Q1 2020 : First impressions
High society
Sadly my invitation to this year’s World Economic Forum (WEF) in Davos got lost in the post, but thankfully I was able to tune into the platitudes of the global plutocracy via a series of live webcasts from the comfort of my living room.
This year’s official theme was ‘Stakeholders for a Cohesive and Sustainable World’, which translates into plain english as:
- Rebranding big business as a force for social good, in a world where levels of trust in profit driven organisations is falling, and anti-free market sentiment is rising.
- Championing stakeholder capitalism, which says that a business’s purpose must go beyond profit, because shareholder primacy is now a byword for selfish, self serving, socially and environmentally destructive greed. The worldview of Messrs Gordon Geko and Jordan Belfort = no longer cool.
- Finding new ways to signal how profit driven businesses can ‘do well by doing good’ across a range of important societal and environmental issues like: access and inclusion, social cohesion, health and wellbeing and (of course) carbon emissions.
It came as no surprise to see businesses rushing to announce carbon neutrality goals, nor did the sight of orderly queues forming around alliterative initiatives like ‘A Trillion Trees’. Although here in Germany many of these moves were rightly met with skepticism, here is Joe Kaeser, CEO of Siemens AG:
“I heard a few hundred [American] CEOs talking about corporate purpose, making it into the latest and greatest invention. The moment somebody big from the US Dow Jones goes to Wall Street and says, ‘you know what, I’m gonna miss the next two quarters, and this new corporate purpose is more important to me’, then I will believe them”.
You can almost hear his eyes rolling.
But to act unsurprised, or even indifferent to this ‘better late than never’ response from the custodians of the status quo, risks glossing over a very important question: why do the world’s most powerful vested interests, in business and politics, suddenly care so much about being purposeful?
Man of letters
‘Climate change has become a defining factor in companies’ long-term prospects. Climate risk threatens the future profitability of many businesses and economies’ - Larry Fink, CEO of Blackrock, Annual Letter to CEOs, (January, 2020)
Fink’s recent letter to the CEOs of companies in which Blackrock is invested urges them to assess the ‘socioeconomic implications of physical climate risk’ and its implications for long term prosperity. It could become one of the most important written artefacts in the history of capitalism, because it lays out the incentives underpinning a transition to greener growth, and more broadly, to woke capitalism.
In simple terms, he is asking CEOs to sign up to a doctrine of enlightened self interest, because companies who fail to adapt to climate change and social issues “will go bankrupt, without question”.
The evidence is overwhelming. Companies that resist the winds of change will expose themselves to massive physical, reputational, market, liquidity, insurance, supply chain and human capital risks; risks so all encompassing that they will blow crater like holes into corporate balance sheets. Operating costs are also set to rise in the face of imminent regulatory change, beginning with stricter ESG guidelines and accompanying fines for non-compliance, beyond which we will (finally) live in a world which attaches a higher price to carbon. This will make many carbon intensive business models non-viable, and this is before we get to shifting consumer expectations and the greening of European climate politics. In short, it is highly likely that companies who do nothing will lose their social licence to operate.
In response to this rude awakening, many companies and brands are now doing their damnedest to persuade consumers, shareholders, investors, partners, regulators, politicians, take-me-seriously-celebrities, brand ambassadors, influencers, micro-influencers, god even nano-influencers, that they have it within them to be ‘constructive social actors’.
Going for woke
Co-opting social issues to appear more purposeful and socially engaged has to date been the favoured tactic of many big brands. More than a few have pursued this goal by instrumentalizing issues like gender, race, sexuality, class, mental health and social inequality through calculated but sometimes misjudged acts of ‘woke-washing’.
As Anand Giridharadas argues in his polemic against philanthrocapitalism, Winners Take All: The Elite Charade of Changing the World, woke-washing is an attempt to get out in front of the growing backlash against capitalism, without really changing anything. He argues that woke-washed campaigns, a few of which we will look at in a moment, are stunts designed to distract the public from what is really going on. If their stated objectives are to signal a shift to a more progressive form of capitalism, their unstated objective is to build positive brand equity with valuable customers that convert to increased sales and better net margins.
Giridharadas’s line of attack is compelling because it builds from a plausible premise:
- For brands to be relevant, they need to talk about the things their target audiences are talking about. And they need to be seen to care about the things they care about. As one marketing study argues ‘consumers are looking to brands that stand for something and take a position, so that they can make a decision for themselves if that represents their identity and their values’.
- So it follows that even if you are producing goods that serve no purpose beyond their immediate utility (like removing hair from your face or rehydrating), you should be linking it to some higher cause that your target customers are likely to care about.
- The trouble is, many brands making trumped up claims (FMCGs, sporting goods retailers, airlines, big oil, alcoholic beverage companies etc) are not social impact organisations. They are amazing supply chain and logistics businesses with oversized marketing departments.
- Which means they find themselves in a bit of a bind, now that more and more affluent consumer are going #woke and expecting more social impact from the products and services they consume.
- Or maybe not. Because allocating capital to marketing and corporate PR is still, in the short run, more efficient and more profitable than enacting real change, investing in real innovation and delivering real social impact.
Woke or broke?
If Q1 2020 is anything to go by claims to purpose will only proliferate throughout the rest of this year. Which means we will need to be more attuned than ever to instances of woke-washing . To help I have created the Woke or Broke (WoB)™ matrix. It is a simple tool for assessing the credibility of individual wokeness claims, and the degree to which they have yielded increased financial returns and / or improved brand equity.
Nike
Campaign: Kapernick, ‘Just Do It’
Level of woke: ★★★★★
Authenticity: ★★★★☆
ROI: +31% sales uplift.
Verdict: #WokeKerching $$$
Nike’s support of the NFL player Colin Kaepernick, who kneeled during the national anthem in protest against American police brutality and racial inequality, was a bold stance. It certainly alienated some Nike fans, who saw Kaepernick’s actions as unpatriotic. Many turned to social media and posted videos of themselves torching apparel. But the campaign itself achieved a 31% sales uplift and turned out to be a well-calculated commercial strategy that appealed to metropolitan, progressive liberals in major American cities; consumers with the disposable income to buy $150 Nike sneakers and premium streetwear. It was also a well executed campaign and connected to Nike’s core brand purpose, ‘Just Do It’, a slogan synonymous with action, boldness and fighting for a goal against the odds. This is therefore a #WokeKerching, if not for the whole of American society then at least for Nike, its shareholders and brand ambassadors.
Gillette
Campaign: The Best Men Can Be
Level of woke: ★★★★★
Authenticity: ★☆☆☆☆
ROI: Sales flat.
Verdict: Broke.
Gillette attempted to position itself as a supporter of #MeToo, and in opposition to so called ‘toxic masculinity’; a term used to characterise typically masculine traits like violence, aggression, emotional delinquency and sexual harassment. If this was the smooth glide marketing goal, the reality is less clean shaven. This campaign grates more than a dull razor on three day stubble. #WokeBroke on this one for the purveyors of square jawed hunks and multi blade shaves. P&G have not reported a positive sales uplift, and my guess is that brand sentiment is down.
KLM
Campaign: Fly Responsibly
Level of woke: ★★★☆☆
Authenticity: ★★☆☆☆
ROI: Unreported.
Verdict: flies in the face of long run commercial logic.
This campaign makes a ‘commitment to creating a more sustainable future for aviation’ by urging us to consider alternatives to flying for business and leisure. All of which seems to make very little sense for an industry reliant on huge passenger volumes and levels of aircraft utilisation above 80% to be profitable. It is also surprising coming from an industry that lacks a credible fossil fuel alternative to kerosene burning jet engines (mass market electric aircraft are still a long way off). Which makes this a hard one to call. It will always be easier to craft good copy than rebuild carbon intensive businesses, but as it goes this isn’t a bad attempt. This campaign should position KLM as a more environmentally conscious brand in the segment with the potential to increase loyalty amongst existing customers and improve rates of new customer acquisition amongst more premium (and environmentally conscious) passenger segments. It may even nudge a few of us to change how we get from A to B.
Heineken
Campaign: Worlds Apart
Level of woke: ★★★☆☆
Authenticity: ★★★★☆
ROI: 40m views. 91% positive sentiment.
Verdict: Refreshingly Kerching $$$
We are losing the ability to listen to people with opinions different to our own and have become trapped in reverberating echo chambers that confirm our ingrained biases. In the world beyond our personal filter bubbles public discourse is becoming ever more fractious; not only are student bodies de-platforming speakers considered to harbour dangerous opinions, but individuals across the globe are being attacked by social media mobs for expressing the ‘wrong’ opinions. There is a lot to say here, and what better way to unpick it than over a cold beer. Good brand /product /sentiment fit here. Intentionally or not, this campaign also provides a meta-critique of morally righteous #wokeness, and the inability of its flag-bearers to comprehend that other people may also have legitimate opinions on social issues. That alone deserves a cheers. If you have the time I highly recommend cracking open a cold one and listening to this wide ranging discussion on resisting wokeness between the social commentator and author Douglas Murray, and satirist Andrew Doyle.
Amazon
Campaign: Bezos Earth Fund
Level of woke: ★★★★★
Authenticity: ★★★☆☆
ROI: too soon to tell
Verdict: the cost of doing business in 2020
Your personal wealth is equal to the GDP of Morocco (population 35.7m), the company you preside over delivers over 10bn items a year and your supply chain relies heavily on diesel vans, 20,000 of which you purchased in 2018 as part of an investment in faster deliveries for Prime members. With your fellow tech titans finding their climate conscience (Microsoft has announced it wants to be carbon negative by 2030) you are beginning to look bad, and that’s before anyone mentions your corporate tax contributions. Ahem. What’s more 8,700 of your staff signed an open letter last April demanding your company cut its carbon emissions. So you get on the gram and proclaim to your 1.5m followers that ‘this global initiative will fund scientists, activists, NGOs — any effort that offers a real possibility to help preserve and protect the natural world’. Translated into truth — this is the cost of doing business in 2020, and at less than 1% of Amazon’s market cap (currently $1Trn), it is a price worth paying to keep the flywheel spinning.
Alas, it turns out that keeping things spinning is at the heart and centre of all enlightened self interest and claims to corporate purpose. With that startling revelation, I wish you all a prosperous remainder to Q1. And remember to keep the WoB™ on your person at all times, it could serve a useful purpose.
*If you enjoy this content please subscribe to my quarterly blog which aims to provide a fresh spin on the subjects that keep the world of business spinning.
