Is this new generation of socially-conscious commerce a passing trend, or simply savvy marketing? Newsroom’s Morgan Tait speaks with experts about the changing business landscape.
It was a $60,000 business decision, but to Tony Small, “It just felt right”.
The decision? To ditch polystyrene lids from his small, startup packaging business.
The lids weren’t faulty, there was no issue with suppliers or manufacturing and considering everything else made by Innocent Packaging is compostable, using the lids probably wasn’t damaging his brand.
“It was $60,000 of business that we just discontinued overnight,” he says about the call.
“That’s one person’s wages. I just thought if you’re using compostable cups but have polystyrene lids, those lids are going to end up eventually contaminating waterways and yeah, I really just believed that was the right decision.”
Small’s choice flies in the face of most business decisions – to make as much money as possible and cut as many costs as possible – but is an example of the increasing presence of socially-conscious commerce in New Zealand’s economy.
There is no shortage of new businesses popping up with the appearance of sacrificing their own bottom line for the good of society, the environment or animal welfare.
Buy your lunch and give one to a child, buy fancy nut milk and provide workers a living wage, pay a premium for ethically farmed chemical-free food in packaging that won’t hurt the planet – or in no packaging at all.
The list of little guys goes on. And not only are they making real differences, but business is booming.
Last year’s Deloitte Fast 50 featured a strong contingent of socially-conscious businesses, a trend that judges said had been growing in recent years.
Now, large corporations are at it too. They can’t shut up about the charities they support or the transparency of their supply chain.
McDonald’s, once the poster child for the evils of globalisation, now wallpapers its restaurants with the faces of families helped by its charities and the backstories of the farmers who harvest its meat and produce.
The moral of a modern business success story is less about the bottom line and more about, well, morals.
It is less common for a business to solely promote its strong financial returns without also mentioning the steps it takes to help society.
Business NZ Sustainable Business Council chief executive Abbie Reynolds said the shift began up to a decade ago, but was halted by the recession and global financial crisis.
It has gained momentum again in recent years, largely driven by younger generations.
“There is a few drivers to what you’re seeing, a really significant driver is – and there is plenty of research around – that suggests millennials are more social minded than any other generation and are starting to take that into the businesses they work for.”
Reynolds, a senior Vodafone executive, said graduate applicants are asking what the company contributes to society.
“One hundred percent of people applying for graduate roles are asking what Vodafone does for the environment and society. That is starting to have an impact and that is absolutely the trend.”
The effects of environmental issues – global warming, pollution and animal extinction – are becoming a reality impacting the quality of life for millennials, she said.
“There are issues they need to worry about that did not exist for Generation X and Baby Boomers.”
Rising living costs were another factor. As home ownership becomes less of a reality for New Zealanders in their 20s, they are more willing to take financial risks in other areas.
“They think they aren’t going to be able to own a home any time soon, so they may as well just go out on their own and do something they are passionate about.”
Last year’s Acumen Edelman Trust Barometer – a global survey into the faith of populations in government, politics, media and NGOs – showed trust in “the system” has never been lower.
People feel like they have to change the world themselves.
Luke Kemeys, a successful young accountant with a six figure salary, was sitting next to a man on a plane when the two got talking.
When Kemeys, now 29, told the man his occupation, he was questioned about school donations.
The issue, where families are billed for the “donations” to their children’s state-funded schools or the children miss out on certain activities, has long been contentious.
Kemeys was astounded that the man sitting next to him, a father with children in school, did not know the donations were eligible for tax refunds.
“I thought everyone knew that, but when I dug around I found out that 60 percent of them were going unclaimed.”
That turned out to be about $46 million worth sitting in the IRD’s bank accounts and in just two months Schoolrebates.co.nz has transferred more than $70,000 back into the accounts of New Zealand parents.
“When I found out there was this problem, I just felt like I had to fix it,” he told Newsroom.
The business is growing so fast it’s pulling in 100 new clients each week, has witnessed a competitor start, and Kemeys has been told large accounting firms’ clients are checking in to ensure they too are receiving the service.
“Everything that we are making is going straight back into advertising. We are effectively paying for parents to learn how to do it and it’s up to them if they want to use us.
“I could still be sitting in my accounting job and making six figures if I wanted to, but I just love helping people, it’s my number one value.
“I hate the idea of people missing out just because they don’t know how to do one simple thing.”
It is businesses like this that are on the rise, where the core purpose is to help people.
“They are making money but it’s not their sole purpose,” said Reynolds. They have a core purpose of being about more than shareholder returns.
“Businesses are here for more than business returns, they have a role to play and they are able to be a powerful force for good.”
And of course, there is the internet.
“There are issues they need to worry about that did not exist for Generation X and Baby Boomers.”
Social media allows ideas to be easily shared, openly discussed and leave a digital footprint which is measured and analysed as a tangible part of the cultural zeitgeist.
It’s a no-brainer for businesses to use such data to target consumers.
Recent research into public perceptions by J Walter Thompson New Zealand showed a change in consumer demand for brands that reflect global citizenship.
“With the rise of the global citizen, being connected to the rest of the world improves a country’s reputation as well as its economy,” the findings stated.
“Today local brand leadership is about solving the problems that matter in the world, from the environment, to poverty, peace and social prosperity.”
Last year, the United Nations implored businesses to do their part for a sustainable world by changing business practices to promote sustainable consumption and production.
Auckland University senior marketing lecturer Dr Mike Lee said the success of socially-conscious businesses inspired others to do the same.
“There is definitely some savvy marketing in there,” he said. “People have heard successful case studies about encouraging consumers to spend money with companies in line with their values.”
He said the emergence and prevalence of social media gave smaller voices a platform on which to be heard.
Reynolds agreed: “A lot of businesses have been doing good things for society and the environment but they haven’t told their stories, so are starting to do so now.”
Dr Lee cited The Body Shop as an example of a business who had been committed to sourcing ethical ingredients and stopping animal testing for decades.
Now, there are more businesses doing the same thing.
In the past there was a handful of NGOs like World Vision, Unicef and the SPCA which people could donate to, now the options are everywhere – and easier to support.
“Humans are really lazy by nature and while they might not want to go out and physically do something, we feel better about ourselves by spending money and trusting that that money is doing what it is asked to do.”
But, said Dr Lee, entrepreneurs whose businesses start with a social or environmental purpose at the core were different to large corporations who wanted to boost their brand.
“Businesses that are far smaller are able to get that message out there and connect with people much more easily.”
The presence of such businesses on social media allows consumers to connect with the brands without a huge – or no – marketing spend.
It is hard to go online without seeing a post, photo or advertisement promoting such endeavours.
However, publisher-at-large of Idealog, a publication championing small business and tech, Vincent Heeringa, was not convinced that presence translated to sales.
He said there is a lot of “noise” on social media and in the media about ethical business practices, but there is a also a large silent majority, especially of older, middle New Zealand who – literally – don’t buy into it.
“Yes there is a movement … but the noise is far greater than the economic impact.
“When it comes down to it, how many people are prepared to get the free range bacon rather than the other bacon? The majority of people are still not prepared to pay extra for ethically produced food.”
Not to mention the people who can’t afford it.
Heeringa said stories about socially conscious businesses always performed incredibly well on the website.
“But we are still the minority, the majority of people still don’t care where their milk comes from, how their eggs are farmed or where their packaging goes.”
So could it be a passing fad?
“I hope it’s not,” said Dr Lee. “It’s a win win for everyone.”
“Humans are really lazy by nature and while they might not want to go out and physically do something, we feel better about ourselves by spending money and trusting that that money is doing what it is asked to do.”
In fact, he predicts that these types of businesses will continue to grow and associate themselves with different causes.
“The market will probably get quite cluttered as people try to do different things.”
Dr Kate Jones, an AUT lecturer in marketing, advertising, retailing and sales, agreed.
“I don’t think it is just a fashion, I think it is here to stay. It is not easy to tell if the silent majority care or not, but what we can measure is how businesses are reacting and we are seeing more transparency or pressure for transparency.”
Social media and the internet forced businesses to be honest about their practices, she said.
If a fact or statistic was found to be fake, it was highly likely to be ousted online and no doubt create some kind of public outrage.
“With that comes a lot of pressure on businesses to think more about what they’re doing and what they’re saying.
“Companies 10 years ago did not have to worry about this.”
It was becoming part of the norm, she said.
“We are seeing politicians talk about it and I think we will soon see even bigger conversations about sustainability of brands and products.”
Sustainability, after all, is about ensuring longevity – whether it is the continued growth and success of a business or safeguarding Earth.
So how do you balance both simultaneously?
“If you’re getting into business, it is very important to be profitable,” said Small, who is aiming to take Innocent Packaging from 90 percent environmentally friendly to 100 percent by 2018.
“You have to pay people within the company, you need to be able to look after them and give people pay rises to make them stay.
“Maybe I am just naive, maybe I will be out of business at some point, but money is not by any means ‘evil’ and I think you will see more businesses have a social impact that will also be able to bring financial rewards.”
