Corporate Social Responsibility and Sustainable Marketing: What is Sustainable, Anyway?
“Sustainable!”
“Eco-friendly!”
“All-natural!”
These words are hard to miss in today’s products. As Anders Fogh Rasmussen, former Secretary-General of NATO and founder of the Alliances of Democracies stated, “Business as usual is dead. Green growth is the answer to both our climate and economic problems.” His philosophy is reflected in our current economy. As the climate crisis worsens, consumers today have grown increasingly aware of environmental concerns. Businesses have had to revamp their marketing strategy to appeal to consumers’ changing preferences and lifestyles, leading to the emergence of sustainable marketing (Saxena and Khandelwal).
Introduction
To examine sustainable marketing, one must understand how marketing relates to consumers. Marketing refers to the actions a company takes to create, communicate, and deliver valuable content to consumers in order to promote their products and services including selling, delivering, and advertising (“What Is Marketing?”). Sustainability, on the other hand, is meeting society’s needs while still protecting environmental conditions so that future generations can meet their needs. Thus, sustainable marketing is defined as creating, communicating, and delivering content that protects both natural and human capital (Gittell et al.). While other articles often use the phrase “green marketing,” I will instead be using “sustainable marketing” as sustainability involves multiple domains beyond ecological, such as ethics, governance, and equality.
As businesses’ main concern is to attain profitability, this may seem contradictory to the idea of sustainability. Why would companies invest in environmental protection when there is no immediate financial benefit? The answer is clear: one cannot claim profitability without maintaining long-term economic performance. To do this, businesses must create an attractive platform for investors and consumers, which will help them maintain a reliable consumer base.
Background
Sustainable marketing originated when consumers first started pushing for corporate social responsibility. This can be traced back to the early twentieth century, where investigative journalists such as Ida Tarbell and Upton Sinclair performed rigorous research and exposed corrupt and monopolistic practices of corporations. Books such as The Jungle and The History of the Standard Oil Company increased public scrutiny on industries and led to the call for tighter government regulation.
However, the book that spurred the push for environmental protection was published in 1962, titled Silent Spring by Rachel Carson. Carson’s book highlighted the devastating impacts of pesticides on both the environment and public health, resulting in the banning of DDT. Her story inspired an environmental movement that spurred a series of environmental protection legislation in the 1970s, including the establishment of the Environmental Protection Agency (EPA) and the Clean Air Act (“Legacy of Rachel Carson's Silent Spring National Historic Chemical Landmark”).
As the demand for socially and environmentally responsible products increased, corporations realized that adopting sustainable practices would give them a competitive edge in the marketplace (Gittell et al.). Today, sustainable marketing has become commonplace in markets but continues to face several challenges: weak government involvement, “greenwashing,” unclear standards for “sustainable” products, and uncertain consumer behavior.
Challenges and Potential Solutions
I. Limited Government Involvement and Greenwashing
Governments have played a key role in shaping sustainable development. An increasing number of governments have imposed carbon taxes and regulations to lower carbon emissions by corporations. However, these policies are often undermined by political leaders that focus on short-term economic growth and power rather than accounting for long-term negative externalities. This leads to limited government financing options, which severely deters businesses from producing and marketing their products sustainably (Ofori). Without government funding, it is difficult to raise the estimated $4.3 trillion dollars that are needed annually worldwide to fund green infrastructure (“Green Infrastructure Offers Big Savings on Top of Climate Benefits.”). Research and innovation also require government funding to discover more cost-effective sustainable strategies, but many underdeveloped countries do not have access to sufficient funding, especially when public expenditures outweigh national income (Ofori). Furthermore, countries cannot depend on investors to fund sustainable businesses since investors may be deterred from the “newness” of sustainability and the lack of records to forecast returns on investment. Sustainability also requires high investment, and returns may be low initially. Without funding, focus on short-term economic benefits and fear of resource misallocation may cause corporations to avoid embracing a competitive strategy that appears to have little market potential (Gittell et al.).
In addition, while agencies such as the World Fair Trade Organization and the United Nations Economic and Social Council exist to promote sustainable trade relationships between countries, many flaws limit effectiveness. First, membership is often voluntary in these organizations, and international organizations have little jurisdiction over transnational corporations. National agencies are also unable to control corporations’ practices when production is outsourced internationally.
To address these problems, tighter government regulations and enforcement could propel corporate social responsibility. Governments should recognize that sustainable policies will help build competitive industries and attract investments, as more investors are scrutinizing sustainable commitments as the climate crisis worsens. Collaboration between other local and foreign governments can also develop stable partnerships that can aid in keeping each other accountable for sustainable actions. It can also tailor policies towards regions’ specific needs, especially areas increasingly stricken by climate variability. Governments should also promote the long-term economic benefits of sustainable economies, including increased profits, differentiation, and efficiency. This can help more corporations rebrand their marketing strategies to reflect the embracing of sustainability in both developed and developing countries (Ofori).
II. “Greenwashing” and Unclear Standards for Sustainable Products
Unclear federal standards for “sustainable” products, as well as weak government involvement, also lead to a lack of corporate accountability. This leads to the term “greenwashing,” which involves deceptive marketing practices companies adopt in order to mislead consumers into believing they are sustainable and generate more sales (Gittell et al.). Without a clear definition of sustainability, it is easier for companies to claim they are sustainable without providing clear justification. Consider a recent example of greenwashing: Volkswagen’s Clean Diesel campaign. Volkswagen launched a Clean Diesel campaign in 2009 that claimed to be more environmentally friendly than hybrid and electric vehicles. This was advertised on multiple platforms including Super Bowl ads, social media, and print. After selling 550,000+ vehicles on this claim, it was revealed that Volkswagen had inserted an emission masking device to give the illusion of complying with all federal emissions levels. Instead of reducing nitrogen oxide emissions by 90% as claimed in advertising, Volkswagen’s Clean Diesel vehicles emitted up to 4,000% more than the federal level! (“FTC Charges Volkswagen Deceived Consumers with Its ‘Clean Diesel’ Campaign”)
Greenwashing is complicated further by the fact that no universal definition of “sustainable” products exists; in fact, no product is truly “green.” Just as all products have economic costs, products always have environmental impacts such as natural resource extraction and carbon emission. Thus, products are marketed based on the magnitude of their impact compared to other products. This causes producers to label a product sustainable if it performs better than other products in one certain attribute. Recycled products and hybrid cars are thus often called sustainable without considering other environmental impacts of the product.
An improved way of labeling sustainable products is by considering attributional life-cycle assessments (LCAs), which collect a variety of environmental impact indicators per product instead of a narrow window of just one attribute. However, it still has limitations in that a business’ overall impact is not considered. In this way, “green” products can sometimes increase consumption and lead to unintended market failure if not properly analyzed. An example of this is the direct rebound effect phenomenon, in which fuel-efficient vehicles are expected to reduce emissions and increase the consumer’s spending money. However, these savings may actually increase market demand as this will encourage the consumer to drive more. While the vehicle will reduce emissions per unit, the total environmental impact will increase (Zink and Geyer).
Another solution to measuring sustainability is for corporations to consider their net environmental impact. This practice ensures that a product or corporation is sustainable only if it reduces environmental impact, across all business activities. In addition, stronger integration must be made between scientists and finance experts to establish environmental literacy. By strengthening awareness of all environmental implications of business activities, corporations can help displace unsustainable products and avoid unintended effects such as increased market demand for activities requiring greater emissions (Zink and Geyer).
III. Uncertain Consumer Behavior
Businesses are also deterred by sustainable production and marketing due to uncertain consumer behavior. According to rational choice theory, consumers perform a cost-benefit analysis to maximize utility when comparing products and services. While research on the price elasticity of sustainable products is limited, sustainability seems to have a limited impact on product differentiation strategies especially compared to lower prices and increased convenience. Many consumers are becoming increasingly concerned about environmental issues, but this is often only if the benefit of sustainability comes without any compromise. Consumers will likely gravitate towards sustainable products if prices become either identical or lower than current market prices, but the process needed to lower production costs is lengthy (Gittell et al.).
In addition, the tragedy of the commons explains that individuals tend to make decisions that benefit them regardless of the negative consequences on the general public. Thus, individuals act in their own interest when they have open access to a common resource, which leads to overconsumption of natural resources (“Tragedy of the Commons”). Furthermore, the nature of the common resource results in no individual being incentivized to limit consumption. This causes consumers to feel as if they have no contribution to the natural environment, and will thus not purchase products with so-called ecological benefits. Hence, sustainable marketing is put in jeopardy.
Recent evidence suggests that sustainability is becoming a greater influence on consumers’ buying decisions (Gittell et al.). Recognizing this can help businesses revamp their marketing campaign to reflect and foster the increasing concern towards environmental issues. Consumers should be educated to understand the difference their buying decisions can make on the environment. This behavior change can be supported through financial incentives to encourage consumers to adopt more sustainable practices (Ofori). Price barriers and tradeoffs should also be minimized to encourage more consumers, not just from affluent backgrounds, to consume sustainable products. In addition, consumers are more likely to purchase environmentally friendly products from corporations that make sustainability the core of their mission. This can be bolstered through corporate transparency and effective communication, which will build trust and loyalty with consumers (Gittell et al.).
Conclusion
With the aggravation of the climate crisis, consumers have grown more aware of environmental issues. There has been more intense pressure and scrutiny on corporations to curtail their carbon emissions and demonstrate social responsibility. This change in consumer preferences has transformed traditional marketing into one that embraces sustainability. However, sustainable marketing still faces hurdles as limited government involvement and funding can cause corporations to instead opt for “greenwashing” as a way of generating greater sales. This, along with an unclear definition of sustainability as well as an intention-action consumer gap, results in a lag in private sector involvement in green economies. Minimizing the price gap between sustainable and traditional products through research will take time. In the meantime, governments should promote active collaboration with other governments to promote commitment to sustainable policies. Governments should also establish qualified leadership and policies to support sustainable business, as this will build competition through differentiation and lead to more investors and stable profit in the long term (Ofori).
What can consumers do? Rather than falling for now-meaningless labels such as “sustainable” or “eco-friendly,” we can search for certification and information to back up companies’ claims. Instead of examining companies through a “lesser of two evils” lens, we can ensure that their products are creating a net environmental impact instead of measuring single attributes in products. We can push for corporate transparency and greater enforcement of environmental regulations through lobbying Congress. Most of all, we can realize that as consumers, we have the power to transform corporations’ marketing strategies by changing our own preferences to embrace sustainability.
Written by Alvina Zhan, UCLA Undergraduate Economics Student
Works Cited
“FTC Charges Volkswagen Deceived Consumers with Its ‘Clean Diesel’ Campaign.” Federal Trade Commission, 29 Mar. 2016, https://www.ftc.gov/news-events/press-releases/2016/03/ftc-charges-volkswagen-deceived-consumers-its-clean-diesel.
Gittell, R., et al. The Sustainable Business Case Book. Saylor Foundation, 2012, https://saylordotorg.github.io/text_the-sustainable-business-case-book/.
“Legacy of Rachel Carson's Silent Spring National Historic Chemical Landmark.” American Chemical Society, https://www.acs.org/content/acs/en/education/whatischemistry/landmarks/rachel-carson-silent-spring.html. Accessed 26 Nov. 2021.
Ofori, Daniel. “Opportunities and Challenges of Green Marketing.” Green Marketing in Emerging Markets: Strategic and Operational Perspectives, edited by Chipo Mukonza et al., Springer International Publishing, 2021, pp. 251–76, https://doi.org/10.1007/978-3-030-74065-8_11.
Saxena, Ravindra P., and Pradeep K. Khandelwal. “Green Marketing: A Challenge or an Opportunity in the Global Environment.” The Global Studies Journal, vol. 2, 2009, pp. 59–74.
Taylor, Michael.
“Green Infrastructure Offers Big Savings on Top of Climate Benefits.” News.Trust.Org, https://news.trust.org/item/20211025132838-61z66/. Accessed 28 Nov. 2021.
“Tragedy of the Commons: What It Is & 5 Examples | HBS Online.” Business Insights - Blog, 6 Feb. 2019, https://online.hbs.edu/blog/post/tragedy-of-the-commons-impact-on-sustainability-issues.
“What Is Marketing? — The Definition of Marketing — AMA.” American Marketing Association, https://www.ama.org/the-definition-of-marketing-what-is-marketing/. Accessed 26 Nov. 2021.
Zink, Trevor, and Roland Geyer. “There Is No Such Thing as a Green Product.” Stanford Social Innovation Review, 2016, https://ssir.org/articles/entry/there_is_no_such_thing_as_a_green_product.