Sustainability & Growth Ad World 2021 talk.


Hello all, today I will share content with you from a talk I recently conduced at Ad World 2021. It was a great experience to be speaker at the event. To quote the organizers: "This was another record-breaking year for the books with 53,721 attendees, 4,163 companies, 166 countries, and 151,566 (17 years 110 days) hours of content streamed so far. Couldn’t have done it without you!" 💪🏼✌🏼


I will be talking to you about the value of purpose - for individuals, companies and organizations. How sustainability fits into all of this, and how brands respond to a future of conscious consumption at scale while developing their purpose-driven ecosystem often with the power of meaningful partnerships. And why? Because we all know that the motto faster, higher, further no longer works and is no longer sufficient as a motto.

We all live in a time of constant change,


disruption and technological developments like AI, IOT, big data to name a few that are faster and more complex than ever before. And now we have to deal with the countless challenges posed by COVID-19. In times like this a sense of purpose grows in its significance and is an important psychological resource for people of all ages to develop and/or recruit during this crisis.


SETTING THE STAGE

Before I deep dive let’s take a few moments on a few definitions on what some call buzzwords to ensure we are all on the same page:

- Purpose is the reason for which something is done, created or for which something exists.

- Company purpose is a bold affirmation of its reason for being in business. Purpose is not do-gooding.

- Sustainability simply means the ability to be maintained at a certain rate or level.

- Sustainability in the business context is a business approach to creating long-term value by taking into consideration how a given organization operates in the ecological, social and economic environment. Sustainability is built on the assumption that developing such strategies foster company longevity.





PURPOSE

The understanding and meaning of purpose has changed for many humans purpose is defined as a personally meaningful, relatively firm intention that guides behavior, is characterized by active engagement, and contributes to the world beyond oneself (Damon et al., 2003). The discussion of purpose has a decades-long history in existential and humanistic psychology. In short, it is said that people are generally psychologically and physically healthier when they have a meaningful reason to live and ways to contribute to the world beyond themselves. Given the benefits of having a sense of purpose, there has been an increasing interest in understanding the development of purpose. COVID-19 has undoubtedly brought a disruption in routine and feelings of fear and uncertainty to many people’s lives. For youth—and adults—who are still developing a sense of purpose, engaging in goal-directed action may be one way to manage these challenging feelings and actively cope with stress. Questions like: What needs do I see in the world? What are my values, and how are they related to my experience of COVID-19? What strengths and skills do I have or want to develop to help address the needs I have observed? Which company do I want to work for that shares my values and contributes to the greater good…. Just to name a few.



CORPORATE PURPOSE

Purpose in a corporate context increasingly plays a role for companies and brands. Especially that employees, consumers and shareholders exert more pressure. In a business context purpose charges the mission, the mission statement and the vision with a common good reference. A company purpose has its origin. There is no future without a heritage. Deutsche Bank, Ford or Bayer cannot simply change their purpose. Because it has grown historically. According to Harvard Business Manager found that only 28 percent of employees feel connected to their company's Purpose which is a problem from my point of view.

In Europe purpose has tradition and is anchored through medium-sized companies. It’s in their DNA and seen by many as Europe's few real competitive advantages. The entrepreneurship, the SMEs and the many family businesses have always had the self-image of also being useful to society rather than just to shareholders.



SUSTAINABILITY - PROBLEM VERSUS OPPORTUNITY

Surely but slowly we are moving away from a world in where most sustainability reports tend to be PR activities, with little connection to the core business. Fact is, that we run a global economy that is using resources at 1.5 times the regeneration capacity of our planet. The long-believed attitude that sustainability is a source of problems is shifting to a source of opportunity. Some companies and brands are already more advanced than others.


According to Otto Scharmer there are 5 stages in which we can define development levels:


1) Alleviating projects- old style corporate responsibility

2) Making sustainability part of the organizational practices – sustainability is turned into a real thing,

3) Making sustainability part of business innovation – sustainability begins to be reframed from a problem to an opportunity

4) Creating an organizational culture of sustainability – connect sustainability of more than just elements of the core business.

5) Creating a purpose driven ecosystem and organization – purpose let organization with primary focus positive and environmental impact and also operating a necessary level of profitability.





Sustainability can therefore be seen as a game changer, to the extent that not only regulation, but also conduct guidelines and ethical standards operate as constraints on the behaviour of enterprises and their pursuit of profits.

  • People are much more likely to choose an employer if there is a purpose there that actually benefits society. In return, they are increasingly willing to forego salary. Such questions also play a more important role in purchasing decisions. Today, companies can no longer avoid linking profit orientation to a purpose.

  • It affects not only Generation Y, but all age groups and also managers themselves. (Harvard Business Interview)


BRANDS / TRENDS (Trendbook 2021)

- Ethical Brands - The continually growing number of cause-washing cases has led to corporate social responsibility losing its effect. Consumers no longer trust the contrived goodwill of large companies. In an attempt to maneuvre themselves into more credible positions, such companies are now holding a mirror up to society in general. They promote the kind of values and standards that most people would agree with, such as environmentally-friendly consumption, to pave the way towards a better world, while marketing their services as a step in the right direction. Start-ups are also increasingly investing in new products with a social mission. The emotional touch in the new brand message is crucial here: the more deeply the consumers are affected, the greater their identification will be. In this way, brands act on the general public political positions and establish themselves as moral authorities.


- Circular Economy: 3.5 million tons of waste are produced around the world every day and this figure is predicted to almost double by 2025. The aim of the circular economy is to no longer allow products to become waste after their use and, instead, reintroduce them into the production cycle as secondary raw materials.

The cycle begins with a proper yet uncomplicated form of recycling and ends with waste mining. Products made up of secondary materials can then be actively sought – ranging from leftover food to buildings with integrated scrap tires. Closing off material cycles is not only positive for the environment. Resource-intense industries also profit from the reprocessing of valuable raw materials.


- Clean Tech: Clean tech refers to ecologically clean technologies and methods that help to reduce emissions and spare resources. The driving forces behind the clean tech economy are the growing ecological awareness, the economic desire to achieve a boost in efficiency and the political will to regulate CO2.

Concrete clean tech applications include solutions for saving energy, for independently harvesting energy from renewable energies, for storing energy, for processing technologies to avoid or reduce air, water and land pollution, and for sustainable mobility. The aim of clean tech is the complete avoidance of emissions: Environmentally-friendly bitcoin mining (Hydro Miner).


- Ethical Consumption - Our own form of personal consumption has become a distinguishing characteristic. Consumers increasingly rate the range of products according to moral considerations: products should be vegan, produced fairly and be as emission-free as possible. This development is strengthened by the knowledge that individual purchasing decisions can have a long-lasting influence on the range of goods on offer.

However, it is not always easy to live an ecologically sustainable and resource-friendly life. Apps and organic supermarkets that cater to this development help to enable people to live as ecologically and ethically as possible, with a high degree of convenience while doing so.- Tesla Vegan car seats.


- Zero Waste - a philosophy and a goal, by “closing the loop” and not wasting anything to develop a sustainable economy.


How do consumers respond to these trends?


SHIFT IN EXPECTATIONS / AND MORE EMPOWERED CONSUMERS

There is a clear shift in consumers expectations and a stronger sense of empowerment. That is reflected in a different way we consume: we are consuming more conscious.

We shifted from

  • The 1960ies from environmental & philanthropic consumers to

  • Now: conscious consumers to

  • the Future to consumers that are conscious at scale when sustainable products are affordable and attainable at scale.


Sustainability has become a serious issue for consumers: Consumers are paying more attention than ever before to the entire lifecycle of products.



Greener consumers demand more from brands and we can see a big shift in their behavior:


Climate catastrophes and COVID-19 have raised consumers' expectations for

environmental sustainability. In Forrester's Consumer Energy Index Online Survey, Global Consumers, May 2020, 38% of UK, 42% of Italian, 51% of Spanish, and 57% of French online consumers said they spend more time now thinking about climate change than they did before the pandemic. By forcing people to focus on health and hygiene, the pandemic also strengthened the perception that environmental sustainability affects our personal lives. We care more and more about the food and medicine we put in our bodies, the cosmetics we apply, the clothes we wear, and the cleaning products we use in our homes. Brands in the food, health, CPG, and fashion industries are taking notice and establishing a more emotional relationship with consumers for everyday products. This is important because:


In addition to this Corporates feel the INVESTORS EXPECTATIONS SHIFT

When some of the world’s largest shareholders start asking questions about environmental, social and governance (ESG) issues at the companies they own, corporate directors need to have the right answers. In the past 18 months, responsible investment has reached a tipping point, as concerns about sustainability challenges – especially climate change – have come front and center for many institutional investors.

Larry Fink, wrote that “climate change has become a defining factor in companies’ long-term prospects. … I believe we are on the edge of a fundamental reshaping of finance.”

Plus Corporates want to attract ethical investments as well the practice of investing in companies whose business is not considered harmful to society or the environment:

Consumer pressure and ethical investment are changing the way that corporations work.


How investors are thinking about ESG (Environmental, Social and Governance)

Companies are being urged to curb emissions, enhance governance and improve disclosure. We can see that investors are adopting a range of strategies. Some exclude (or divest from) companies or industrial sectors they consider to be high-risk, or that breach norms such as the UN Global Compact. Some tilt portfolios toward companies that score better on ESG metrics or invest in sustainability-themed portfolios, such as companies specializing in climate solutions or clean water. Some stress active ownership, engaging with company management to encourage them to improve ESG performance, while others are seeking “impact” investments that deliver social or environmental outcomes as well as – or in favor of – financial returns. Many use a combination of approaches.

Certainly, the messages from investors to companies are increasingly clear. For example, Climate Action 100+ – an alliance of investors who manage more than US$40t, coordinated by five global investor networks, including the Institutional Investors Group on Climate Change (IIGCC) – is asking for companies to curb emissions, enhance governance and improve climate-related disclosures. It is engaging with 100 “focus companies” in the MSCI ACWI global equity indexes with the highest direct and indirect emissions, and an additional 61 firms that present high levels of climate risk or opportunity.

“Climate change is one of the most significant long-term risks facing investors,” says Stephanie Pfeifer, CEO of the IIGCC and a member of the global Climate Action 100+ steering committee. “We believe investors have a vital role to play in driving the low-carbon transition across the global economy. Investors can use collaborative engagement as a means of influencing positive change and protecting the long-term value of the assets they invest in on behalf of their beneficiaries.”

Specifically, the Climate Action 100+ initiative aims to fundamentally change corporate behavior, and can point to commitments secured from some of the world’s largest oil, gas and mining companies, which have agreed to enhance their climate change commitments in response to engagement campaigns by the initiative.

Investor engagement has also resulted in a number of companies reviewing their lobbying practices on climate change, whether through their trade associations or their direct advocacy with policymakers, says Pfeifer.

Specifically, the Climate Action 100+ initiative aims to fundamentally change corporate behavior, and can point to commitments secured from some of the world’s largest oil, gas and mining companies, which have agreed to enhance their climate change commitments in response to engagement campaigns by the initiative.

Allianz Global Investors is one of many investors calling on investee companies to disclose information about their approach to climate change using the framework proposed by the Task Force on Climate-related Financial Disclosures (TCFD). It says companies should report on their governance of climate risk, the metrics and targets they use, and how climate change is integrated into their strategies, among other things.


CLIMATE CHANGE AND CORPORATE RESPONSE

How companies address climate risk will depend on the sector in which they operate.

While companies face a range of ESG challenges, climate change is at the top of the agenda for many.


INSTITUTIONAL INVESTORS ARE TURNING TO RENEWABLE

The stability of returns that can be generated by renewable energy infrastructure is compelling. Institutional investors around the world are increasing the volume of capital they are allocating to renewable energy infrastructure as a means to hedge their climate exposure, according to investment managers.

In a report published last year, institutional investors surveyed by Octopus Investments said they planned to increase significantly the allocations of capital they direct to renewable energy, from 4.4% to 7.4% – representing US$210b.


PARTNERSHIPS

When corporations like BASF, Bosch and SAP form a values alliance to explore their contribution to society, there's a reason for it: the companies have realized that they can no longer saw the branch they're sitting on.


A Changing Landscape

  • It is reasonable to expect that recovery from COVID-19 will result in structural and systemic changes across all sectors and regions. These changes are likely to include new priorities such as increased focus on health and safety, accelerated digitalization, increased virtualization of the workforce, supply chain resilience, new associated business models and commitment to sustainability.

  • As companies, large and small, prepare for a new normal with fundamentally reshaped economies and societies, it’s inevitable that they will need to incorporate these priorities in their business models. One way to achieve this is by establishing a web of alliances. By partnering with both large specialist firms, and innovative start-ups, businesses can collaborate to shape new market offerings.

  • Traditional partnerships tend to be driven by one-on-one connection or the need to tackle specific problems. In a post-COVID environment, we are expecting to see a rise in purpose-led alliances. These will not be bound by traditional industries, but instead coalesces around deeper human needs and common purpose (e.g. workplace health and safety, wellness, trust, sustainability etc.). These value-based structures will bring together a broader set of collaborators, including corporate peers, companies from other sectors, innovative start-ups, technologists, futurists, universities, government agencies and many more.

So, how should company and high-growth scale-ups build purpose-driven ecosystem alliances? Aligning Needs with Innovative Capabilities

  • It starts with something fundamental – matching market or customer needs with capabilities. For example, in a post-COVID world, remote-first consultation might become the new normal for GP practices. Similarly, an on-demand production capability could be a key requirement for FMCG and fashion retailers who depend on responding quickly to changes in consumer trends.

  • Inevitably, gaps arise between market needs and capabilities. These gaps are where companies tend to look for new solutions and partners to bolster their offerings. High-growth scale-ups should have proactive dialogues with enterprises to demonstrate how their value proposition can help corporates address those specific gaps. In turn, this will lead to meaningful conversations that lay the foundations for partnerships and purpose-driven alliances.

  • Over the last few months, we have seen a number of interesting alliances between corporates and scale-ups. In the UK, Aldi is delivering groceries to homes for the first time through a partnership with Deliveroo, an online food delivery company. In Germany, How.fm (a start-up that provides digital training and coaching for workers around issues like health and safety, compliance and work procedures), is forming several partnerships with corporates who are reliant on traditionally skilled workers and want to quickly upskill them for post-COVID new working realities.

Turning ‘I’ Into ‘We’

Even when there is a strong mutual desire for corporates and scale-ups to collaborate, many partnerships unfortunately get stuck because of conflicting objectives. When corporates consider alliances, they typically have two primary objectives: the partnership should have high alignment to their strategy and the investment costs should not outweigh the benefits. However, this could often be at odds with how scale-ups approach alliances. Scale-ups typically want to use alliances to expeditiously increase their revenues, and expect high alignment to their core capabilities to minimize additional investments.

This inevitably causes tensions and it is important to bridge the gaps early on.


While starting alliance discussions, both parties should ensure shared vision and transparent communications as the hallmarks of their working relationship. Underpinning this should be executive sponsorship and commitment. Both sides should not shy away from difficult conversations, such as those related to future investments, sharing of data, ownership of joint IP, time commitment, and so on. Measures of success are important to establish, but alliance partners need to look beyond quantitative measures towards broader qualitative metrics in order to encourage partners to be more ambitious and celebrate change.

And, most importantly, cultural alignment matters. A key concern for scale-ups is that they want to retain their freedom to innovate and not get bogged down by organisational structures. Meanwhile, corporates often find it difficult to deal with the ‘asymmetry of risk’ and the fail-fast/learn-fast mentality inherent in scale-ups. Bridge these cultural differences by recognizing the value each party brings to the table, acknowledging the degree of inter-dependence on each other and putting in hard yards to build on personal chemistry between individuals.


Turning the I into We, and recognising and accepting these differences early in the alliance is crucial for long-term success.


TRUST THE COMMON DENOMINATOR

  • Purpose-led alliances need to deliver purpose-led growth that benefits both the customers and the alliance partners.

  • Trust is the connective tissue that binds alliances together. Companies need to show authenticity and consistency while dealing with ecosystem partners, demonstrating collective gain. Show empathy towards the financials, consider the health and safety of both workforces, and demonstrate an unwavering commitment towards safe and ethical use of customer data. These traits will be the key hallmarks of successful purpose-led ecosystem alliances in the months and years to come.

Partnerships help causes generate revenue, build brand, and raise awareness. They help companies garner employee engagement and customer loyalty while creating positive stakeholder perceptions, and building brand. Audiences are left with a better understanding of both brands’ values, a way to support the causes they care about, and feel-good feels that have cross-generational appeal. In each case, building the brand is at the core.


How to find the right partnership for your company or cause?

1) Begin with purpose. 2) Align audiences through shared values.

3) Integrate marketing and communications. 4) Involve brand leaders


CONCLUSION



  • Purpose is the new narrative

  • Covid-19 amplifies our needs and changed/s behavior that leads to more empowered and informed consumers

  • Sustainability is a source of motivation for employees, investors and ultimately for managers themselves

  • There are 5 level of development stages: Luft nach oben

  • Consumers are changing to conscious consumption at scale - Green consumers are frustrated — especially in Europe — and demanding that brands go beyond touting their environmental sustainability efforts and take real action

  • Matching brand's words with actions to reach your consumers is important

  • Cause- or greenwashing needs to be avoided at any time

  • More and more companies develop external purpose driven eco systems - Purpose let partnerships or alliances are key to success

  • Turning the I into We is the name of the game


Last not least: Together we can make a difference.

Thanks for your time and it was a pleasure to be a speaker :)





(Illustrations credit to Ogilvy)



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