Three Marketplace Trends
Here are three current trends that appear to be having a significant impact on
consumer decisions in the marketplace:
- "Sustainable Consumption" Goes Mainstream
Amid an age of plenty -- at least in the U.S. and other industrialized nations --
there is growing interest in the simple question about "How much is enough?"
This question is certainly not new, but more recently it has extended beyond a
small corps of alternative lifestylers to more mainstream folks who, for a
variety of reasons, are beginning to question the linkages between quantity of
possessions and quality of life.
In recent years, the voluntary simplicity movement has grown to include burned-out overachievers and others wishing to escape the fast-track treadmill of the
New Economy. Voluntary simplicity courses now are being taught in schools, even
inside companies. And there's the growing attention paid each year to "Buy
Nothing Day" (or, in some countries, "No Shop Day"), an annual event promoting
reduced consumption. In 2000, Buy Nothing Day activities took place in more than
30 countries, from Brazil to South Korea to Israel. Meanwhile, a 1998 book,
The Overspent American: Upscaling, Downshifting, and the New Consumer, by
Harvard economist Juliet B. Schor has gained attention and currency. Schor
identified an insidiously ruinous form of "competitive spending" she calls "the
new consumerism." This new consumerism has spawned a backlash, according to
Schor, leading some Americans to "downshift'' to lower-paid, less-demanding jobs
and curb their appetites for "commodified leisure."
Clearly, this is no mere recasting of the green consumer movement. While
environmental impact is a factor in "sustainable consumption," it is only part
of the equation. Sustainable consumption is decidedly more complex, taking on a
more global perspective than green consumerism, grappling with the gaps between
the "haves" and "have nots" in both the developed and developing worlds. It has
to do with satisfying basic human needs and with spiritual, moral, and ethical
matters. And it involves addressing the problem of underconsumption that
characterizes a significant percentage of the world's populace.
How are companies responding? Surprisingly, one place "sustainable consumption"
may manifest itself is in the automotive industry. At first glance, automobiles
and the environment seem at direct odds with each other. Yet most modern
societies are built around the notion of mobility -- getting to jobs and
schools, moving goods and materials from place to place, shopping and
transporting purchases home, and in general living lives that enjoy the freedom
and independence of movement. Automobiles are not going away. Indeed, car
ownership is expected to continue its upward climb in coming years.
Consider the numbers: In 1999, the global passenger car fleet stood at 520
million vehicles, according to the Worldwatch Institute. And while that may seem
significant -- the number of cars has doubled since 1975 -- it means only about
8 percent of the earth's population owns a vehicle. More than nine in ten people
don't -- yet.
What happens when the newly opened markets of India, China, Africa, Eastern
Europe, and Latin America create perhaps a billion more middle-class individuals
desirous of increased mobility? Can the planet and its people support this
magnitude of vehicle growth? How do you bring mobility to billions without
necessarily raising pollution and resource use proportionately? The global
automobile manufacturers -- at least, those that plan to be around in 25 years --
are pondering that question. Ford, General Motors, Honda, Volvo, and other
global automakers are beginning to view themselves not merely as vehicle
manufacturers but as "mobility providers," or even "sustainable mobility
providers." "Sustainable mobility," for example, embodies the notion of
"servicizing" a product. Servicizing refers to an increasingly utilized business
model centered around selling the services a product delivers, rather than the
physical product itself.
An example from the world of automobile manufacturing involves Ford and the
automotive paint division of DuPont. In the 1990s, Ford recognized that a
significant amount of the paint it was buying did not end up on vehicles.
Inefficient manufacturing processes allowed much of the paint to escape as air
emissions or water-based sludge. Ford paid twice for the paint -- once to buy it
and once to properly dispose of the wasted paint -- neither of which brought
value to Ford or its customers. So DuPont and Ford renegotiated their
relationship to "servicize" the painting process. Now, rather than selling Ford
paint, DuPont sells a service -- painted cars. This gives DuPont an incentive to
paint cars with the least amount of waste. A business model that shares the
resulting savings rewards both companies for their increased efficiency.
The notion of servicizing can apply not just to painting cars, but to owning and
driving them, too. Consider, for example, the Intelligent Community Vehicle
System, or ICVS, created in the late 1990s by Honda.
ICVS is a system of shared electric and hybrid-electric vehicles -- from
bicycles to small passenger cars -- suitable for use in a campus or small-
community environment. Participants receive an electronic "smart card" that
enables them to use the system. So, for example, someone needing to use an
electric-assisted bicycle would insert a smart card into a vending machine at a
centrally located kiosk and receive a small battery that is easily inserted into
the front of the bicycle near the handle bars. After reaching her desired
destination, the user would return the battery to a nearby vending machine, with
the appropriate charge levied to her smart card. Meanwhile, the system keeps
track of the bicycle inventory and where they are located.
Using the small passenger cars in the ICVS system involves even more
sophisticated technology. An individual desiring to use a car inserts his smart
card into a kiosk, at which time a vehicle automatically drives up and parks.
The user's smart card serves as a means for both unlocking the doors and
starting the engine. Then, when the user reaches his destination kiosk, he locks
the car, inserts his smart card into the kiosk -- and the car drives away and
In effect, ICVS has "servicized" transportation by removing ownership of the
physical good (the car), and providing only the desired service (the ride from
place to place).
Honda isn't alone in thinking about such notions. William Clay Ford, chairman of
Ford Motor Company, acknowledged in a 2000 speech that, "We understand the
triple bottom lines of sustainability must all be addressed for us to be
successful. For example, we can't expand in potentially huge markets such as
India and China -- and provide a better life for millions of the world's poorest
people -- unless we can do it in a sustainable way. In addition to the
automobile, [sustainable mobility] may include mass transit, or Internet access,
or something we haven't even thought of yet."
Of course, there is the human factor. Getting people to accept the notion of
sharing, not owning, vehicles could be challenging if the U.S./Japanese/European
model of individual car ownership takes root in emerging markets. While the
notion of sharing vehicles may be compelling, it has never been tried on a large
scale. Can automobile companies' considerable marketing clout shape individuals'
mobility aspirations? It remains to be seen how much consumers actually will
embrace products and services that promote "sustainable consumption."
- Looking Beyond Products to Companies
The protests over the notion of globalization in recent years are a pointed
reminder of the growing collision of environmental concerns with those of human
rights, labor, and community economic development -- the so-called triple bottom
lines of economic, environmental, and social sustainability. Activists -- and a
few enlightened business leaders -- are recognizing that companies increasingly
are being judged not just on how much economic value they add, but also on how
much environmental and social value they add -- or destroy. Whether the triple
bottom line becomes the new consumer standard, and how companies adapt to
consumer expectations to be "socially responsible," will be among the more
interesting marketplace stories of the coming years.
What, exactly, makes a company "socially responsible"? There's certainly no
consensus. Most definitions illustrate the sweeping agenda that businesses face
in satisfying the needs of demanding consumers. For example, according to
Business for Social Responsibility corporate social responsibility, or CSR, is
defined as "operating a business in a manner that meets or exceeds the ethical,
legal, commercial, and public expectations that society has of business. CSR is
seen by leadership companies as more than a collection of discrete practices or
occasional gestures, or initiatives motivated by marketing, public relations, or
other business benefits. Rather, it is viewed as a comprehensive set of
policies, practices, and programs that are integrated throughout business
operations, and decisionmaking processes that are supported and rewarded by top
That's no small order. Indeed, BSR lists 116 CSR topics
and subtopics provided that comprise the CSR agenda. For companies
conducting business on a global scale in "Internet time," the CSR agenda can be
overwhelming. But not for consumers, who increasingly expect companies to pay
attention to all of their impacts: on employees, customers, communities, the
environment, and other "stakeholders." And today's consumers aren't afraid to
make an example of companies perceived to be behaving badly.
Consider Nike, the $8 billion footwear and apparel company, which has become a
lightning rod for activists, consumers, the media, and others, who have taken
aim at the company's workplace, environmental, and human rights practices.
According to its critics, Nike has engaged in a variety of practices that have
exploited Third World workers and the communities where they live. The images
proffered by Nike's critics are vivid: women and young children toiling for long
hours for low pay in squalid conditions, breathing fumes of toxic chemicals,
unable to protest for fear of losing their jobs, manufacturing goods whose price
tags exceed their monthly pay.
Nike acknowledges that in the past it was less than vigilant in monitoring the
practices of its factories -- nearly all of which are contracted to independent
manufacturers -- but it has launched an aggressive and ambitious effort not only
to correct such situations, but to set a shining example for its industry. The
company has begun using sustainability as a design criteria to reduce the use of
toxic materials and generation of waste in its manufacturing process. Nike cut
the use of solvents in its adhesives by 800,000 gallons in one year and has a
goal of reducing its use of volatile organic compounds per unit of production by
90 percent by 2001. The company also supports organic cotton farming by
providing incentives for farmers to switch to organic production.
None of this seems to have stemmed the tide of criticism. In recent years, Nike
has been named among the ten "worst" international corporations by Multinational
Monitor magazine; had an Indonesian factory looted and burned by protesters; and
suffered criticisms by U.S. women's groups, who pilloried the company for
commercials that call for empowering women while poorly paying its predominantly
female overseas workers. Its hometown, Portland, Oregon adopted a resolution
urging its troubled school district to "respectfully decline" a $500,000 cash
donation because of the company's alleged human rights abuses.
The experiences of Nike and other companies that have come under intense public
scrutiny because of perceived wrongdoings suggest that consumers' expectations
of brands are changing. It is no longer enough that a company delivers good-
quality products. In the search for differentiation, the battleground shifts
from the tangible -- pounds of chemicals and other wastes released into the
environment -- to the intangible -- ethics, values, and corporate culture.
- The Rising Power of NGOs
In his 1998 book, Which World?, World Resources Institute senior
scientist Allen Hammond developed three scenarios "to explore alternative
possibilities for how the future may unfold" in the 21st century. In the most
idyllic scenario -- Hammond dubbed it "Transformed World" -- he described an
explosion in the number and influence of nongovernmental organizations, or NGOs.
The NGOs' power, he said, comes from their "ability, despite the bewildering
number of causes they espouse, to form spontaneous coalitions and to motivate
and arouse public opinion."
Whether "Transformed World" comes to pass remains to be seen, but the
transforming power of the NGOs already is evident. In recent years, coalitions
of activists increasingly have influenced how companies, politicians, and the
public think about issues ranging from child labor to sustainable forestry.
The world of NGOs -- which range from public-service and humanitarian-relief
agencies to local, national, and global activist organizations -- is growing.
For example, in 1948 there were 41 consultative groups formally associated with
the UN Economic and Social Council. Half a century later, there were more than
Why the growth? One contributing factor may be the near paralysis of government
institutions in addressing environmental and sustainability issues. Another may
be the recognition that there is a wealth of knowledge and expertise outside of
government and the private sector. Still another is a sense that cooperation is
needed to produce new technologies and policies. Today's NGOs are more willing
to engage companies in productive dialogues and partnerships. They are better
tuned to what makes companies tick, and they know how to leverage meager
resources to promote corporate change.
Consider, for example, the experiences of one well-known consumer-products
company that came under scrutiny by a group of "zero-waste" NGOs for failing to
live up to a commitment to use a significant percentage of recycled material in
its packaging. The NGOs placed the company on a list of targets for a nationwide
campus boycott. Most such boycotts have negligible effect on company sales and
profitability, and this boycott was no exception. But the NGOs added a twist:
College students also were urged to boycott the company's recruiters when they
visited campuses seeking to interview potential job candidates.
That hurt. The company's top environmental manager received a call from senior
management, wanting to know how the company got into this mess -- and how it
could get out of it. In an economy in which a company's ability to attract and
retain talent has become a source of competitive advantage, the recruitment
boycott cut to this company's core business strategy.
NGOs' roles can cut both ways. As P.J. Simmons writes in "Learning to Live with
NGOs": "Embracing a bewildering array of beliefs, interests, and agendas, they
have the potential to do as much harm as good. Hailed as the exemplars of
grassroots democracy in action, many NGOs are, in fact, decidedly undemocratic
and unaccountable to the people they claim to represent. Dedicated to promoting
more openness and participation in decisionmaking, they can instead lapse into
old-fashioned interest group politics that produces gridlock on a global scale."
All signs indicate that NGOs' power will not wane any time soon. During the
1990s, NGOs rose to become almost de facto governments, often wielding more
clout than elected officials in engendering change in the corporate sector.
Emboldened by their fight against globalization and empowered by the Internet,
NGOs increasingly will band together to fight industrial pollution, push a
sustainability agenda, and encourage consumer participation. But NGO activity
won't all be anti-business: Many groups will promote firms they see as proactive
and responsible, create buyers' groups to support emerging technologies, and
even launch for-profit ventures to jump-start promising products and services.
All of which will create opportunities for companies and consumers to engage in
new and productive dialogues.
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