Your Brand and CRO

Mike Harrison, SVP Worldwide Marketing & Sales, Timberland

Well we're hopefully getting the AV System working. Thanks Michael. It's an honor to be here addressing this first inaugural CRO conference. I'd like to congratulate Jay and Michael on the launch of CRO building on the success of Business Ethics Magazine before it. It's an interesting fact I was shared last week that if you take the 100 companies that made the Business Ethics list of the 100 most ethical companies in America last year they have a combined market capitalization of more than $2.7 trillion dollars. That's bigger than the GDP of many countries. Most countries in the world. Bigger than the GDP of UK, France or even China, which I think, makes a pretty eloquent argument that corporate social responsibility has truly reached the mainstream. The gathering pace of CSR is also reflected in the headlines these days. To rip another article from the headlines this is an article from the Financial Times in September compared to this one two weeks later. [laughter] It certainly feels like CSR is an idea whose time has come. I'm going to talk to you today about the role of CSR and the brand. About engaging the consumer in CSR and the role of the corporate responsibility officer in making that happen. But first let me share a little context.

As Michael mentioned at Timberland the concept of CSR is well worn and well rooted. We've been living it since 1973 when our current chairman, Sidney Schwartz, made the world's first guaranteed waterproof boot and coined the Timberland brand name to go with it. Since then Timberland has grown to be about a $1.6 billion dollar global company selling boots, shoes, clothings and accessories through our stores and others in 81 countries around the world. That's what we do at Timberland. But equally important to our success, I believe, is who we are. A community of 6,000 employees, and many thousands more who work in an extended family of suppliers, partners, and customers who are passionate about the notion of giving back to their communities. And to exercise this passion using the 40 hours of paid time each year the company gives them for volunteer work.

It's interesting to reflect that back in 1973 when Sidney Schwartz was inventing that waterproof leather boot, it was perfectly legitimate to ask whether CSR had any role at all in corporate strategy. Even in the 80's when I went to business school we learned about Milton Freedman's assertion that the business of business is to earn a profit. Nothing more, nothing less. In fact he called CSR a morally subversive doctrine. [laughter] This was the definition of corporate citizenship at the time. One that informed behavior and constrained imagination. Much as the imagination of 15th century explores was constrained by the common wisdom that the earth was flat. Fortunately there were pioneers who imagined a round world like our own CEO Jeff Schwartz. Or Harold Schultz of Starbucks who said a company should lead with its heard and nurture its soul. It should inspire other companies to aim high. It should do more than simply avoid doing harm. It should consciously seek to do good. Thanks to leaders like these the first round of the CSR debate has been won. The world is no longer flat.

In today's round world more than half of the top 250 companies in the world publish a social responsibility report. In today's world NGO's, like the climate group, 1% for the planet and organic exchange proudly boast the world's largest corporations as members. In today's world a company like Home Depot can tap into the creative power of corporate volunteerism and perform 500,000 hours of community service in just one month. The world is no longer flat. Enlightened companies know that the long term health of their business depends on creating value not just for shareholders but for the communities in which they operate as well. They've also discovered something we learned at Timberland a long time ago that Michael mentioned. Employees at such companies are more satisfied, more motivated and will compete to work for socially responsible companies.

Even investors are starting to take notice. A recent study of fund managers found that 52% believe the social environmental considerations will influence their investment decisions over the next two years. I experienced this first hand on Friday. We held our 3rd quarter analyst conference call at Timberland and these things usually follow a pattern. We talk about our results, we talk about our progress against our strategic initiatives, and we talk about our progress on our CSR agenda. And without fail the analysts ask us about our results, they ask us about our progress and strategic initiatives and they completely fail to ask any questions about what we are doing in CSR. Last Friday was the first one in 14 calls I've attended where we actually got questions about our environmental agenda and what we are doing to address the increasing consumer demand for sustainability which I think was a really positive sign. So this all sounds pretty good. Maybe as I said the CSR debate's been won. As corporate responsibility pioneers we should be able to celebrate winning this ideological debate and focus on polishing the brass plate of this newfound discipline, exciting events like this one.

But not so fast. If CSR is now mainstream why is public trust in corporations still at an all time low? Look at the headlines or at this gallop poll conducted for the World Economic Forum. It showed large multinational and national companies as some of the least trusted institutions with only congress getting a lower trust rating. [laughter] While institutions such as trade unions, NGO's and the armed forces all scored much, much higher up the list. I suppose you could blame this on, this lack of trust on the media or a few bad apples, lots of press coverage about former CEO's going to jail, egregious pay packages, stock options being back dated, etc. But let me ask a tougher question. If corporations are now amongst the most influential economic entities on the planet why is climate change a more acute threat now than it was 20 years ago? Why will more children go to bed hungry in America tonight than did 20 years ago? Why are we not seeing more positive outcomes from CSR? I believe its because in most companies CSR activities are still at the periphery, disconnected from the value creating engine of the enterprise. Especially the core process of acquiring and retaining customers. I believe a big opportunity is being missed. I don't just mean the opportunity to build trust in corporations. We're also missing the opportunity to harness the power of billions of consumers to make choices that make life better for all and at the same time giving them a reason to prefer our brands.

Consider this. In the US a new product is launched every three and a half minutes. That's more than 150,000 new products a year. Then hundreds of billions of advertising dollars are spent in an effort to differentiate them and make them appealing. Still more than 85% of new products fail after just a few years on the market. Now consider this. Research has identified 63 million so-called [lohas] consumers in the US. These are consumers leading a self-described lifestyle of health and sustainability who are willing to pay up to 20% more for products that fit their values. In his excellent book, Citizen Brands, the British author Michael Wilmot argues that faced with an overload of choice consumers will increasingly turn to brands they trust to help them navigate the sea of sameness that's out there and a citizen brand, that is a brand with strong social responsibility credentials, is more likely to be accepted as a choice manager because it embodies a range of values they can trust. I think we are already seeing this with some powerful brands emerging like Whole Foods, Patagonia, Aveda or in the UK Howie's and the Co-Op Bank.

And my message today is that all of us as corporate responsibility officers have the opportunity to build the same competitive advantage into our brands. Now how can we do this? I'll be the first to admit that at Timberland, despite our heritage, we've been a bit ambivalent over the years about broaching the subject of CSR with our consumers. From time to time we have reached out through advertising or events. For example our give races in the boot campaign in the 90's. Or the community build us tour. In the last 3 years we've pulled together thousands of inner city volunteers to work on neighborhood renewal projects. Or our annual earth day event where we invite consumers to join us in a day of environmental service. But other times we kind of shied away from this for fear of seeming cynical. Because as my colleague Matt Ryan of Arnold Worldwide writes in this month's CRO Magazine - if the consumer hears the message simply as buy our stuff because we're good people these efforts are doomed to fail. But through a sort of trial and error process we've learned that we can engage consumers in CSR selectively if we apply the following principles or golden rules. First, you have to engage the consumer in issues they care about. You have to know their values and focus on the overlap with what your brand stands for. It sounds obvious but when it comes to CSR it can be hard, a hard discipline to keep. At Timberland, for example, we've got a lot going on in the CSR area. In the last year our employees have participated in more than 300,000 hours of community service. We partnered with the actor Don Cheedle to design an exclusive boot to help his Save Darfur campaign aimed at tending the atrocities in the Sudan. We worked with City Year and Bill Clinton to launch a community service volunteer core in South Africa; planted 100,000 trees in the [Horachin] Desert in China; installed one of the 50 largest solar panels in the world to Para distribution center in California; got rid of organic solvents from 30% of our shoes; raised levels of organic cotton in our apparel; collaborated with artists from the 5 boroughs of New York to invest in local community; organized a four day rebuilding project in some of the areas devastated by Hurricane Katrina; and literally hundreds and hundreds of other efforts around the world as our employees devoted their service hours to issues of local interest. Are we proud and passionate of all these things? Yes. Do we wish our consumers knew about them? Absolutely. But can we effectively communicate them all? No. More importantly would consumers even care if they knew? Not always. Because each have their own values and concerns.

Now on the other hand we do find our industrial consumer, top guy on the left, the guy who buys Timberland Pro boots for work on the job is interested in the work we are doing to build affordable housing. Indeed 15,000 of them turned out last week for a community service event in Indiana. Our urban youth consumer will engage in effort to support urban communities, art and culture. Our so-called outdoor recreationist, the consumer who buys our hiking gear for use in the outdoors, will show up for environmental action on Earth Day. While our casual-wear consumer does care about climate change and will support our re-forestation efforts in China, Europe and the US, selective engagement can work. We've also learned that how you engage the consumer is really important too. You can't expect them to buy your brand because of CSR. Better think of it as a kind of a gift with purchase. Something that will pay back in time with loyalty and brand reputation. For example in our new flagship store in Regent Street, London, we promised shoppers we'll plant a tree in their name every time they buy a pair of boots and we gave them a packet of seeds as well. Some may say isn't this just another example of old fashioned cause related marketing? But I'd argue that what differentiates this strategic values branding from plain old tactical cause related marketing is rule 3. It's authentic. You can't fake it. It comes from the inside out, not the outside in. Traditional marketing was too often like building the movie sets of those old Wild West towns, you know, like Blazing Saddles. Each brand a two-dimensional façade built with advertising that hopes to just enough to appeal to the consumer. Values brands are different. They are three dimensional entities and the consumer is welcome to look behind the façade. Branding from the inside out also means doing before telling. As it happens, Timberland's Asian employees started a re-forestation project in China using their volunteer hours 6 years before we ever sold Timberland in China and long before we started to talk about re-forestation in our shop windows. Maybe that’s a case of better lucky than smart but it spoke volumes about authenticity when we launched the brand in China earlier this year on an environmental stewardship platform.

Inside our branding also means not being afraid to invite consumers behind the façade to inspect what's there, warts and all. For example this year Timberland launched an effort to improve transparency in the footwear industry. We call it our nutrition label, kind of like the labels you get on food in the supermarkets. It’s a label on all our shoe boxes that reveals the environmental impact, the community impact, and the factory conditions in which each pair of shoes is made. The label reveals we're not perfect. We're not yet carbon neutral for example but we will be by 2010. But hopefully it also encourages the consumer to demand more transparency and make an educated choice. And a quick scan of the activist blogs shows some success to date as you can see from the quotes on this slide. I particular like the second posting - whatever the shortcomings of the Timberland tag, its up to you the consumer to vote with your feet and make other producers aware.

So the first three principles are about knowing your consumer, then engaging with them thoughtfully and authentically. But at this stage you may be forgiven for asking but with whose army are you going to do all this? The fourth golden rule is about creating leverage through partnerships with NGO's and other organizations that can scale your company’s impact. There's no way Timberland could have planted 300,000 trees in the Horacin Desert in China without our NGO partners. Nor could we have performed thousands of hours in service in inner city communities without our partnership with City Year, a volunteer youth core whose New Hampshire chapter is actually housed in our Timberland headquarters up in New Hampshire. Nor could the Timberland Pro Team have organized last week's community service event in Indiana for 15,000 volunteers without our partnerships with Future Farmer's of America or Skills USA. As a global brand our strength is our voice, our ability to reach and motivate people, employees, partners, consumers. Our NGO's partner strengths is in putting that raw idealism to work in a constructive way.

Finally, I'm a big believer in the truism that you get what you measure. If you care about putting CSR in the business model, you better measure and report outcomes, not just activities. As head of Worldwide Sales and Marketing at Timberland, I have Vice Presidents reporting to me who run Europe, Asia and North America and every year we set goals. Not just for revenue, profits and cash flow but for hours served in communities, trees planted, carbon emissions offset in each region. In this way we try to ensure that CSR is integrated in our strategic plan. This brings me to my final point. The role of the corporate responsibility officer. It may be a bit presumptuous of me, a sales and marketing guy, to be prescribing or talking about the role of the CRO but here goes anyway. First, get involved. Get in the way. Step outside your functional boundaries. Make everyone understand that CSR is mission critical to the enterprise. CSR is too important to be left to the social responsibility department. Second, make it your mission to integrate CSR into the core value creating activities of the business including customer acquisition and retention. Third, become a storyteller. The inside out approach requires that the company values and CSR efforts are well understood inside and outside the company. Metrics and social responsibility reports are useful but they don’t inspire the way storytelling can. Fourth, develop those external networks. Forge partnerships with NGO's and get your executives on their boards. The NGO's will benefit from your business acumen, your executives will in turn benefit from direct exposure to social and environmental issues. Finally, make your organization accountable for outcomes, not just activities. Set high standards for your team and the rest of the company and make sure performance measures and incentive programs reflect the CSR agenda.

In summary, putting CSR at the heart of the business model is not just an untapped opportunity, it’s an imperative for those of us that believe companies can be a huge influence for positive social change in the century ahead. If we don't take this opportunity the current momentum will abate. The risk is that CSR will settle back to being about compliance rather than conviction. If we succeed we'll forever cement CSR as an indispensable function of brand building in the 21st century. I believe that's a challenge worthy of the great companies represented in the room here today and on the 100 Most Ethical Companies list of Business Ethics Magazine. And best of all we're the lucky people who get to make it happen. Thank you.

[applause]

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