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Can you buy CSR?

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California
Management Review

Can You Buy CSR?

Philip H. Mirv i s

© 2008 by The Regents of

the University of California

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 COMMENTARY

Can You Buy CSR?

Philip H. Mirvis

O
nce at the margins of the marketplace and frankly ridiculed in
many managerial circles, commercial practices aimed at pro-
moting human welfare and environmental sustainability are
fast making their way into larger, more traditional corporations.
Jeffrey Hollender, CEO of Seventh Generation, made this argument in his 2003
book What Matters Most: How a Small Group of Pioneers Is Teaching Social Responsibil-
ity to Big Business, and Why Big Business Is Listening.1 One telling indicator has been
the acquisitions of CSR-driven businesses such as the Body Shop by L’Oreal,
Tom’s of Maine by Colgate-Palmolive, Stonyfield Farm by Groupe Danone, con-
fectioner Green & Black’s by Cadbury Schweppes, and Ben & Jerry’s by Unilever.
What’s it all about? The simplest answer: Finding opportunities in grow-
ing markets. These small companies had strategic foresight in establishing their
business models. They capitalized, variously, on growing interest in all-natural
ingredients, eco-friendly products, and cause-related consuming; and while
these may have been countercultural views in the 1960s and 1970s, they have
since been carried forward by baby boomers into the marketplace and passed on
to their children. Particularly in the west but growing
worldwide, there is a move toward healthy and sus- Commentary on “Can the virtuous
tainable consumption.2 This is reflected in trends as mouse and the wealthy elephant live
varied as preferences for organic foods and clothing (a happily ever after?” CMR, 51/1.
market growing 20% annually), for fair trade coffee
and chocolate (over 70% annually), and for sustainably sourced agricultural
produce. There is also interest in “ethical” consumerism as evidenced by an
increase in cause-related products and marketing, as well as interest, at least
among half of the world’s consumers, in a brand’s connection to social
responsibility.

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 Can You Buy CSR?

There is, not surprisingly, considerable debate about the gap between
people’s expressed interest and actual buying behavior in these regards, and
certainly as to whether consumers will pay a premium for such goods and ser-
vices.3 For example, the UN’s environmental program describes a 40/4 gap
where 40 percent of consumers say they want to buy green product but only 4
percent regularly do, at least as of 2004 when the report was issued. Claims that
consumers will pay 5 percent more for brands from socially responsible compa-
nies simply don’t bear out, except in the case of a few well-known icons like
Ben & Jerry’s and the Body Shop.
That said, it is well documented that a firm’s social credentials can help
differentiate its brands, that consumers will switch brands due to CSR issues, and
that when they know about a firm’s bona fides in this area, it is a factor in pur-
chasing decisions. Indeed, evidence is that when a product’s social content aligns
with their consumers’ personal interests, it can be decisive in building brand
loyalty.4 There are indications, for example, that consumers will switch from one
brand to another of same price and quality if the other brand is associated with a
cause. A 2007 survey by Cone, Inc., shows that 87 percent of consumers would
switch under such conditions versus 65 percent in 1999.5
Studies estimate that the size of the LOHAS (Lifestyles of Health and Sus-
tainability) market will grow from $200 billion in sales today to $420 billion in
three years to $845 billion by 2015.6 To reach this growth market, companies
such as L’Oreal, Colgate, Unilever, and others could develop new brand proposi-
tions but, as is so often the case, it seems less risky and cheaper in the long run
to buy market share through acquisitions. In this market at least, a case can be
made that the CSR pedigree and expertise of acquirees are key strategic assets
and a prime source of continued value creation.
The hitch: studies show that between two-third to three-fourths of all
acquisitions don’t succeed—that is, that their post-combination earnings over
the next several years lag behind the projected performance of the two compa-
nies had they never joined. I’ve studied acquisitions for some thirty years and
worked actively with senior executives on several
Philip H. Mirvis, Senior Research Fellow, deals (some winners; some not).7 Sometimes buy-
Boston College Center for Corporate ers pay too much or pick the wrong partner. Some-
Citizenship. <pmirv@aol.com> times acquired owners play the spoiler, or
experienced managers and talent bail out, or there’s
simply nothing left in the product pipeline to fuel growth. More often, though,
the price is workable, the partnership has promise, and there’s plenty to build
on. So what goes wrong? Managers try to put the companies together and dis-
cover that they simply don’t fit.
In the cases at hand, I’ve worked with Ben & Jerry’s for decades and
through them got to know the Body Shop and Stonyfield Farm.8 From this van-
tage, and my M&A experience, let me build on the logic of Austin and Leonard’s
article [James Austin and Dutch Leonard, “Can the virtuous mouse and the
wealthy elephant live happily ever after?” CMR, 51/1 (this issue)] and look at

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 Can You Buy CSR?

issues of strategic, organizational, and cultural “fit” between the parties to these
deals and what makes it so difficult to “buy CSR.”

Strategic Fit
First, let’s pause for a reality check: It would be a mistake to presume that
an acquiree’s full CSR portfolio—such as its innovative social campaigns, pro-
gressive green agenda, and creative volunteerism—were a primary or decisive
consideration in all of these deals.9 Setting these aside, purchasing attractive
product lines and brands enabled the buyers in these cases to enter into or
expand their presence in all-natural, healthy living, “good for you” categories of
food, beverage, and personal care. With their marketing reach and acumen, they
expected to bring local businesses to global scale. Select deals also opened up
new opportunities: Colgate, for example, gained access to the grocer Whole
Foods and to countless natural foods outlets with Tom’s toothpaste and deodor-
ants and L’Oreal moved into retail franchising and face-to-face consumer
research with the Body Shop. The strategic point: CSR is nice, but not necessary
to grow in these categories and channels.
Indeed, Nestlé, SA, says that it is transforming from an agro-food to a
nutrition, health, and wellness brand. Its recent acquisitions of the Novartis
Medical Nutrition group and Gerber baby foods further the cause but without
any specific CSR connection. (Note, too, that Nestlé quietly owns a substantial
chunk of L’Oreal!) Similarly, Pepsico is making moves to improve the nutritional
values of its offerings. Quaker Oats and Naked Juice offset at least some of the
bad press associated with fattening corn chips and sodas, but offer the firm noth-
ing special in so far as CSR credentialing. (Its worth noting, too, that Pepsico
partners with Unilever to bring you Lipton Ice Tea; but it has had no involve-
ment in its partner’s development of fair trade practices.)
Does CSR matter in the LOHAS market? For purposes of image-burnish-
ing, Coca-Cola’s recent purchase of Honest Tea and Clorox’s acquisition of Burt’s
Bees fit with more eco-friendly messaging from parent companies that are oth-
erwise criticized by social activists and environmentalists. The authors here go
further and contend that, at least in the case of Ben & Jerry’s and Stonyfield,
new owners had intentions to build on their acquiree’s CSR reputations and to
learn from them so as to socially innovate throughout their own product lines.
This necessitates real sharing, knowledge transfer, and co-creation, no mean feat
for elephants and mice who, except in folk-and-fairy tales, are different crea-
tures and live in different worlds.

Organizational Fit
A key question: Are these acquisitions about buying brands to gain in a
growing market segment? Or about buying companies whose DNA will continue
to infuse their own offerings and, perhaps, inform how its new owners do

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 Can You Buy CSR?

business? This turns our attention to matters of organization fit or how the com-
bining companies are put together.
Evidence suggests that the Body Shop, Tom’s, and Green & Black have
been configured as what M&A specialists call “preservative” acquisitions.10 They
operate as more or less “stand-alone” business units with new owners exercising
financial oversight and exerting some strategic control. For owners, this is an
expensive proposition as cost savings are modest (some back office consolida-
tion) and revenue growth depends on new marketing and distribution expendi-
tures, rather than co-innovating and co-branding. However, it’s the best way to
ensure that you retain the value of what you bought.
Stonyfield is a different story: it joined with Danone as an “additive”
acquisition. Teams from the two companies worked together to combine the
“best of both” in areas of sourcing and product development Furthermore, there
is evidence of what the authors here call “reverse osmosis” where the parent
company learns from and adopts some of the “social technology” of its acquired
offspring. This strategy, when successful, grows value on both sides of a deal.
Ben & Jerry’s acquisition, by comparison, is a mixed-model. It has kept
remnants of its marketing autonomy, but in several areas (e.g., finance, IT, com-
munications, sales, and, crucially, manufacturing), Unilever effected an “absorp-
tive” integration. After a brief period when, under agreement, no changes could
be implemented, Unilever undertook massive layoffs at the B&J headquarters;
converted B&J’s fun-and-funky website to corporate control; and installed one
its own marketers as general manager. The impact was negative and immediate:
long service employees that were not laid off left anyway; Ben and Jerry refused
to put their personal likenesses and messages on the corporatized web site; and
the new GM, while greeted with a festive B&J parade, was viewed as an
interloper.
To make matters worse, the main manufacturing plant—and site of the
brand building and #1 Vermont tourist attraction factory tour—was severed
from B&J control and reported into Unilever’s North American Ice Cream divi-
sion in Green Bay, Wisconsin. Initially, the parent company invested in plant
upgrades and equipment to improve efficiencies, a possible plus. However, this
was followed by months of political power plays as the ice cream division sought
to modify ingredients, challenged longstanding commitments to pay dairy farm-
ers a premium to sustain them through tough times, fought against further use
of organic and fair trade ingredients, and pushed constantly to increase margins.
Their justification: B&J’s product costs, particularly compared to Good Humor
and Breyers, the other brands in the Unilever North America ice cream portfolio,
were simply too high.
This model yields what are euphemistically termed “financial synergies”
in an acquisition, but often produces other costs: lower morale, quality prob-
lems, a loss of innovativeness, and so on, results observed at B&J’s two years
after its acquisition. It can also create friction between the parties, magnified
here by the “misfit” between the two organization structures, and wreak havoc
with the culture of the acquired firm.

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 Can You Buy CSR?

Cultural Fit
On the face of it, these acquisitions fit into two categories: deals where
the acquired firm has strong CSR credentials and the parent does not (Body
Shop/L’Oreal, Tom’s/Colgate); and deals where both companies have a reputa-
tion and track record in CSR (B&J’s/Unilever, Stonyfield/Danone). This catego-
rization, size differences asides, would seem to be a predictor of the cultural fit
between companies.
Still, cultural compatibility is not crucial to the success of preservative
acquisitions: large, multi-business companies often host different subcultures
among their acquirees, and give them a measure of cultural autonomy, at least
for a time. Moreover, in the cases studied here, culture clashes between
CSR/non-CSR firms were mitigated because the partners found “value align-
ment” (Tom’s/Colgate) and “shared passion” (Green & Black/Cadbury). This
allows otherwise distinct company cultures to co-exist, provided the companies
don’t fully integrate.
Certainly Danone and Stonyfield, who did combine, had much in com-
mon. Dating from the anti-corporate protest movements of the late 1960s in
France, Danone was birthed with a “dual commitment” to business success and
social responsibility. Stonyfield, in turn, was founded in the early 1980s as a pro-
ecology alternative to mainstream food producers and eased into its acquisition
by Danone that purchased shares over several years. Growth in the organic and
probiotic markets has transformed the business lines of both partners and pro-
moted cross-pollination that, of itself, helps to forge a shared culture.
Unilever’s pedigree in CSR dates from its founding in the 1880s by social
entrepreneur William Hesketh Leaver.11 In key respects, however, its social
interests and innovativeness lagged over the next decades, until revived by the
two chairmen who led the B&J acquisition and by their successor who commit-
ted the firm to a new “vitality mission.”12 None of these top executives, how-
ever, stayed close to B&J’s integration into Unilever or, as one B&Jer reframed it,
its near “disintegration.”13 Here’s how some at B&J see the cultural misfit:
“When I started here it seemed like the product and social missions were upfront
and the economic mission took care of itself. Now its all about money.”

“They didn’t take the time to figure out that they spend millions on advertising to
sell products and we spend a little more on ingredients and get a ton of free press
out of our social mission.”

“The cultures of Green Bay and here (Burlington, Vermont) are night and day.”

These comments exemplify a culture clash where differences between

the two sides are magnified and the higher power party is portrayed as destroy-
ing its partner’s ways.14 To some B&Jer’s eyes, Unilever was a profit machine
(“we make money, its just never enough), that micromanaged its subsidiary
(“the new boss runs a multimillion dollar company and worries about the color
of the drapes”), and that ultimately wanted to absorb them (“we’re being

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 Can You Buy CSR?

homogenized”). These perceptions fit a familiar theorem where difference in

power plus differences in culture equal feelings of oppression.
Then, as sometimes happens in a combination as the two sides learn from
one another, things began to change. For one, Unilever’s GM on the scene came
to see value of and became socialized in B&J’s ways; subsequently, he used his
influence to gain the acquiree more sway in recipes and sourcing decisions. Sec-
ond, the parent company learned the hard way about the vagaries of social capi-
talism in the United States. For months, the Green Bay team had
“pooh-poohed” B&J’s warnings about growing activism over “battery cage”
chickens. When NGOs began to protest the use of eggs from tortured hens, how-
ever, higher ups in Unilever took notice, heeded B&J’s advice on ingredients,
and began to pay closer attention to what its subsidiary had to say about other
aspects of socially responsible business. (Interestingly, B&Js independent Board
of Directors, established at the time of the acquisition to safeguard the brand and
social mission, exerted its prerogatives here and tipped the debate toward the
use of “Certified-Humane cage-free eggs.”)
Finally, and most important, B&J got a new chief executive, or Chief
Euphoria Officer, Walt Freese, who had been GM at CSR pioneer Celestial Sea-
sonings and was savvy to corporate morays. Freese put together a “Managers of
the Mission” team, or MOM, that spent the next years effecting “reculturation.”
This re-engaged Ben and Jerry personally in social campaigns, including leading
demonstrations in Washington, D.C. and led the firm to re-hire select flavor
specialists and cause marketers. Soon thereafter, B&J, in partnership with the
Dave Matthews Band and SaveOurEnvironment.org, launched a “moo-vement
to lick global warming.”

The Longer View

The best way to judge the success of an acquisition is its longer term
impact: Does the acquired brand continue to innovate and resonate with con-
sumers? Is it complemented by other acquisitions and in-house product develop-
ments that spark synergies and give the parent company a broader or deeper
presence in desired categories of business? Furthermore, given the thrust of this
research, can big companies learn about CSR through their acquisitions and, to
borrow a corporate cliché, “take it to the next level?”
Frankly, there isn’t much evidence that L’Oreal or Colgate have built on
their CSR acquisitions or moved in new directions in their product lines and
brands. The former is pitching “sustainable development,” and has some worthy
social campaigns, but it hasn’t to any great extent revamped it offerings, adver-
tising, or animal testing policies. The latter gets good marks for its philanthropy
and health-and-hygiene programs around the globe but isn’t a social innovator
and continues to use questionable chemicals in its products including parabens,
saccharin, and triclosan (a microbiocide).15 At this point, then, these efforts to
buy CSR have been “one time deals.” The Danone/Stonyfield combination, by

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 Can You Buy CSR?

comparison, has been win-win-win, for each company and for all stakeholders
concerned.
The Unilever and B&J deal is more complicated to judge. On the one
hand, the parent company has moved aggressively to clean up the nutritional
value of its foods-and-beverages and add social content to many of its brands
(e.g., the Dove ‘inner beauty’ and Omo “dirt is good’ campaigns among others);
on the other hand, it certainly made hash of the integration of B&J by putting a
super-premium brand and CSR icon into a backward, cost-driven business divi-
sion.
There are, however, many different stories of the mouse and elephant. In
a Turkish tale, the mouse has delusions of grandeur about defeating an elephant.
In an Indian version, the mouse frees the elephant from a trap. In an American-
ized variation, an elephant rescues the mouse from distress. All of these apply to
Unilever and B&J. Two examples illustrate.
During one meeting between European and American marketers, for
instance, the EU team wanted to introduce the ice cream maker to continental
consumers through its “free trade” pints; that way B&J’s CSR credentials would
be front-and-center and differentiate it from its main competitor Häagen Dazs.
“What about the funk, ‘two real guys,’ the social activism?” a B&Jer countered,
adding, “We do ‘fair trade’ because of who we are. It’s a holistic brand that
promises to be progressive and fun.” On this count, the elephant had to admit
that with all of its marketing acumen, it really didn’t know how to introduce the
real guys behind a brand that it was offering. But the mouse, in turn, had to
acknowledge that it is difficult to globalize “Vermont’s finest,” and for Unilever
to credibly send an “anti-establishment” message to consumers anywhere. This
exchange opened up a broader dialogue on the meaning of CSR and brands
between the two sides, got Ben and Jerry personally back into the game, and got
B&J’s marketers, heretofore unversed in global marketing, working together
with Unilever counterparts around the world.
In another meeting, a Unilever team of CSR specialists and marketers
were trying to develop a new “brand key” to vet the ingredients, messages, and
socio-ecological implications of their many brands. Test case: Ben & Jerry’s. Sub-
sequently, they introduced this approach to the global business and to peers in
other noncompeting companies. The rationale: CSR is not only good for
Unilever’s brands, it can help other companies and create a more positive cli-
mate for doing business around the world.
Interestingly, the latest news is that B&J is going to report into a new
North American marketing group and reconnect the factory to the business.
Reflecting on such developments over the past two years, one B&Jer remarked,
“It’s almost like we’re using the social mission to drive the business again.” This
new movement, tentative as it is, would reclassify Ben & Jerry into a “transfor-
mative” acquisition—where both the mouse and the elephant learn from and
are transformed by their partnership.

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 Can You Buy CSR?

Notes
1. J. Hollender and S. Fenichell, What Matters Most: How a Small Group of Pioneers Is Teaching
Social Responsibility to Big Business, and Why Big Business Is Listening (New York, NY: Basic
Books, 2003).
2. See A. Kleanthous and J. Peck, “Let them Eat Cake” World Wildlife Fund, (WWF-UK,
2006).
3. D. Vogel, The Market for Virtue: The Potential and Limits of Corporate Responsibility (Washington,
D.C.: Brookings, 2005); T. Devinney, P. Auger, G. Eckhardt, and T. Birtchnell, “The Other
CSR,” Stanford Social Innovation Review (Fall 2006); United Nations Environmental Program,
“Talk the Walk,” 2005, <www.uneptie.org>.
4. C.B. Bhattacharya and S. Sen. “Doing Better at Doing Good: When, Why, and How Con-
sumers Respond to Corporate Social Initiatives,” California Management Review, 47/1 (Fall
2004): 9-24.
5. “The 2007 Cone Cause Evolution Survey,” July 9, 2007, at <www.coneinc.com>.
6. See <www.lohas.com> for statistics.
7. P.H. Mirvis and M.L. Marks, Managing the Merger (Englewood Cliffs, NJ: Prentice Hall, 1991;
Frederick, MD: Beard Books, 2003); M.L. Marks and P.H. Mirvis, Joining Forces: Making One
Plus One Equal Three in Mergers, Acquisitions, and Alliances (San Francisco, CA: Jossey-Bass,
1998).
8. For background on Ben & Jerry’s see F. Lager, Ben & Jerry’s: The Inside Scoop (New York, NY:
Crown, 1994); P.H. Mirvis, “Environmentalism in Progressive Businesses,” Journal of Organi-
zational Change Management, 7/4 (1994): 82-100.
9. In an interesting laboratory study, researchers found that perceptions of acquirer’s motives
in this CSR space had an impact on consumers. Specifically, consumers identify strongly
with acquirers of CSR-driven businesses when they attribute the appeal of the target to its
CSR agenda and less so when they attribute it to target’s profitable products. See E.Z.
Papavasileiou, S.D. Swain, and C.B. Bhattacharya, “Consumer Reactions to Acquisitions of
Socially Responsible Companies,” submitted to the Association of Consumer Research,
Memphis, 2007.
10. On acquisition types, see D.B. Jemison and P.C. Haspeslagh, Managing Acquisitions: Creating
Value Through Corporate Renewal (New York, NY: Free Press, 1991).
11. For background on Unilever, see G. Jones, Renewing Unilever: Transformation and Tradition
(Oxford: Oxford University Press, 2005).
12. See vitality mission in B.P. Googins, P.H. Mirvis, and S. Rochlin, Beyond ‘Good Company’: Next
Generation Corporate Citizenship (New York, NY: Palgrave-McMillan, 2007).
13. Quotes from interviews at Ben & Jerry’s by myself and Julie Bayle-Cordier, from HEC Paris,
who is doing her dissertation on the changing organizational identity of acquired CSR-
driven firms.
14. Interestingly, this was very much the projected story of CSR-oriented Brazilian Banco Real’s
acquisition by the more traditional Spanish bank Sandover. Now, however, CSR is a com-
mon point to building a new bank culture for the parent company in Latin America. On
such dynamics, see A.S. Sales and P.H. Mirvis, “When Cultures Collide: Issues in Acquisi-
tion,” in J.R. Kimberly and R.E. Quinn, eds., Managing Organizational Transitions (Home-
wood, IL: Irwin, 1984); P.H. Mirvis and M.L. Marks, “Culture in Corporate Combinations,”
in C. Cooper and R. Burke, eds., Leading In Turbulent Times (London: Blackwell, 2003).
15. Prior to its acquisition, Tom’s of Maine scored 16 out of 20 in the Ethical Consumers “ethis-
core” rating system; Colgate Palmolive scored 5 out of 20. For background, see <www.ethi-
calconsumer.org>.

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