The business of going green

Withdrawing plastic bags, promoting greater diversity – the business of doing good is growing. But is it a genuine change for the better, or just another way for companies to reach into our wallets? Rob Mitchell reports.

Twenty billion dollars is a lot of green. It’s how much the planet’s top 500 companies spend on corporate social responsibility (CSR) each year.

That’s the stuff they like to tell you a great deal about – social and environmental initiatives, donations to charity, volunteer work in their communities and a greater focus on ethical supply chains and sustainability.

Sometimes they genuinely mean it; sometimes it appears to divert attention from less green endeavours; and sometimes the warm fuzzy is simply another way into your wallet.

New Zealand is no exception. Supermarkets are pulling the plastic from the checkouts and increasingly the shelves; they’re also looking to ban caged eggs and make a stand against ‘‘period poverty’’ by offering discounted women’s sanitary products.

Mitre 10 and Bunnings, among other initiatives, are phasing out insecticides that threaten our bees, and other companies are committing to do much more.

Sustainability, the circular economy and social licence have graduated from buzzwords to the boardroom, with businesses incorporating these initiatives and many more into their strategies, and hiring people to make sure it all gets done.

Academic Nitha Palakshappa sees a real, meaningful trend on the back of consumer pressure and civil activism; Greenpeace boss Russel Norman agrees, although he also sees plenty of green-washing, in which businesses exploit both the environment and then our heart-strings to encourage us to look the other way.

Both believe that industries are increasingly taking the lead from a retreating Government.

Kiri Hannifin, general manager of corporate affairs at Countdown, thinks it’s simply good business; companies responding to customers’ concerns about impacts on the environment and elsewhere. She’s charged with steering the firm’s efforts in sustainability and CSR, and she’s quite proud of the work.

‘‘We’re pretty environmentally minded at the executive level,’’ she says. ‘‘Broadly and in principle, we believe that being a values-based, purposeful business is good for business, no matter which way you look at it: cost of doing business, reduced waste, attracting and retaining employees . . .’’

The supermarket chain appears to be putting its money where its mouth is. Initiatives such as pulling plastic bags and cutting the cost of sanitary items might garner more engaged employees and environmental awards, but they are not strictly commercial decisions.

‘‘There’s no money in bags for us, not a single cent; it’s an extremely expensive thing to do, to change checkouts,’’ says Hannifin. ‘‘One of our bags you buy for $1, use it for as many times as it lasts, bring it back and we’ll replace for free forever; there’s no money in that. Some of the decisions we make are not commercial decisions at all, like reducing the price of tampons.’’

It’s doubtful there’s much money in boosting the number of female executives, getting a Rainbow Tick for LGBTI inclusion or incorporating unconscious bias training either, but that’s what the business has committed to do by 2020. They are among 20 pledges that align with the United Nations’ sustainable development goals.

Hannifin bristles when asked about the business case for pursuing such pledges.

‘‘We don’t quantify it like that,’’ she says. ‘‘We’re doing it because we think it’s the right thing to do.’’

Mitre 10 chief executive Neil Cowie agrees. Along with competitor Bunnings, the home hardware and gardening chain is phasing out products containing neonicotinoids because studies have linked the chemicals with declining bee populations.

‘‘The information coming through was . . . yes, there is potential damage being done here and there is a case to be answered,’’ says Cowie.

It will start pulling dozens of affected products from the shelves of its 82 stores in November. The hunt is on for suitable alternatives.

Like the plastic bags it scrapped some time ago, its efforts to source sustainable timber, the office it opened in Asia to monitor its products, and the factory visits and third-party audits to ensure an ethical, transparent supply chain, the decision to pull products is not a commercial one.

‘‘There’s always issues that pop up and, if I do the business case today, it ain’t gonna stack,’’ says Cowie. ‘‘You can wait until the mainstream starts to shift, but if you want to be a leader then sometimes you have to take those leaps of faith.

‘‘Our social licence means that we need to play our part,’’ he says. ‘‘For us it’s also about focusing on the long term.’’

He’s not wrong to compare it to a leap of faith, because there’s not a lot of evidence to show good works make good commercial sense.

Two studies conducted last year, in the Netherlands and Taiwan, established a good link between CSR and customer loyalty and retention.

The Faculty of Economics and Business at the University of Groningen researched 93 brands in 18 industries, including telecommunications, banks, insurance firms, department stores and supermarkets.

It found CSR ‘‘has a positive effect on customer attitude, which

in turn predicts actual customer retention two years later’’, especially for brands perceived to be innovative.

Feng Chia University’s Department of Marketing went further. It looked at whether consumers would reward a company’s good works with cash.

Its findings revealed that ‘‘CSR associations and environment efforts not only left consumers with a positive attitude and emotional attachment toward the retailer, but also generated positive behavioural intention at both product and store levels’’.

Other studies and surveys conceded that there were potential benefits in attracting and retaining good workers, improved community engagement, a greater focus on innovation and efficiencies, and waste minimisation.

But the research was less emphatic about improvements to the bottom line.

Cristiana Manescu, at the University of Gothenburg’s School of Business, Economics and Law, wrote of her 2010 study that ‘‘the results reveal that CSR activities do not generally have a negative effect on profitability, but that in the few cases where they have a positive effect, this effect is rather small’’.

The Florida Atlantic University’s College of Business was even less impressed. It found ‘‘that emphasising CSR is not good for shareholders’’ and that investing time and money in social and environmental initiatives was often at the expense of more revenue and profit.

Social responsibility, it said, could actually reduce a firm’s overall performance.

There’s a risk, too, of businesses trying to do the right thing getting too far ahead of their customers, even when it’s the customer doing some of the pushing.

Australia’s giant Coles supermarket chain banned singleuse plastic bags on July 1, in line with state government law changes and apparent customer sentiment. It charged shoppers 15c for reusable bags.

But some customers balked, so the chain dropped the charge, earning the anger of environmental groups.

Its biggest rival Woolworths stuck to its guns on charging for

bags and took a big hit on customers and share price.

Coles showed that lofty social and environmental goals carry a risk.

Back in New Zealand, Countdown and other supermarkets have a plan to ban eggs from caged chickens by 2025. That could make eggs too expensive and alienate some customers.

But should it be the role of our businesses to take the lead on various societal objectives and agendas?

If so, what of chicken meat from suppliers who are not free-range? Or milk from producers accused of dirty dairying?

Various lobby groups would love to see sugary drinks and treats pulled from shelves to battle obesity, and tobacco yanked because of its well-established links to cancer, death and many deplorable statistics.

‘‘At the very principled level, tobacco is a legal product, like

alcohol, and we sell it,’’ says Hannifin. ‘‘With tobacco, what we know now is that sales are going right down, smoking is on its way out.

‘‘On sugar, I’m working with the industry as a whole with the government about how we as a food and grocery sector in New Zealand can help with obesity levels and what is our obligation and responsibility as a business and what can we do for reformulation, labelling, helping our customers make healthy choices, lowering the price of fresh fruit and vegetables.’’

That’s likely to be music to the ears of people like Greenpeace executive director Russel Norman.

He sees a ‘‘growing consciousness among consumers about environmental issues’’, on the back of ‘‘decades of campaigning by the environment movement’’.

‘‘I think the way change happens, civil society groups campaign on issues, you get changes in direction among people,

that then creates an appetite for consumers, which businesses respond to and also for political parties to respond to.’’

Despite that progress, there’s still a long way to go in combating climate change, improving energy use and minimising the impacts of agriculture, he says. His caution is understandable when you consider that the $20b spent by the globe’s top 500 companies is just 0.06 per cent of the $30 trillion they’ll make in revenue.

And green-washing continues, he says, despite the growing awareness of smarter consumers.

‘‘The fishing industry is probably one of the most egregious examples.

‘They promote themselves as environmentally sustainable and yet what we’re seeing in the industry is incredibly destructive environmental processes . . . misreporting, bottom trawling,

drowning thousands of seals, dolphins, albatross, you name it.

‘‘Their response is not to change their practices, it’s to run a TV green-washing ad campaign.’’

Norman believes the Government should be playing a bigger role in helping busy consumers better understand that tide of misinformation and the motives behind it.

It is the ‘‘missing part of the picture’’, he says. ‘‘In all of this, what’s really important is there’s a critical role for the government as regulator. We rely on them to enforce a series of mandatory environmental bottom lines.’’

Academic Nitha Palakshappa says businesses, pushed by smarter consumers, have increasingly taken the lead.

‘‘I think what we’ve seen in the research is that the government has sort of backed off and the responsibility in many respects is shifting,’’ says the Massey University senior lecturer in

marketing, communications and journalism.

It’s a change that has been decades in the making, building on New Zealand’s already strong community spirit – ‘‘we have always been high in terms of charitable donations’’.

‘‘But what is happening is that CSR is becoming far more strategic,’’ says Palakshappa. ‘‘It’s becoming actually embedded in the organisational strategy; it’s not something happening off to the side, it’s something that is becoming inherently part of their day-to-day business and how they conduct themselves.’’

She too believes there’s a long way to go, and consumers ‘‘can do a lot more in terms of voting with our actions as to what we buy, how we buy and how much we buy and that’s really important.’’

But they remain the vital force. ‘‘We’re going to see more and more change because we’re going to help drive that change.’’

‘‘What’s really important is there’s a critical role for the government as regulator.’’ Greenpeace NZ executive director Russel Norman