficient comparable and meaningful data available” on the impacts of certifications and roundtables. Not only that, impact isn’t always the top priority for businesses: last week’s ISEAL 100 thought leaders survey found that only 56% of those surveyed from the corporate sector saw “improved sustainability performance” as the main benefit of using voluntary standards, while 78% cited “increased operational effectiveness”.

The need to question and to evolve the eco-label model is becoming more acute as global companies begin committing to audacious, long-term sustainability goals and need to find effective ways of delivering, as well as credible ways of communicating what they’ve done. Consider Unilever, which has committed to sourcing 100% of its agricultural raw materials sustainably by 2020. How will the company deliver – and show that they’ve delivered – on this goal when, as of 2009, only 8% of global tea production was certified sustainable according to one of 10 independent standards?

As Jan Kees Vis, Unilever’s global director of sustainable sourcing, says: “Companies and brands are struggling with the question how to mobilise consumers to give preference to products and brands that have the potential to deliver positive social and environmental outcomes. The tools available seem to be labels and brands, and I think there is room in the market for both.”

Eco-labels have started to evolve to meet the challenge: ISEAL and WWF have recently completed major strategic reviews of their voluntary standards and multi-stakeholder initiatives. But we need to step back and consider what eco-labels were designed to achieve in the first place, consider objectively the limitations of the eco-label as a tool, and ask how it can be complemented by other ways of creating trust and influencing behaviour change across global supply chains.

Ultimately, eco-labels strive to accelerate sustainable behaviour. Neither consumers nor producers can be expected to do the right thing unless they know what that is, and eco-labels are to be commended for focusing on this need – as are the global companies who are pushing to make effective use of them.

Patrin Watanatada is leading a project at SustainAbility to explore these issues. Signed, Sealed… Delivered? This can be downloaded here

The Leading Edge of Sustainability – New Spheres, New Mindsets, New Models

[This post originally appeared on the SustainAbility website.]

“Sustainability” has become part of the modern business lexicon. But what does it really mean?

In a 2010 survey of global CEOs by Accenture and the UN Global Compact, 93% of the 766 CEOs surveyed said that sustainability issues were “very important” or “important” to the future success of their businesses. In this same survey, 81% agreed or strongly agreed that “these issues are fully embedded into the strategy and operations of my company” (up from 50% in 2007).

We’re glad to see this evidence of the growing importance of sustainability issues on the global corporate agenda, and we celebrate the ambitious goals and substantial progress of many businesses. But we have to disagree that 80% of companies have fully embedded sustainability into their strategy and operations. The participants at our annual members’ workshop in London seemed to feel the same – in response to our informal pre-workshop survey, most said they “strongly disagreed” or “disagreed”.

Such a disconnect between what the CEOs think and what many others think comes from a disagreement over what sustainability means. Sustainability isn’t just about a few percentage point reductions in carbon emissions, or a selection of sustainably sourced product lines, or a supplier policy – as important as all of those are as starting points. But what is it then?
We kicked off our recent Engaging Stakeholders Program member workshops in London and New York by asking each other: “What is sustainability leadership?” Here are some of the themes we discussed.

New Spheres

Manage outside the walls of the company. Leading businesses are expanding their spheres of interest and influence, seeing both responsibility and opportunity in the value chain as well as in the direct footprint. This is reflected in commitments that expand outwards (for example, in 2005 Walmart committed to sending zero waste to landfill; five years later it has committed to increasing the income of one million small & medium farmer suppliers), but also in a new view of what it means to manage a business. One of our workshop participants said that his company had begun to think of suppliers as part of the organization, and that this approach shaped everything they did on supply chain management.

Set Big Hairy Audacious Goals that go beyond the value chain. Examples we’d put into this category include GlaxoSmithKline’s efforts to increase access to medicines; Nike’s goal to develop a closed-loop business model; Google’s goals to make renewable energy cheaper than coal and (less widely known) to maintain the viability of one of its key input industries, journalism; and most recently Unilever’s Sustainable Living Plan, which aims to define a sustainable model for consumer goods value chains.

Look for the best ideas everywhere. The age of “Not Invented Here” is beginning to seem out-dated even in mainstream business. P&G now sources 50% of all new product ideas from outside the company. GSK, Nike and Walmart are all taking open innovation approaches to achieving their sustainability goals through GSK’s Open Lab for R&D into developing country diseases, GreenXchange for patents and Earthster for life-cycle assessment analyses, respectively.

Support individual leadership and innovation – particularly by the young. Many of the examples cited were of leadership from young people or employees, and DSM’s presentation on their young employees’ global bottom-up sustainability network was one of the most popular sessions at the workshop. It is becoming a constant refrain and source of hope that today’s young people are, as a group, much more interested in sustainability than their elders – and are full of ideas and energy.

New Mindsets

Think in terms of economic ecosystems. The least-understood and most overlooked dimension of the triple bottom line, economic impact, is perhaps the most important of all. As SustainAbility chairman Geoff Lye noted in his presentation, we are at a time when the economic power of business today has never been greater. The total annual sales of today’s top 200 corporations is $11 trillion – just under the GDP of the United States, over twice that of China, and five times that of the UK.

Businesses exist to create and distribute value, and the way they do this must be fundamental to any definition of sustainable business. Think of it as corporate economic responsibility, corporate social innovation, business-led economic transformation, or, as one of our members suggested, quite seriously, “Making Business Beautiful!” Whatever you want to call it, sustainable business is a way of doing business that sees each business as part of a larger economic system:

  • Where suppliers and employees are better able to supply and to work if they are treated and paid fairly;
  • Where shared resources and infrastructure are invested in through a good tax base (and businesses pay their fair share of that tax base);
  • Where customers have affordable access to products that will genuinely enrich their lives, including the basics (water, sanitation, nutrition, healthcare, energy, ICT and finance); and,
  • Where competition is healthy and businesses are diverse, making the whole system more resilient.

See values, norms and cultures as crucial enablers. Two participants at our London workshop named the end of the Catholic Church’s absolute ban on condom use and the work of Mechai Viravaidya to popularize the use of condoms in Thailand through humor as favorite examples of sustainability leadership. More generally, almost all agreed that understanding and influencing the expectations and values of everyone from consumers to investors would be crucial to the success of future sustainability initiatives. This is now mainstreaming as a topic of discussion – see, for example, the theme of the upcoming 2011 World Economic Forum, Shared Norms for the New Reality.

New Models

As SustainAbility co-founder John Elkington wrote last year in The Transparent Economy:

Properly understood, sustainability is not the same as corporate social responsibility (CSR)—nor can it be reduced to achieving an acceptable balance across economic, social and environmental bottom lines. Instead, it is about the fundamental, intergenerational task of winding down the dysfunctional economic and business models of the nineteenth and twentieth centuries, and the evolution of new ones fit for a human population headed towards nine billion people, living on a small planet already in ecological overshoot.

Indeed, the search for these new business models is becoming increasingly vocal. At last year’s Clinton Global Initiative meeting, Ceres, Nike, the Skoll Foundation and CalPERS launched a working group on this subject.
Two key goals of these new models:

Collaborate to deliver solutions. Sustainability leadership has moved well beyond compliance (‘because it’s the law’), and even accountability* *(‘because we are pushed, we must’), towards solutions (‘because we can, we will’). Increasingly, leading businesses are looking at their core competencies and asking how these can solve pressing social and environmental challenges, often in collaboration with other industries. As former Harvard Business School professor Shoshana Zuboff has written, “For a century… the manager’s job was to oversee and control what was inside ‘my company.’ Everything else was a distraction. [Now] you need to collaborate… you can’t do it alone because the needs of individuals don’t conform to existing organizational and industry boundaries.” At our London workshop, Vodafone’s Sarah Sanders presented on their work to partner with pharmaceutical companies to make healthcare more accessible through Vodafone’s mobile platform.

Influence consumption – and defy waste. Our workshop participants agreed that addressing consumption was crucial, but admitted that this was also one of the greatest challenges for their business models. Product portfolio changes such as PepsiCo UK’s commitment to increase the percentage of whole foods and low-fat dairy in its global portfolio are important steps, but more is needed. One fascinating trend in this direction is collaborative consumption, web-enabled platforms that allow people to share the use of existing assets. One of our workshop participants named Streetbank, which allows neighbors to borrow household items from each other, as her favorite example of sustainability leadership.

What’s Next?

The leading edge is out there. As author William Gibson famously wrote, “The future is already here, it’s just not evenly distributed.” Here are three leadership themes we’d like to see more of in 2011. We welcome your additions to this list.

  • Sustainability strategy as large-scale collaboration and change management. “Traditional” approaches to sustainability strategy have been heavily focused on the company’s own performance, planning and processes, with partnerships and organizational change as a second step. We now expect to see leaders increasingly placing collaboration and change management at the heart of their strategies. A key part of this will be formal and informal structures to encourage and harness insight and innovation among employees as well as stakeholders. Interestingly, a look at the business section of any bookstore will demonstrate how collaboration and behavior change, once on the sidelines, have now become part of the global business and economic conversation.1
  • Business initiatives to understand and affect values and behaviors. Many businesses have access to deep insight into human behavior through their market research capabilities and relationships with consumers. We want to see more of this directed towards positive change. The power of brands to change our values and aspirations has been a key theme at the Sustainable Brands conferences.
  • Efforts to systematically identify and scale new business models based on creating value from fewer physical resources, such as Daimler’s Car2Go pilot based on the Zipcar car-sharing model.

1 See Macrowikinomics; Collaboration; Drive: The Surprising Truth About What Motivates Us; Nudge: Improving Decisions About Health, Wealth, and Happiness; Switch: How to Change Things When Change Is Hard; Sway: The Irresistible Pull of Irrational Behavior; etc.

Employee Engagement: Hearts and Minds

Once considered almost as a by-product of a company’s sustainability strategy, employee engagement on sustainability is now a hot topic, recognized as a crucial driving force for delivering on that strategy. And persuading people to change requires engaging both the rational, analytical mind and the emotional heart.

At SustainAbility’s recent Engaging Stakeholders Program members’ workshops in New York City and London, we explored employee engagement by asking:

  • How are leading companies motivating their employees to take action through practical guidance and compelling communications? In New York, Intel’s Suzanne Fallender updated us on Intel’s initiatives to make sustainability relevant to specific business functions and link it to compensation and professional objectives. In London, DSM’s Jacqueline van Zundert discussed the DSM Next initiative, a self-organizing global network of younger employees passionate about sustainability and business.
  • How do we properly harness the power of language? Using language strategically to communicate and to persuade was a major thread of conversation throughout the workshop. For our employee engagement session, guest speaker John Marshall Roberts of Worldview Learning introduced us to a (literally) colorful way of thinking about the different ways people see the world, and designing targeted messages to suit.

John’s talk proved such a hit that we asked him to share his thinking with our broader network. Our illustrated interview features John in conversation with SustainAbility’s Patrin Watanatada on how to engage colleagues and stakeholders more effectively by putting yourself in their shoes – in other words, engagement through empathy.

Here’s the video….

The Slow Housing movement?

The Mother Nature Network features a slideshow of ten of the world’s smallest homes.

From energy expenditure to building materials, living in a smaller house is one of the best ways to reduce your ecological footprint. Giving up the luxury of space and living more minimally isn’t always easy, but it does come with a few perks: fewer possessions, bigger skies and open spaces! Plus, a smaller house makes it easier to cozy up to your loved ones. Here’s a reminder that bigger isn’t always better: 10 of the tiniest homes in the world.

Reduces your housing expenses too – giving you time, flexibility and further footprint reduction possibilities.

Sustainable Brands 2010: “The Power of AND”

[originally published on SustainAbility.com]

“The opportunity to make our planet smarter is both real and measurable on one hand, and truly inspiring on the other.” – Sam Palmisano, CEO, IBM, quoted by Lee Green, VP Innovation, IBM at Sustainable Brands, Monterey, California, June 2010

For us, this captures the Sustainable Brands 2010 conference in a nutshell: the sustainability efforts most likely to succeed are those that are both robust and data-driven on the one hand, and joyful, surprising, delightful and principles-driven on the other.

Sustainable Life Media and its flagship conference Sustainable Brands, founded by KoAnn Skrzyniarz in 2007, brings together the brand, design and sustainability communities to catalyze sustainable innovation.

SustainAbility has been a part of the Sustainable Brands community since its early days: executive director Mark Lee serves on the advisory board and has given plenary presentations at the event the last three years, and team members Chris Guenther and Preetum Shenoy have both participated in the conference. This year, Jennifer Biringer facilitated a panel organized by Patrin Watanatada on “Restoring ‘Places and Faces’ to the Global Value Chain”.

Below are the seven key themes we heard at this year’s conference. The first three are perennials – they are why so many of us believe strongly in the connection between sustainability and brands (see, for example, our Five Principles for Sustainable Brands) – while the last four are more recent insights, reflecting lessons learned by brands along the way.

  1. What we value as a society is changing – and the brands that respond will be the brands that win.
  2. Sustainability is (really) good for brands.
  3. Brands are (really) good for sustainability.
  4. Sustainable brands connect supply and demand in innovative ways.
  5. Sustainable brands meet consumers where they are.
  6. Sustainable brands “create the crowd.”
  7. Sustainable brands rely on lots of data – but not too much.

Read on for more on each of these themes…

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The end of cheap [insert global resource here]

Two years to the week after the collapse of Lehman Brothers, the new Basel III global financial regulations are out (what’s that?) and the British Bankers’ Association complains on behalf of consumers everywhere: “This means the end of ‘cheap money’!”

Well. That is a good thing, is it not?

Remember what’s at the heart of our global environmental and social challenges:

  1. Our key resources are too cheap – be they food, oil, money.
  2. Our systems are too good at separating reward from risk – be it here and now, over time, through geographies.

Are there insights to be gleaned for other sectors from  how financial regulators conceptualize and try to manage these issues? The financial system represents our economy at its most abstract and quantified, so it’s fascinating to think about, anyhow.

Basel III raises the Tier 1 capital requirement, which means that banks will need to hold more common equity to buffer against unexpected losses, which essentially comes down to this: more skin in the game. And more protection against financial crises, and, apparently, good things for the economy (at least as measured through GDP – see explanation from finance blogger Felix “Shedding No Tiers” Salmon).

Browsing

…the danger of New York City cycling is due to mindset: cyclists behave and are treated like pedestrians, but are moving many times faster and in the road – also, loving the term “bike salmon” for a cyclist who goes the wrong way up the street and generally ignores traffic laws with abandon (Felix Salmon)

…sustainable consumption = shared consumption (Joel Makower, Collaborative Consumption, McKinsey Quarterly)

…“#Wherewereyou: WaPo puts the humble hashtag to work” – on journalism as curating, and the semantics of Twitter’s hashtag (Nieman Journalism Lab)

…(short) URLs are the new cookies: “whoever owns the shortener sees the engagement between the audience and the content, no matter where it happens” (O’Reilly Radar)

…is Google design overly data-driven? what about principles? (Co.Design)

…Tom Friedman on why the United States “is #1(1)” – its problems are incremental, American leaders don’t ask Americans to sacrifice, Americans don’t sacrifice on their own, and as for global leadership, “After you” (NYT)

…human beings were designed to pulse – sound tips from the Energy Project on how to get more done, be happier, and be better to your loved ones (openforum.com)

Better Place: The Very Model of a 21st Century Enterprise

betterplace

Photo: With colleague Jennifer Biringer, test-driving the Th!nk EV at Better Place’s Palo Alto headquarters back in June.

Many of us at SustainAbility have a big sustaina-crush on Better Place, the start-up working to build the infrastructure for electric vehicles—charging stations and battery packs—in cities around the world, and its founder Shai Agassi. (Our biggest Better Place fan, Gary Kendall, has contributed to their blog here and here, and the urgent need to transition our systems away from oil is a recurring theme for our team—see most recently Jeff Erikson’s blog on the BP Deepwater Horizon spill.)

But what’s a crush without a little analysis? Here are seven reasons why we think Better Place is one of the best examples of a 21st century enterprise out there.

1. Better Place started with an urgent social need, is moving rapidly to bring a solution to market, and is doing so by prototyping around the world. First, Agassi started with a Big Hairy Audacious Goal for his country: no less than independence from oil.

Says Better Place Australia CEO Evan Thornley in an interview on CNET’s CarTech blog: “[When Shai Agassi was coming up with his initial white paper] he went through the stages of ‘how can we run a country without being dependent on oil?’… We’re a mission-driven organization; we want to get the world off oil. There’s nothing good about it: fighting over it, paying for it, running out of it, or polluting the atmosphere with it.”

And Better Place is not wasting any time, as Cisco strategy EVP Inder Sidhu writes in a nice excerpt from his strategy book Doing Both, which argues that pursuing two seemingly disparate paths at once is often mutually reinforcing:

Agassi hopes to move quickly—before the next wave of first-time car buyers choose gas- or diesel- powered vehicles… Over the next five years, Chinese and Indian consumers are projected to buy as many as 70 million vehicles—more than all of the cars that exist in the UK and Germany today.

Most technology startups set out to build advanced products for sophisticated customers in established countries… Afterwards, they typically water down their innovations for sale to customers in emerging countries. Agassi has dispensed with this model and is instead focused on building simple solutions that can be deployed anywhere around the world simultaneously.

2. Better Place is thinking service, not product. Why are service-based business models often a better bet from a sustainability perspective?

Service-based models incentivize manufacturers to make assets that last and to take end-of-life responsibility (think Xerox copiers). They allow many more people to get use out of the same amount of physical assets (think laundromats, or car sharing services like Zipcar, and see Rachel Botsman and Roo Rogers’s Collaborative Consumption website and book for more examples). And they start with the human need and ask, “How can we best meet this?”

Agassi understands that people fundamentally seek the service of convenient mobility. This insight means that his business model is designed around meeting that need for mobility as effectively as possible, rather than making the current model (liquid-fuelled cars) somewhat better.

For transportation, says Agassi in an interview, what matters is miles:

Oil companies sell miles…at the end of the day [not gasoline]. [Better Place is like] an oil company that has a guaranteed supply of oil at a cost of zero dollars a barrel… I don’t sell the energy—the battery makers do that. I sell the convenience. (Interview by Martin LaMonica, CNET)

And access to a service is often a much better model for the customer than owning the asset itself, say Better Place’s Evan Thornley and Guy Pross in another interview:

Separating the battery from the car is a key to our business. It not only takes that battery [technology] risk from you, but also saves you from purchasing the battery up front, which is a huge part of the cost of hybrid and electric vehicles. (Interview by Derek Fung, CNET)

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