A Future Driven by Purpose
Companies that have a defined purpose – standing for and taking action around something bigger than their products and services – are growing, prospering, attracting the best talent, and staying competitive in a challenging economy. Their purpose initiatives are the inspiration for their employees to rally, the reason their customers want to engage in business and their lens for making strategic decisions.
Companies, organizations and experts refer to the concept of purpose with a number of different terms – sustainability, CSR, shared value, community relations, social impact, stewardship and purpose. Throughout this document, we will use the terms ‘sustainability and social impact’ and ‘purpose’ interchangeably, but they all refer to how companies engage with society for business and social impact.
We know consumers and employees are continually making demands on businesses to play a stronger role in being good stewards of our planet and people. However, Ketchum, in partnership with Carol Cone ON PURPOSE, wanted to understand more deeply why retailers and manufacturers invest in sustainability and social initiatives and to foster a more robust conversation across the entire supply chain.
￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼The Manufacturer /Retailer Dynamic
The Ketchum Global Business “Return on Purpose” Study takes an innovative look at the dynamic between retailers and manufacturers as it relates to their purpose-driven initiatives in the environment and society. It is one of the first studies to explore the perceptions of purpose by retailers and manufacturers in the context of their supply chain relationship. It also highlights the complex relationship and engagement in investment decisions around social and environmental issues and offers an initial understanding of where they align and differ on drivers and barriers, stakeholders and desired outcomes of purpose.
The study looks at the interdependence of retailers and manufacturers in their purpose commitments and the reputation and business value that these initiatives deliver to them. It reveals that retailers and manufacturers are conflicted about how much influence end consumers should have – recognizing their importance but not always making them a priority – and that employee opinions for both segments are vastly undervalued.
Ultimately, we believe that by examining the outcomes of this study, companies on both sides of the supply chain will realize better returns on their purpose investments and initiatives.
￼￼￼Committed ￼to Purpose ￼
Not surprisingly, the study shows that retail and manufacturing executives across the globe are committed more than ever to investing in sustainability and social initiatives. What is surprising, however, is that while they are influenced by consumer and employee expectations, the reasons for continued investment are focused more strongly on a complex set of business drivers guiding their purpose initiatives for themselves and their relationships with each other.
There is near-universal recognition in the manufacturing and retail sectors that sustainability and social initiatives have taken on critical importance in the areas of operations, sales and reputation. Nearly all of the respondents in both sectors consider it to be very or somewhat important – 94 percent of retailers and 98 percent of manufacturers. And 93 percent of both groups expect purpose-driven initiatives to increase in importance over the next two years.
￼￼Both sectors strongly agree that purpose is critical for any business looking to thrive beyond the next 100 years. Manufacturers and retailers agree on this point almost equally – 64 percent for retailers and 69 percent for manufacturers. This belief is generally held most strongly in the United States, with 68 percent of retailers and 73 percent of manufacturers weighing in.
Confirming common beliefs about differences between Europe and the US, the study shows that the United Kingdom (UK) and Europe hold purpose in higher esteem than the United States (US). Eighty percent of UK and 70 percent of European retailers consider it to be very important – versus only 64 percent of US retailers. In manufacturing, the pattern is consistent, with 76 percent of UK and 74 percent of European sector execs ranking it as very important – against only 53 percent of the US manufacturing leaders.
This geographic commitment is consistent with the popular notion that Europe’s engagement in sustainability has been embedded for a longer time and thus is more ingrained in the fabric of business than in the US.
This pattern tends to be more strongly realized by manufacturers on a region by-region basis than for retailers. In the US, retailers and manufacturers say that they have had initiatives in place for a relatively equal length of time, while in Germany, retailers believe they have been undertaking sustainability and social impact programming longer than their manufacturing colleagues.
It is feasible that European executives don’t even recognize some or many of their initiatives as purpose-based programs because they have been in place for so long and are fully woven into the fabric of their culture, as alluded to on page 5.
Their US-based counterparts may be more conscious of these efforts being purpose-based – perhaps because of either their relative newness or because of nomenclature used by their colleagues.
It is clear too that the financial, legal and regulatory structure and constraints of companies in Europe, Asia and the US differ, thus creating unique sets of challenges and opportunities for companies to fund and support sustainability and social initiatives. For example, in the US, corporate-sponsored foundations must exist as separate entities from a company, making it more challenging for the foundation to fund purpose initiatives.
In the UK, a charity or NGO is funded through multiple mechanisms – government, lottery, EU, donations and corporate partnerships. Being a separate entity means that they don’t have to pay VAT and get some reductions/exemptions on certain expenses and can also benefit from gift aid, which means donors don’t pay tax on donations. UK-domiciled companies make donations freely and there is no limit/restriction on the marketing of said donations.
In China, there are multiple mechanisms of funding of (Chinese-managed) charities and NGOs, including government, lotteries, private and corporate donations. However, a distinct difference is that major charities and foundations in China are state-controlled or affiliated. Therefore, many Chinese-owned corporations and multinationals alike prefer to create foundations or work with existing foundations under the large umbrella of state-run charities. This way, they can operate the fund freely and benefit from the state’s favorable policies.
￼￼Another measure where the US is outpaced by the UK and Europeans in both channel sectors is in the expectation of the growth in importance of purpose initiatives over the next two years. For instance, less than half as many manufacturers in the US than the UK believe it will be much more important (29 percent to 64 percent).
￼￼￼￼￼￼￼￼Finally, both sectors see expansion of purpose in environmental and social initiatives. The manufacturing sector across all geographies for the most part expects a broader approach to both environmental and social programs – more so than growth in greater depth of existing programs or in geographic expansion. US manufacturers and UK retailers are the two groups that most expect increases in funding for sustainability and social impact work.
￼ ￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼Driven by Reputation and Business Return
When it comes to purpose, retailers and manufacturers across all regions consistently and fairly evenly acknowledge a wide variety of business growth factors ascribed to purpose programming. The top drivers of why social and environmental efforts are integrated into operations, products and services include reputation enhancement, business results and competitive advantage.
Manufacturers are driven most by the potential to build reputation, while retailers see it mainly as a wayto remain competitive. Retailers also see ROI for reputation gain and improvement of business results. Manufacturers recognize the opportunity to improve business results as well, but also see purpose as core to who they are – an alignment with their business purpose. This alignment was cited in the 2014 McKinsey Sustainability study, which identified a progressive year-over-year increase on businesses aligning their work with their sustainability and social programming – with it becoming ￼￼“a more strategic and integral part of their business.”
In that study, 43 percent – the largest share – said that companies seek to align sustainability with their overall business goals, mission and values.
￼Our “Return on Purpose” study finds that end consumers/retailer customers are not the primary drivers for sustainability and social initiatives – meeting their expectations or demands ranked 6th and 7th out of the 8 study motivators for manufacturers and retailers respectively. Consumer/ customer demand is the least important reason for investment by both US groups compared to other geographies – with US manufacturers considering customer demand or requirement only slightly more important than retailers (57 percent versus 50 percent).
In what might seem like a contradiction, when asked who has “a lot” of impact on their companies’ purpose strategies, manufacturers put consumers in the middle of their consideration set - 5th out of 10, following company leadership, board of directors, retail consumers and regulators. For retailers, consumers rank second behind company leaders for influence on purpose programming.
Yet conversely, the study identifies that consumer and customer satisfaction rank high among retailers and manufacturers as a measure of ROI. Given the traditional factors for consumer and customer satisfaction are price, quality and design, we believe this finding could be an indication that purpose is emerging as a key driver of satisfaction.
This is further supported by the claim that when manufacturers and retailers are developing their purpose strategy, they are doing this based on the need to address competitive pressure and/or customer/ consumer demand. This is especially true for US manufacturers. Disturbingly – and against a great deal of other survey data and qualitative evidence – a relatively low percentage of manufacturers (38 percent) and retailers (40 percent) rated demands and/or expectations from employees as a key driver. In fact, it is the lowest reported factor for both groups. This may be because the study also found that the human resources function is not well represented in the decision-making process around sustainability and social initiatives.
Barriers to implementation vary by respondent group. Manufacturers put a stronger emphasis on obstacles than retailers and predominantly see measurement to be their top barrier. Retailers appear to see communications and business ROI as the key reasons that purpose activities are not taking on greater importance. For manufacturers, low ROI, lack of sufficient measurement approaches to show impact, and the difficulty of measuring ROI on business all combine to stand in the way of momentum.
The distance between the manufacturer and the consumer end of the value chain may contribute to the sense that this group cannot easily quantify the impact purpose strategies have on their business. Many measures start with the consumer and have difficulty working their way back to the manufacturer in a meaningful and documentable way. Many programs are also driven locally and manufacturers may have a more difficult time capturing the business value of many of these initiatives.
The study shows that manufacturers and retailers are looking for increased and sustained consumer demand for purpose products and services. We know that many manufacturers are undertaking these initiatives and bringing the consumer on board by including them in their marketing efforts. At the same time, manufacturers are trying to leverage their sustainability and social efforts to generate deeper relationships and engagement. However, retailers are still focused on providing products that deliver against price, quality and design, and not purpose. According to the study, they think consumer demand is low because they (the retailers) are unable to communicate effectively what they are doing and how it impacts the consumer.*
￼ ￼￼￼￼￼￼￼￼￼Retailers emphasize not talking enough about purpose efforts to outside stakeholders as well as communications that don’t come across as genuine and authentic as being top barriers.This group also considers business ROI too hard to measure and measurement techniques insufficient, but to a lesser extent than manufacturers.
With that said, there are notable examples of retailers not only doing a great job at communicating their purpose activities but also taking a leadin creating and driving measurement and measurement standards. One is an American retailing giant that released a platform for sustainability dialogue inside and outside the company. Its locally-sourced food initiative impacts local economies and delivers environmental benefits. This platform has driven real change and had a major impact on sustainability measures across its entire supply channel.
Another is a major UK multinational retailer whose sustainability model changed the way retailers reported their success and goals, and communicated with other businesses and consumers on purpose initiatives. The company is transparent about sourcing (via an interactive supply chain map), the energy efficiency of its stores and the community work it does. Its sustainability model is a huge hit with the City of London as well. It is clear that the retailer put society and the environment at the heart of its plan.
￼￼￼A final example is a leading global tea marketer that in 2010 co-funded the development of a community center on a tea estate in China’s Yunnan Province, where a substantial portion of the company’s tea is grown. The community center provides health, nutrition and farming education to the communities that grow and pick the tea. The company had found that with the huge influx of young workers migrating to China’s cities, the resulting labor shortage caused older farmers to overuse fertilizers and pesticides, creating environmental problems, soil degradation and reductions in product quality. The tea marketer responded to a need to alleviate poverty while at the same time improving working conditions, environmental outcomes and general quality of life throughout the supply chain.
On another positive note, both greenwashing and purpose as a cost-driving expense received the lowest scores as barriers.
Both give us some indication that purpose efforts are making very real headway as a bona fide business strategy that aligns with both missions and business goals.
Finally, one of the key opportunities to improve communications for all organizations is to better share their annual summary of the progress of purpose – whether it is embedded in the annual report or a separate CSR or sustainability report. While this practice is gaining in both popularity and rigor, of those polled, only 49 percent of all manufacturers publish a comprehensive report, while 38 percent of retailers reported doing so.
￼￼￼The European Landscape
While 2015 may have been a landmark year for sustainability and social impact following the launch of the Sustainable Development Goals and COP21, 2016 also brings significant change. For instance, by the end of 2016, the EU Directive on the Disclosure of Non-Financial and Diversity Information requires disclosure of non-financial data (e.g., environmental, social, and governance-related information) on a regular basis by more than 6,000 large companies in EU member states. In reality that means companies with an average number of employees greater than 500, a balance sheet total of 20 million euros or a net total of 40 million euros, and that are listed on an EU- regulated exchange market, will need to begin reporting on activity beginning January 1st, 2017. So we will have our first reports under the new legislation published in 2018.
While it had been argued that additional reporting of this nature, covering everything from environmental matters to human rights, anti-corruption and bribery to diversity of the board of directors and employee welfare, would be too much of an administrative and financial burden, most companies of the size the directive covers report in some way or another already.
This EU legislation comes at a time when many influencers in the sustainability and social impact field are demanding greater transparency. For manufacturers, customers are demanding full transparency of the supply chain, often setting high expectations and expecting third-party certification of quality. Many manufacturers currently use recognized reporting guidelines, such as the UN Global Compact, GRI or the OECD guidelines for multinational enterprises, all of which would be sufficient to meet the EU Directive’s requirements. EU retailers should be as responsive to their suppliers. Legislation and consumer expectation is changing, transparency is key and those who don’t embrace it in the purpose arena are likely to be forever playing catch up with those who build it into their brands’ reputation now.
Increased CSR Reporting in China
In the last decade, there has also been a significant increase of CSR reporting in China, driven by government regulation and policy. The significance of CSR reporting has been consistently highlighted in top-level official documents, in speeches by senior government officials and most recently, prominently featured at the 13th Five-Year Plan in March 2016, explicitly citing that CSR reporting in China will focus on innovation, transparency, globalization and environmental protection in the near future.
The question is moving from “Should we show our commitment?” to “How well are we showing that our commitment aligns with government priorities and social needs?” This conversation is growing, but there is still room for improvement. While more companies are publishing China-focused corporate citizenship reports, less than 8 percent are translated into Chinese. For Chinese companies in general, CSR programs still tend to be seen as an add-on, rather than central to value creation. But that is changing quickly. According to the China WTO Tribune, the number of CSR reports published in China rose from one to 898 in just 10 years (2001 to 2011).
Both Chinese companies and foreign businesses operating in China are being held to higher standards. Recent laws, such as the Environmental Protection Law, have brought corporate responsibility to the regulatory forefront. It is no wonder, as air pollution continues to be a top-of-mind concern for the country. In December 2015 Beijing issued the first ever red alert for air pollution, which saw the closure of schools and the temporary suspension of construction work, and brought to the forefront the severe environmental impact caused by China’s rapid economic development.
￼￼￼￼￼￼￼ ￼Risk Mitigation and Measurement
Both retailers and manufacturers agree that purpose initiatives can help an organization mitigate risk. Eighty-one percent of all manufacturers agree on this, as do 73 percent of all retailers. Manufacturers in the US and UK put the highest value with 82 percent and 84 percent respectively. Seventy-eight percent of Asian manufacturers also agreed.
Interestingly, though, across the board legal and regulatory leadership are not part of the decision-making process.
Support Thwarted by Funding, Leadership and Measurability
Not surprisingly, money is an issue. The biggest challenge to getting purpose programming implemented is a lack of funding – as reported by 73 percent of manufacturers and 64 percent of retailers. Manufacturers assigned more blame to funding than retailers across all geographies.
A recent study of nearly 500 respondents by the Ethical Corporation (Sustainability in North America – Top Trends 2016) found that only 9 percent of the subjects in its survey had social and sustainability budgets of $1MM or more while 27 percent had budgets of less than $10K. Once we get past funding, lack of clear measurement, as noted in the section beginning on page 14, gets identified next, followed by senior leadership support – both identified earlier as critical to getting purpose projects off the ground and implemented. Both manufacturers and retailers cite a lack of meaningful measurement and senior leadership support as the notable obstacles to implementation and expansion of purpose- driven initiatives.
￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼ Measurement, Intent and Expectation: C-Suite Leadership Ranked Highest as Strategy Influencers
Corporate leaders are considered the most influential within an organization for driving sustainability and social strategies by both manufacturers and retailers. Operations leaders and marketing/external relations teams come in behind the C-suite for both groups as well. Manufacturers also give credit to legal and regulators for instigating purpose programming. Once again HR is not given credit for driving purpose – recognized by only 55 percent of manufacturers and 56 percent of retailers – the lowest ranked group under consideration. Confirming this point of view, only 32 percent of retailers and 30 percent of manufacturers credited employees for having a lot of impact on a company’s purpose strategy. Company leadership is ranked first by 52 percent of retailers and 59 percent of manufacturers.
￼￼￼￼￼￼ Operational Efficiency and Customer Satisfaction Are Top ROI Measures
We know that retailers and manufacturers across all regions struggle with a return on investment for their purpose programs, with measurement being a major impediment. Globally, retailers still hold consumer satisfaction as the top metric (60 percent), which may be due to a lack of additional metrics that can further illustrate results and impact tied to social purpose. Manufacturers rank operational efficiencies and customer satisfaction equally as the top metric (66 percent across all regions). In the US, however, operational efficiencies is ranked highest for both retailers (62 percent) and manufacturers (80 percent).
It is feasible that both groups struggle with measuring purpose in bottom- line financial terms. The combination of not having a clear understanding of the role/importance of sustainability and social impact efforts (58 percent manufacturers and 54 percent retailers) with the distance between B2B players and consumers likely adds to the frustration of internal champions. Managing communications of the value and/or benefits through second or third parties or taking on direct-to-consumer communications is a challenge more manufacturers are considering. However, organizations increasingly recognize the value it brings to consumer and customer perceptions and their own reputation.
Notable outliers on this question were US manufacturers and UK retailers – they ranked operational efficiencies and employee morale as the most important metric respectively to measure ROI for purpose initiatives.
Retailers and Manufacturers Want a Symbiotic Relationship
Both groups are aligned on what measures are important to get and share from each other’s perspectives. Retailers want data from their suppliers (manufacturers) that demonstrates customer satisfaction across all regions. US and Germany rated this value higher than other regions, with 64 percent rating it very important. Asia had far fewer “very important” ratings – only 54 percent. And UK retailers put perception/reputation higher than customer satisfaction – with 76 percent very important vs 60 percent rating customer satisfaction very important.
While manufacturers also consider it very important to deliver customer satisfaction data on purpose initiatives to the retail channel, they feel it is equally important to deliver reputation/perception data. These two measures are equal when all regions are combined – with the UK and Asia placing customer satisfaction measures in the forefront and the US, Europe and Germany putting a greater emphasis on perception/reputation.
￼￼Manufacturers’ Purpose Initiatives Meet Customer, Leader and Shareholder Expectations
Even though manufacturers are not working directly with consumers, their customers are. And that relationship is still important. The manufacturers’ purpose initiatives help not only create a better reputation and relationship with the retail channel, but they also help build and maintain the manufacturers’ brand reputation, which will enhance value and stimulate sales. Manufacturers deliver on sustainability and social requirements in a large part to meet the demand from both customers and the consumer. They also recognize their leadership’s mandate and, in the case of the US, acknowledge demand from investors and shareholders.
￼￼Manufacturers also use purpose when building business with new prospects in the B2B channel. They use these initiatives to showcase commitment to corporate responsibility/citizenship (68 percent), demonstrate compliance on key environmental and social issues (66 percent), add dimension/depth to corporate reputation (61 percent), and to differentiate from competitors (57 percent).
In the US, manufacturers are much more likely to share their commitment to purpose during business development pitches.
￼Sky High Channel Expectations
￼Retailers have high expectations of manufacturers... while manufacturers have high expectations right back. Both consider purpose initiatives pretty close to mandatory. Sixty- one percent of all retailers polled considered sustainability and social initiatives mandatory for manufacturers to have (a score of 4 or 5 out of 5, where 5 is labeled mandatory). On the same scale, 58 percent of all manufacturers consider it mandatory for their customers – the retailers – to have purpose initiatives in place. Most regions are fairly well aligned on these expectations.
However, Asia has even higher expectations for their B2B counterparts – with 75 percent of Asian retailers rating the expectation 4 or 5 out of 5 and a whopping 85 percent of Asian manufacturers holding retailers to that level of compliance. Germany is the least stringent – with only 40 percent of retailers and 44 percent of manufacturers calling purpose initiatives mandatory.
Environmentally sound operations – measures like carbon emissions and water usage – top the list of areas of focus that are included in retailers’ purpose requirements. This is especially true in Asia, with 67 percent reporting inclusion. That measure, as well as community-focused initiatives such as charitable donations and volunteerism, are equally and more frequently included in manufacturers’ requirements.
Social impact initiatives that tie to a company’s focus are also measured by a large percentage of retailers but not as much by manufacturers. In the US, environmental measures – those tying in with a purpose focus and operational measures – are measured more often than the global average by retailers, and even more so by manufacturers.
￼ Implications: How to Increase Your “Return on Purpose”
This study serves as a starting point for conversations between retailers and manufacturers about the role that purpose plays in the supply chain relationship dynamic. When retailers and manufacturers align expectations and partner to evolve environmental and social efforts, together they will realize a higher return on their investments in purpose.
￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼Purpose Today Is Critical for Business and Relationships
Purpose initiatives are no longer being driven as nice-to-do responses to vocal consumer demand. Instead they are based on addressing strategic business factors like enhancing reputation, delivering results and nurturing growth. For manufacturers, the top reason for integrating purpose into the business is ROI on corporate reputation (75 percent). Retailers do it to stay competitive in the marketplace (73 percent). Consumer demand ranked 7th out of 8 drivers for retailers and 6th of the 8 for manufacturers. With that said, the consumer is still at the center of many of these business objectives – just in a much more strategic way – driving business results.
￼￼￼Cross-functional Support￼and Culture Drive Success
￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼Purpose strategies start at the top, but must also engage key players across the company and be embedded into culture. While C-suite leadership and investment continue to be critical to success, it’s now equally important to engage a cross-functional team to achieve the full potential of these programs. At least 70 percent of global retailers and manufacturers say C-level executives, marketing, external relations and operations drive purpose strategies. But fewer than 6 in 10 retailers include HR/employees and legal/regulatory as drivers of purpose integration – even though these functions are often at the front lines of building support for implementation and managing potential risks to reputation.
Employees are under-represented and under-appreciated in this study. Manufacturers and retailers will be well served to consider ways to increase the role staff plays in developing purpose strategies and bringing them to life for their organizations. These players are the front-line ambassadors and the company’s overwhelming face in the community. There is also much research that shows that purpose initiatives increase the value employees place on their workplace, such as the Deloitte Millennial Survey 2016. And if they are embedded in the development, execution and showcasing of a purpose agenda, their pride in doing so will drive real value to the organization.
￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼Communicate ￼Progress and Results
￼￼Your company must prioritize more transparent and consistent communications to all audiences about the impact of the organization’s purpose-driven efforts on business and on society. A top barrier to integration of purpose into a company, particularly for US and European retailers and manufacturers, is lack of communications to external audiences. The functions responsible for communications, marketing and sales should be engaged in the purpose-driven strategies to ensure that results and progress – both successes and challenges – are shared with key stakeholders. The end goal is to increase understanding of the value of social purpose-driven investments on sales and society, and with understanding increase the valuation of the company and its reputation.
￼￼￼￼Consumers Still Matter
Don’t jump to the conclusion that the end-consumer isn’t critically important. Despite the surprising findings in this study, the end consumer still matters and cares – especially as we see the marketplace increasingly dominated by millennials and Gen Z, both of which put purpose at the center of purchasing and employment decisions.
Retailers will be looking to manufacturers for ways to increase the integration of purpose into their offerings, without sacrificing margin or profit. This means manufacturers will need to find ways to build social purpose into goods and services, versus adding on a feature that delivers minimal value for both retailer and consumer.
Measure Purpose Initiatives
Retailers and manufacturers across all regions are frustrated by measurement. While 64 percent of retailers believe purpose-driven initiatives are critical to long-term growth, 4 in 10 say it makes sense to invest only when measureable ROI can be delivered. Your company should focus the scope of its purpose-driven initiatives on social and business impacts that are meaningful to the organization and stakeholders, and then clearly define measurement criteria before starting each engagement. As partners in the supply chain, retailers and manufacturers need to work together to define and prioritize shared metrics to increase relevance and return for both parties. Given that consumer satisfaction is cited as a top metric, and that both retailers and manufacturers prioritize other drivers well above consumer demand, there is room to convene a discussion on shared benchmarks and measurement methods across the supply chain – including measuring consumer satisfaction.
￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼￼Partner Across the Supply Chain ￼
Both retailers and manufacturers recognize that social purpose drives business growth and societal impact. And both face similar drivers and barriers to implementation and results. The next step for both parties is to reach across the supply chain and work together to identify shared goals, assets and approaches. Dialogue and partnership between retailers and manufacturers will increase relevance, providing the foundations to integrate and amplify the power of purpose strategies beyond the boundaries of each individual organization.