Brands Need Social Sustainability to be Truly Sustainable

By Hernan Vargas

A 2012 Sustainable Brands survey found that the “corporate citizenship reputation” perception of the largest 100 global brands/firms declined even when the analytics and technical evaluation of their sustainability programs showed real increased performance over the previous year. The survey was produced by CRD Analytics, an ESG research firm, and Brandlogic, a global branding firm.

David Schatsky from Sustainable Brands builds on a previous article by Aaron Berstler published back in October 2012 that showed the apparently puzzling results of this survey on corporate sustainability performance.

It’s important to note that the CRD Analytics dataset largely adheres to the Global Reporting Initiative (GRI) G3.1 guidelines. It’s also important to mention that the survey is not random, since the research firms interviewed investment professionals, executives and the students of MBA programs in six countries (U.S., UK, Germany, Japan, China and India), arguably a well-educated and, let’s call them, “informed” public in terms of what sustainability is (or should be).

I believe the real reason behind that apparent disconnect in the minds (and, I guess, hearts) of the global informed public may be in the paragraph where Schatsky writes that both in 2011 and 2012 the study found that social factors were twice as important as environmental ones in determining the relative reputation of a firm’s “corporate citizenship.”

My take is that the global public is not seeing the connection between what companies call “sustainability” and what the public seems to expect to be the result of sustainability. Even though, as Schatsky states, there seems to be an ongoing debate in the sustainability professional community on what sustainability truly stands for, I think we just need to go back to the original 1987 Brundtland Commission Report that coined the term "sustainable development." In that report, social equity was included as an integral part of intergenerational equity, probably the key takeaway behind the Commission’s principles and work.

Social aspects, therefore, were originally envisioned to be intrinsically part of any complete sustainability effort (and appear to be a big part of the expectations, at least in the minds of the informed public, of what sustainability is).  So as per the aforementioned Brundtland definition of "sustainability" development, and hence, the social values, social outcomes, institutions and social organizations and issues partaking in it, are an integral and inseparable part of the whole, the so-called “Triple Bottom Line” framework that sustainability programs should yield as outcomes.

The evidence is clear that society at large may not fully appreciate the “sustainable” programs as practiced and emphasized by businesses. In particular, they are suspicious of some major large corporations and brands because they don’t seem to include, or actually simply fail to include, social sustainability aspects that society expects to be part of what should be called “sustainability.”

In 2007, the study conducted by The Hartman Group and Tinderbox, two strategic consulting and sustainability marketing research firms based in Seattle, found exactly the same conclusions as the surveys reported by Sustainable Brands in 2011 and 2012. For the American public, too, favorable sustainability perception has been more positively correlated with companies that show strong elements of social sustainability as part of their “way of doing business” rather than a single-minded focus on environmental sustainability.

As the 2012 CRD Analytics/Brandlogic survey states, “green” seems not to be the same as sustainable. In the minds (and hearts) of the public, sustainability tends to connect with them personally mostly through a direct personal and/or social experience, channel or conduit to which they can relate (like how companies treat their own employees), not primarily through an environmentally-only focused lens.

Why is this important for practitioners of sustainable management? Because I believe 2013 is a critical year for sustainability as a valid mainstream business strategy, and it is incumbent upon us to make sure we agree on what it means from the perspective of the ultimate beneficiaries of it - the general public and citizens of the world. For example, if we want to refer to certain firms, businesses and brands as role models for what sustainability is about, we’d better discuss what consistent role models we want to refer to for the world to see and use as a valid benchmark.

A recent, and tragic, real-life example can help us clarify the issue: the November 2012 Tazreen fire that engulfed a Bangladesh apparel factory for a subcontractor for major western firms (involving, among others, Walmart and Disney, two well-known global firms and brands), killing 112 workers. In the aforementioned 2012 Sustainability Leadership survey, Walmart is graded or ranked as a “Laggard,” while Disney is ranked as a “Leader.”

Francesca Rheannon, in her excellent article at CSR Wire on the Tazreen tragegy in Bangladesh, which she properly compares to the 1911 Manhattan sweatshop fire, reports the ongoing efforts to turn the global apparel supply chain, which seems rife with unsustainable practices, into a sustainable one.

Large retailer firms like Tchibo from Germany are already investing, developing, and implementing employee-oriented and cost-effective programs for workers’ safety involving independent third parties and workers’ unions, financing for remodeling and compliance, and binding enforcement clauses, signed on with the Bangladesh government. Walmart allegedly refused to sign such initiative in 2011. And then, a year later, the Tazreen fire hits Walmart hard. Walmart has lately been used in several prominent ways as an example of “sustainability,” even in college textbooks, in sustainability events, in American media, and the like. To what extent is it that this company and brand are an example of “sustainability” we can all refer to and to what degree?

Walmart rejects the idea that it did not want to agree to finance the new program proposed in 2011, but it just didn’t explain what different approach they tried to take or are going to take, even after seeing that its current compliance program, in place since 1992, seems to have failed to achieve, by its own admission and by all reasonable metrics, real improvements in workers' safety or in general, to set standards followed by the majority of the apparel industry in Bangladesh. In spite of the cooperation and collaboration offered by the Bangladeshi government, no different venue or program appears to have been tried by Walmart after that 2011 meeting, other than continuing the mostly reactive compliance techniques pushed onto manufacturers and licensees.

This essay will continue in Part 2 – Unsustainable business environments call for more strategic sustainability engagement – why was a company like Walmart so exposed?

Hernan Vargas has been involved for years, in a financial role, with the AC Transit teams that developed and implemented the strategies that eventually led to winning the 2013 GEELA California Governor’s Environmental Award, the highest environmental honor in the state. He was instrumental in valuing PPAs, an innovative financing structure for tax exempt companies, in support of the agency’s push to investing and using renewable energy technologies in its operations. Hernan has embraced social finance and social entrepreneurship as his new professional “home.” He started a nonprofit back in 2009 to help accelerate sustainable small business development in underserved, disadvantages communities, and has participated in several national, state and regional efforts to create a new financing and capital formation system that promotes sustainable development, and to foster social inclusion as part of workforce development strategies in the formation of emerging clusters of sustainable industries.