Growing consumer awareness of and engagement with social issues have shifted the goalposts for business success today.
Look back at the past decade and you will notice big shifts in how we communicate, how we shop, how we commute, how we travel and what we eat. Many of the products and services we cannot imagine living without today did not even exist a decade ago. As we wind up a fifth of the twenty first century, one thing that is absolutely clear is that a business as usual approach no longer works for business.
For a long time, the prevailing view was that business exists only to make profits and that it does not have any social responsibility. This Friedman doctrine is now losing relevance as brands compete to appeal to the value systems and beliefs of customers. This is more relevant for companies with consumer facing brands. Such companies face more scrutiny and investigation for their products, services and supply chains. Companies are also understanding these pressures and rationalising them as risks for their long-term existence and growth. It is now widely understood that companies need to be more responsible.
Understanding growth purely in financial terms is flawed. The binary view of the stock market does not measure true growth. In the last two decades, the meaning of growth has expanded. In 2019, 181 CEOs of American corporations endorsed a statement indicating a commitment to end shareholder primacy. The statement redefines the purpose of business by putting customers, employees, suppliers and communities before shareholders in delivering value. However, this statement was received with a fair amount of scepticism and mostly perceived as empty rhetoric.
Companies in India, with the exception of a few large ones, continue to locate their corporate social responsibility in a very narrow sense, outside core business operations. The Edelman Trust Barometer has shown a consistent increase in people’s expectation from business. In 2019, it shows that 76% of people expect CEOs to take the lead on change rather than waiting for governments to impose it. The fact that brands have started experimenting with ‘woke’ marketing indicates that these trends have serious business implications.
Indian consumers today love the idea of big brands and positively engage with the idea of consuming but are largely indifferent about social responsibility of companies. The good news is that this has started to change as individuals begin to question issues with impact beyond their personal universe. Until now, the way individuals engaged with a larger issue and the manner in which they related with brands did not always intersect. However, social media is now aiding consumers’ engagement with companies on issues such as religious discrimination and sexual abuse.
Public awareness on the climate crisis through lived experiences of air pollution and water scarcity issues is quite high. Global cooperation on frameworks such as the Paris Agreement and campaigns such as Greta Thunberg’s Fridays for Future will make business action on climate issues the new normal.
Increasing polarisation of people based on ideologies, beliefs and identities is giving rise to counter-narratives on the value of plurality and diversity. Consumers are becoming increasingly aware and vocal on issues of discrimination based on gender, ethnicity, caste, and more. This will have implications for how companies engage on such issues.
The 2019 International Lifestyle Survey by Euromonitor shows that ‘environment friendliness’ of brands is influencing 67% of shoppers. The recent push to end the use of single-use plastic saw several Indian companies committing to eliminating this material. Natural and organic is another trend that is making strides in the market. There is an upsurge in natural and organic alternatives in the clothing and food sectors. It is interesting to note that, in addition to large companies offering these variants, several smaller companies are entering this space and capturing market share fast.
But sustainability is about much more than environmental friendliness and organic materials. Over 90% of the workforce in India is employed in the informal sector. Violations of labour and human rights in the informal sector are alarming in sectors such as textiles, food, automobile, and more. Consumers are largely unaware of the conditions under which goods and services are produced. Companies selling products and services to end consumers are not transparent about their supply chains. Civil society organisations have a crucial role to play in highlighting violations of human and labour rights in the supply chain, as well as demanding accountability of companies.
One thing is clear: it is not going to be business as usual in the decade ahead. Companies of the near future will have to be very adaptive, listen to their stakeholders and be purpose driven. Their success on these parameters will determine their health, relevance and longevity.