Building a brand solely on social impact is not a guarantee for success, and it comes with risks that can take businesses by surprise - published by Stanford Social Innovation Review, March 16 2016.
These days, businesses that put their social mission in the spotlight are taking the world by storm. But building a brand solely on social impact is not a guarantee for success, and it comes with risks. Social enterprises and other businesses should consider these five points before making social good the star of their show.
1. When a business’s impact model comes under fire, the entire business can suffer.
To make their social impact clear cut to the public, businesses often simplify transactions: A purchase means another product is donated to someone in need, or the percentage of a sale goes to a good cause. But it’s not always so simple, and when this social impact model comes under scrutiny and is intertwined with the brand, companies risk of losing credibility and sales.
Tom’s Shoes is a well-known case in point. Tom’s has built its business on the now much-replicated buy-one give-one model, resulting in more than 35 million pairs of shoes donated to children across the world—one for each pair sold through its commercial channels. The company has put buy-one give-one at the front and center of its brand—an easy-to-understand impact model its customers love to support and be associated with. But in recent years, Tom’s philanthropic model has garnered criticism pointing out that products donated to developing countries often distort the local markets, undercutting local suppliers and contributing to unemployment. The company has faced headlines linking it to social harm—the exact opposite of what it set out to achieve. Tom’s is developing a new impact model—one that addresses these issues—but it will be far less easy to capture in a four-word phrase.
2. Consumers may not value what a business thinks is socially valuable.
Many businesses aiming for impact put a social issue at the center of the story of their brand. But in some cases, they might be better off not mentioning it at all and instead focusing on product benefits.
In 2008, for instance, Indian mega-conglomerate Tata Group launched the Nano, a “car for the masses” priced at $1,500. It proclaimed its vision of an India where even the poorest could afford a car. The project failed to meet expectations, partly because no one was willing to buy what everyone else saw as a car for poor people. By contrast, the Kenyan mobile payment system M-PESA has made an invaluable social impact by providing people at all income levels with a money-transfer service, effectively creating a bank for everyone. Though it has advanced the lives of millions, M-PESA simply promotes itself an effective, cheap, and safe way to pay bills and receive payments. If M-PESA labeled its customers as “bottom of the pyramid” and its product as a way to “rescue” them from poverty, it would likely make the brand far less attractive in the eyes of its intended consumers.
3. The impact a business is working toward may be harder to achieve than it thinks.
Consider: A company starts with a great social mission and shouts it from the rooftops. But a ways down the road, it finds that accomplishing that mission is much more complex than it could have imagined, and it can’t deliver on its promises.
Tony’s Chocolonely started off in 2005 as an ambitious Dutch chocolate manufacturer that aimed to end the exploitation of slave labor in its supply chain. The original label on its chocolate bar wrappers featured a pictogram of a breaking chain, with the words “100 percent slave-free.” Over the next few years, Tony’s realized it couldn’t guarantee this claim (nor could any other company in the industry) and changed the labels. They now read, “Working together to become slave-free,” and the company hopes to achieve its original mission next year when the origins of cacao butter will finally be traceable. The brand has been open about the problems it faces in the global chocolate trade and even shares articles critical of their long journey towards slave-free on Facebook. While the popularity of the brand has not suffered (today it is the third-biggest chocolate brand in the Netherlands), it is safe to assume that Tony’s is the exception to the rule. A similar scenario could easily put another company out of business.
4. A brand based on goodwill can forget to compete on quality.
Branding something first and foremost as socially or environmentally good might end up distracting some businesses from delivering the best product or service it can deliver. Even if a business successfully sells a feel-good product or service to a consumer, that feel-good effect won’t be enough to keep them coming back if the product is sub-par. This sounds obvious, but many organizations depend on good intentions to keep them afloat.
5. Social and environmental impact won’t be differentiating forever
Times are changing, and soon competitors in every market will be able to claim the same mission for impact. Today, amid big banks rocked by scandal, a small, ethically driven bank that invests only in sustainable or social impact funds is set to catch people’s eye. On supermarket shelves packed with mass-produced foods, organic, handmade products stand out. But as time goes by, many more companies will incorporate social and environmental responsibility in their messaging, and in the long term, relying solely on this aspect of brand as an advantage over others is risky.
Businesses should consider a multi-value approach. What are other differentiating qualities? If a company delivers micro-credit to the base of the pyramid, is it the best at service or does it offer the lowest rates? Does it also offer free personal finance classes? Businesses need to give people a reason for why they should choose their product or services over another’s.
Putting social or environmental impact at the heart of a brand is often an instinctual move when developing products or services designed to create change. But it’s not a failsafe strategy. Businesses must consider their consumers, market, and positioning before building a brand. If the goal is to create real impact, companies might achieve that sooner through playing it down.