Taylor Gray, Ph.D.
The world is a better place when companies are good corporate citizens. I remain focused on developing meaningful and actionable insights from empirical data in pursuit of a better world.
We have developed Motive from a fundamental belief that the world is a better place when companies are good corporate citizens and that consumer demand is the most important force in driving companies to become better corporate citizens (a worldview we know as Democratic Capitalism).
"The critical element in unlocking the transformative potential of corporate citizenship comes down to how a company’s approach is communicated to, understood by, and engaged by consumers."
As we previously explored, corporate citizenship is not a guarantee of a better world but it is a force which shows greater promise and potential of leading to a better world. This promise and potential is developed, or fails to be developed, based on how each company develops their own approach to corporate citizenship and how consumers choose to engage with companies in relation to these approaches.
Communicating Corporate Citizenship
The critical element in unlocking the transformative potential of corporate citizenship comes down to how a company’s approach is communicated to, understood by, and engaged by consumers. Good corporate citizenship is not as simple as developing an appropriate culture and structure of such, but rather in having an appropriate culture and structure acknowledged and engaged as such by consumers, and hence by society.
For context, I am not a good neighbor because I believe myself to be a good neighbor, rather I am a good neighbor when my neighbors believe that I am a good neighbor. In this vein, a company is not a good corporate citizen because it claims to be one but rather because consumers recognize it as a good corporate citizen. One’s place in society is built from communication, understanding, and engagement with others rather than self-styled titles and proclamations.
Communicating corporate citizenship is of paramount importance for both consumers and for companies themselves. There are three broad categories of communication failures which carry different consequences for companies and for consumers.
Communication Failure #1: Image Washing
Image washing occurs when a company invests more in image than in substance, often even invoking misleading statements and projections. A company may know that consumers want to see action on issues of environmental sustainability or social justice and equality, as examples. The company may also know that it stands to gain more customers if people believe it is taking such actions, or inversely, it stands to lose customers if people do not believe it is taking such actions. In these instances, the company has the choice to meaningfully engage with the expectations of consumers and put in the work in developing cultures and structures meeting consumer interests; or, the company has the choice to carry on operating as it is but invest heavily in image management to try and convince consumers that it is taking meaningful action even though it isn’t.
"Image washing may benefit a company in the short term as it can leverage the good will of consumers without needing to commit to actually doing any of the work."
Image washing is often color-coded. The most common type is that of greenwashing wherein companies seek to rebrand as being environmentally sustainable even though no meaningful changes have been deployed within their operations. Whitewashing follows this same pattern but is often applied to all non-environmental issues--misleading image management to offset occurrences of labour abuses, discrimination, inequality, and so on. Lastly, bluewashing is the case of a company seeking to align its image with the efforts of the United Nations and its various programs and agencies in the hopes that the good-will engendered by the international organization will provide a protective umbrella from criticism.
Image washing may benefit a company in the short term as it can leverage the good will of consumers without needing to commit to actually doing any of the work it is believed to be doing, yet it is a disservice to consumers which ultimately harms the company over the longer term.
BP, one of the world’s largest oil and gas ‘super-majors’, remains one of the clearest examples of greenwashing today. The company, formerly known as British Petroleum, rebranded simply as BP, with the initials alluding to the new slogan of ‘Beyond Petroleum’. Extensive marketing campaigns sought to represent the company as being attuned to the environmental interests of consumers within a world increasingly marked by climate change and pitched the company as progressing from being an oil company to being an energy company. Yet the company’s responsibility for the largest oil spill in Britain, the largest oil spill on Alaska’s North Slope, and the largest marine oil spill in the history of the petroleum industry along with over-promised investments in renewable energies and the ruling of a record setting OSHA fine for its role in the Texas City Refinery explosion all combine to undermine the company’s marketing claims. BP’s greenwashing is apparently so egregious that, not content to simply boycott the company, some consumer groups are now challenging the company in court over its unsubstantiated and misleading marketing tactics.
Communication Failure #2: Halo Effect
The second failure of communication is that of the Halo Effect, and although typically less nefarious than image washing, nonetheless serves as a disservice to consumers and, potentially, to companies themselves over the longer term.
"Good corporate citizenship would suggest one should not take credit for what one has not actually done."
The Halo Effect takes advantage of our human nature to extend our positive feelings of one, or a few, specific elements and apply them across a whole. We often assume that an organic food we like is better for us and is likely made by a company committed to being ‘good’--we have positive feelings with the concept of ‘organic’ and then extrapolate these feelings to all other aspects of the product, including the company that made it, even though the concept of ‘organic’ does not necessarily apply to any of these other aspects.
As a thought experiment, briefly consider McDonald’s Restaurants and Panera Bread and now ask yourself which one is most likely to have the more developed environmental responsibility program. Based on actual empirical data we have reviewed, the answer in McDonald’s Restaurants--and significantly so. Yet, when we asked this question amongst ourselves, we all voted for Panera Bread--we all had more positive feelings about the family-style restaurant and cooking at Panera Bread than we did about the fast and convenient approach of McDonald’s Restaurants and we implicitly, and erroneously, extended these positive feelings to all aspects of the company. This is the Halo effect in action.
In the case of image washing, companies actively mislead consumers but in the case of the Halo Effect, companies simply do not seek to correct consumers from misleading themselves. Although companies can benefit from this and gain favor with consumers without needing to meaningfully engage in certain areas, good corporate citizenship would suggest one should not take credit for what one has not actually done. The risk is real for companies that seek to benefit from the halo effect--as a consumer I do not want to feel misled, whether by the company or by myself; and if I do feel misled then any positive feelings and association can quite quickly turn negative.
Communication Failure #3: Hyper-Focus Trap
The third failure of communication is one that we refer to as the Hyper-Focus Trap and is typically a greater disservice to good corporate citizens than it is to consumers. In this setting, a company may have developed a broad and holistic approach to corporate citizenship yet be particularly enamored with one, or a few, specific initiatives. From this intense interest grows the assumption that all consumers must naturally also be equally interested in these issues. At this point, the company becomes so focused on communicating their commitment to, and developments within, these specific issues that they neglect to communicate all other aspects of their approach to corporate citizenship.
The trap here is that a company which has developed a very thorough and wide-reaching approach which could be of meaningful interest to many consumers all with varying interests is instead understood as being a company pushing a special interest which may only be meaningful to a specific subset of consumers.
To put this in context, consider the case of Adidas shoes and clothing. Through the company’s website, you can filter the products according to not only size, price, color, collection, and so on, but also according to ‘sustainability’ (see here). This is impressive because it is one of the first instances of such a large brand making it so easy for consumers to align their purchases with their interests.
The trap, however, is that when you review what Adidas includes in their consideration of ‘sustainability’ you would believe it was only about the use of recycled materials in their products. If the use of recycled material is of interest to you and is a consideration that shapes how you gauge a company’s degree of corporate citizenship then this new product filter is great. But what if my interest in sustainability was more focused on labour conditions, supply chain dynamics, social justice, and climate change? This new 'sustainability’ product filter would leave me wondering if Adidas was really even concerned with any issues or if it was simply another case of greenwashing.
This is truly unfortunate as, based on the empirical data we have reviewed, Adidas is one of the leading companies in athletic footwear and fashion across a wide variety of elements which could be of interest when considering corporate citizenship. The company doesn’t only address the use of recycle materials, but also its contribution to climate change, labour relations, supply chain dynamics, employment diversity and equality, community development, water conservation, material sourcing, government relations, and so on. Rather, it just so happens that the company has become hyper-focused on recycled materials right now. As a consumer wanting to support companies which align with my interests and my vision of a better world, I would be better off buying from Adidas than I would from nearly any other company in this sector. But I wouldn’t be aware of this as the information and data I need to make this decision has been obscured by the company’s hyper-focus on its most recent environmental commitment.
"It is remarkably difficult for consumers to make good choices--the balance of information is simply not in our favor."
Supporting Consumer Power with Better Information
As we said at the open, good corporate citizenship is not as simple as developing an appropriate culture and structure of such, but rather in having an appropriate culture and structure acknowledged and engaged as such by consumers, and hence by society. Communicating corporate citizenship is of paramount importance for both consumers and for companies themselves. One’s place in society is built from communication, understanding, and engagement with others rather than self-styled titles and proclamations.
The world is a better place when companies are good corporate citizens and consumer demand is the most powerful force in driving companies to be good corporate citizens. Yet this relationship must be fueled by credible and accessible information in order to unlock any transformative potential.
The relationship is harmed when companies purposefully mislead consumers. The relationship is harmed when companies allow consumers to implicitly mislead themselves. The relationship is harmed when companies accidentally mislead consumers even through the best of intentions. In this landscape, it is remarkably difficult for consumers to make good choices--the balance of information is simply not in our favor.
At Motive, we remain dedicated to leveraging empirical data to empower consumers to identify image washing, to not lead themselves astray under the halo effect, and to not miss an opportunity to engage a company which aligns with their interests. We remain dedicated to returning balance to the relationship.
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