|


 

 
  

John Paluszek
Senior Counsel,
Ketchum

at
Santa Clara University
Markkula Center for Applied Ethics

April 6, 2005
]|

 

6A discussion of how brand and business

ethics interact « the ability to generate
ë



   by high
standards of business integrity and
social responsibility.´
]

 


G Ethics Branding CAN add value «

with selected audiences.

BUT «

G t requires 6niche communications.´

D ST NCT
NS MUST BE MADE !

|

 ]
]

. Define the terms.

. Scan the landscape and horizon.

. Defend 6Ethics¶ Brand Value´



 
.

V. Answer: What is to be done ?

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6The system or code of morals of a particular

person, religion, group or profession.´

6Ethics is what you , not what you say.´

6Ethics´(compliance) of course. But 6compliance

ethics´ isn¶t enough. Applied ethics is the key.
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Brand: What you µstand for¶ in the public¶s mind.

What they think they can expect from your 
 



 
« [
 

eputation:What people remember and say about

an 
  . What they identify with that

  

6Brands that connect are grounded in values,

culture, and authenticity.´
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ecognition -- and consequent policy

formation and performance -- that
brand and reputation can be enhancers,
differentiators, or accelerators of
organizational results.
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Every time an organization makes a

significant decision there are four broad
sets of implications:
±
perational
± Financial
± Legal
± 
  

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!

 " 

6« business that embodies transparency

and ethical behavior, respect for
stakeholder groups, and a commitment to
add economic, social and environmental
value.´
² U.N. Global Compact/SustainAbility
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Shall we overcome «

Enron, Worldcom, Adelphia, etc. ?

6Ultimately the value of a company depends on

how much faith people have in the organization «
That faith is fostered by an ineffable and scarce
element « called legitimacy.´
± akesh Khurana, Harvard Business School/
nternational Herald Tribune
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G 6 ntangibles such as good governance, loyal
customers, strong brands, a culture of innovation,
well managed human capital and exemplary
environmental practices are what drive 






.
² Thomson Financial

G Three±fifths of surveyed CE
s estimated that

corporate brand or reputation represents more
than 40 per cent of a company¶s market
capitalization
² World Economic Forum/Fleishman-Hillard
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G 6Failure to live up to stakeholder expectations can

threaten corporate brands, reputations and long-
term shareholder value.´
² The Conference Board, 2005

G 6The newly revised U.S. Sentencing Guidelines are

putting growing pressure on companies to develop
effective compliance and ethics programs «[here
are] seven essential elements in making sure your
compliance programs are effective.´
² The Conference Board, 2005
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G Mainstream financial analysts are developing

criteria to better integrate environment, social and
governance issues into analysis, asset management
and securities brokerage.
² U.N. Global Compact

G Codes of Conduct: 6
ur code was developed with

maximum input from employees « and relevant
NG
s. The µvoice¶ of the code is largely that of the
workforce, only partially that of the company.´
² io Tinto (international mining company)
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uestion
± How does my company fit into the U.N. Millennium
Development Goals on global poverty, disease, education,
resources? Can we run a healthy business in a sick world?

Answer
± Balance market development with humanitarian
commitments thru partnering with governments and/or
NG
s. Good business with good citizenship.

 
 

 

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6Brand identity is the common door into a

relationship for all stakeholder classes ±
M 



 .´

² Patagonia
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G Consumers/Customers

G Employees

G nvestors
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!  


The Ethics/Brand Dilemma of outsourcing and

6The Consumer Society´:

6Products are manufactured in China at a fraction

of the cost of making them here, and Americans
get great deals «The problem is, 
 
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² obert eich, U.S. Secretary of Labor, 1993-97

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Paradox:
6While 84% [of consumers surveyed] said
CS would influence buying decisions, only
5% consistently buy brands on ethical
grounds.´

² The Business Communicator/M
 esearch

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'


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6L
HAS is an acronym that stands for Lifestyles of

Health and Sustainability and describes a $226.8
billion  U.S. marketplace for goods and
services that appeal to consumers who value
health, the environment, social justice, personal
development and sustainable living.´

$  !"#%
  

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! 
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s the U.K. also a harbinger ?

6[1999-2003] demand for ethical goods and services

has rocketed from 3.5 billion to 24.7 billion pounds
[currency] « t is clear that UK consumers are
increasingly willing to take action through their
wallets to support business they consider ethical and
to avoid companies they consider to be unethical.´

² ]
&
 #
/Cooperative Bank Ethical ndex
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ndustry esponses (a few of many) --

G Autos: hybrid engines

G Pharma: drug discount cards
G
ffice products: green catalogs
G Food production: SA8000 certification
G Apparel: production codes with local
monitors; organic fabrics
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6 f the brand is the promise, employees are the

promise keepers.´

6 nternal communications can convey the benefits

of the brand idea and encourage involvement
«There is always the temptation to see brands as
something ephemeral ± the realm of marketing«
not the whole organization.´

² The Holmes eport/6Living the Brand´ by Nicholas nd

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Contribution to Brand Value:

1.) u

  the brand: Employees
must understand the brand and what it
stands for ± and their role in making
the brand real.
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'


|

Contribution to Brand Value:

2.) ´]
'
( f employees buy
into the company¶s genuine brand,
there¶s a better chance of retaining
them (with consequent reduction of
costly employee turnover).
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Contribution to Brand Value:

3.) &


 
  ) on the rise, can
reduce costly, brand/reputation-
damaging transgressions; and, under
U.S. sentencing guidelines, result in
lesser penalties.
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Socially esponsible nvesting (S )

G 6S is the bow wave for a deep change in American

consciousness´
² William Greider, 6The Soul of Capitalism´

G Some $2 trillion in S fund assets

G Comparable 
. educed stock 6churn´
G Negative, positive screens;moral values applied
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Pension Fund Clout

G 
state controller (NY), the pension fund trustee,
has recovered over $6 billion in 6ill gotten gains´
(corporate ethical-legal transgressions).

G CALPES, other pension funds have helped remove

CE
s,directors of corporate boards.
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² —#

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A potential code 6should have basic principles with

respect to who you¶re accountable to, and what
your priorities are between yourself, your client
and your regulators «
6 t¶s really something that has to be embedded in
an organization all the way up and down.´

² Felix ohatyn, investment banker

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* |



G At the Core or ntegrated Element ?

þ 


G A Critical Component

X + 

G Special Communications Strategies
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|





At the Core --

Case history: American Apparel Company

G 6New Paradigm
G Scalable Business Model
G Environmental Commitment´

 
  , #
-
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|





As an ntegrated Element ±

Case history: Whirlpool

G Market research: customer surveys documented
value of CS attributes in energy and
environment.
G CS data generated adaptation of regional
emphases (U.S., Brazil, Europe)

 
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The challenge:

6A bird and a fish may fall in love but they

will have a hard time finding a place to
build a home.´

² Tevye in 6Fiddler on the oof´

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þ




Why Consider a Partner?

G Credibility/Trust
G Vital Feedback
G esults
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þ




Some Potential Partners:

G 6Causes´ (Cause-related marketing/
6strategic philanthropy´)
G Non-Governmental
rganizations (NG
s)
G Governments
G Competitors
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þ




Case histories

G Cause/Philanthropy
± Nokia/ nternational Youth Federation
6Make A Connection´

G NG
s
± Nike/Local Asian NG
s
Monitor company¶s new workplace codes
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þ




Case histories

G Governments
± Coffee ndustry/U.S. A D
Fair Trade Coffee

G Competitors
Global Mining ndustry(via WBCSD, E T )
Codes: environment standards, transparency
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X
!  

 

6Most companies do not 


 their CS
communications at 
   

. The
result is their CS activities have minimal
influence on their corporate brand or on
consumer purchasing behavior.´

² United Nations Environment Program

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X
!  

 

First, be realistic. There are 

 
downsides. (But many can be refuted.)

G 6Don¶t raise your head over the trench´

G 6CS can be a cost disadvantage if
competitors don¶t do likewise.´
G 6Most journalists aren¶t interested.´
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X
!  

 

Be realistic:

G General media 
 largely uninterested.

G Trying to impress the general public is akin

to 6boiling the ocean.´
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(X
!  

 

Use the 6CS trade media´

(they are sources for general media)

G Ethical Corporation
G Business Ethics
G CS Newswire
G Covalence website
G Journal of Corporate Citizenship
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X
!  

 

Address 6proximate publics´ directly

G Consumers/Customers
± Customer research, 6P-
-P´ etc.

G Employees
± ntranet

G nvestors
± Analyst communications
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X
!  

 

Apply the new nformation Technology

creatively and consistently --

G nternet, websites, blogs, podcasts, etc.

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X
!  

 

Benefit from shared experience:

G U.N. Global Compact

G Business for Social esponsibility
G Center for Corporate Citizenship
G World Business Council for Sustainable Development

G And, of course, academic centers/applied ethics

! 
 |

6 CS is no longer an option. t is an integral

prerequisite to our long-term success «

6 ncreasingly CS means

quality management.´

² From: 6 ] *#+ 

"
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. / 0"! 


,
 


6With the fast-spreading commitment to

CS, a case can be made that a
fundamental new business model ± one
that respects stakeholder and shareholder
values simultaneously ± is evolving.´
|

 

 
  

John Paluszek
Senior Counsel,
Ketchum

at
Santa Clara University
Markkula Center for Applied Ethics

April 6, 2005