Business Respect - CSR Dispatches No 128 - 26 May 2008

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An email newsletter with news and discussion focusing on corporate social responsibility globally, looking at the companies in the news and the emerging issues. Linked to the website at http://www.mallenbaker.net and produced every two weeks.

In this issue, we look at the phenomenon of 'stealth marketing'.

In the news:

Feature articles on the internet:

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Topics:

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Welcome

For marketers, nothing is a bigger turn-off than the dreary compliance language of corporate social responsibility. It is the marketers job after all to know about customers and opportunities to sell to them, not about citizens and things they might disapprove of.

I am a great fan of finding a common ground to talk about social responsibility in terms of opportunities - things to do rather than things not to do. But sometimes you have to note that there is a line, and marketers that have no idea of what being a citizen means keep wandering over it.

This issue's main article is an excellent case in point - focusing on something that has been described as 'stealth marketing'. Groucho Marx once famously said that the most important thing in life is sincerity - if you can fake that, you've got it made. In the web 2.0 world, it has become about customers talking to each other - authentic brands being talked about because they are remarkable. So it was only a matter of time before marketers tried to fake authenticity. Needless to say, such attempts are extremely high risk, and have a good track record now of going disastrously wrong.

So the dreary compliance stuff does have its uses after all!

Also, this issue includes a book review - the first for some time. I am intending to include more of these in the future, and will hopefully build these over time into an additional part of the 'resources' section on the website.

I mentioned last time that Business Respect sponsor the Social Marketing Network had changed its name. Now, following a conversation with the network's founder, John Drummond, they have decided to offer two weeks free access to the website resources at the Social Marketing Network website to Business Respect subscribers. If you are a subscriber (rather than reading this on the website) then you can click on the personalised link in the sponsors ad below to send an automatic request to be granted access - they will then come back to you with login details (note - at the Network end this is human-powered, so allow a little time before you get your details). Thanks to John for making this available to readers.

On the website, voting has been continuing, and remains pretty tight. The current state of play:

In the face of an extended economic recession companies will:
keep CSR as a priority 204 (38%)
cut budgets, but still focus on key issues 222 (42%)
drop CSR as an unaffordable luxury 104 (20%)

Thanks to the 530 people that have voted so far. Still time to make your own views known.

Mallen Baker
mallen@mallenbaker.net

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CSR News 26 May 2008

GlaxoSmithKline wins approval for bird flu vaccine

GlaxoSmithKline has been granted EU approval for a new vaccine designed to combat the feared outbreak of a human-spread variant of the H5N1 bird influenza.

The company's Prepandrix will become the first vaccine for use in this eventuality, and various governments have already begun to stockpile the drug for the possible instance that the virus mutates from being a disease almost exclusively affecting birds to one that could be deadly to humans.

Japan: Victims of 40 year old food poisoning incident to sue company

The company that manufactured cooking oil contaminated with persistent toxins, Kanemi Soko K.K. and two of its officials, are being sued by 26 people newly acknowledged as victims of a mass food poisoning incident which occurred 40 years ago in 1968.

The suit was brought about by poisoning with polychlorinated biphenyls (PCBs) and Dioxin. The plaintiffs were acknowledged as having suffered poisoning after diagnostic criteria had been introduced in 2004. The individuals said that, although the incident happened many years ago, the impact on their health included skin disorders and deformities, had been permanent and had ruined their lives.

The company had rejected their compensation claims.

Brazil: Companies launch carbon reporting programme

Eleven major Brazilian companies, along with six Brazilian subsidiaries of mulitnational firms, have signed up to a new programme to report greenhouse gas emissions.

The Brazil Greenhouse Gas Protocol Programme will create a voluntary register, and commit the companies to disclosing their emissions of the six major greenhouse gases. The companies signing up are: Alcoa, Anglo American, Arcelor Mittal, Banco do Brasil, Bradesco, CNEC, Copel, Ford, Grupo Abril, Natura, Nova Petroquimica, O Boticario, Petrobras, Sadia, Votorantim and Wal-Mart.

The programme does not commit companies explicitly to reducing their emissions, although the clear objective is that by beginning to measure, and account for, these emissions the companies will begin the process of managing their reduction.

EU: Finance ministers considering clampdown on 'excessive pay' for executives

The chairman of the group of European finance ministers, Jean-Claude Juncker, has said that they are looking for ways to reign in what he described as scandalous pay packages for business senior executives.

A key target is likely to be so-called 'golden handshake' clauses that allow for large payments to departing executives which, in a number of countries, are currently tax deductible. Such payments have often been seen as controversial, particularly when the executive in question leaves in conditions of controversy.

Some countries have already legislated in such areas, including the Netherlands and France, which hae both set limits on the practice.

Juncker also said that large pay settlements for bosses made it more difficult to tell the broader population of workers that they should exercise wage moderation at a time of growing inflation.

Namibia: Companies failing to rise to the challenge of HIV/AIDS

Companies in Namibia are failing to get to grips with the realities of HIV/AIDS, according to a report by PriceWaterhouseCoopers.

Some companies are simply failing to grasp the threat that the disease poses to their operations, and believe that their workers are not at risk. Common perceptions also include that it is solely the government's responsibility to address HIV.

Only around 30 percent of companies have conducted HIV prevalence tests at their workplace, with none of those that had conducted such tests recording 100 percent participation in them.

Norway: StatoilHydro pushes Norway to highest ever carbon emissions

StatoilHydro has been blamed for being responsible for a 3 percent increase in Norway's total carbon emissions last year, due to gas flaring at one of its plants in northern Norway.

Emissions from Norway had declined over the last two years, but problems at the Melkoya plant had led to 1.6m tonnes of carbon dioxide being emitted - sufficient to reverse that progress to date and to put Norway's overall emissions at a record high.

The Norwegian government has sought in recent years to portray itself as a champion of the environment, leading to pressure on it to act over the impacts of the country's oil and gas industry. StatoilHydro has put in a request for permission to emit up to 1.5m tonnes of carbon dioxide during the first half of the year - normal production would see the plant emit just 1m tonnes annually.

South Africa: Lawsuit against companies support for apartheid to progress in US

An appeal to the US Supreme Court against a lawsuit accusing major international companies of aiding South Africa's previous apartheid system has fallen on a technicality, meaning that the case will now proceed.

The Court found that it was unable to rule in the case because of a rule that six out of the nine justices were required to sit to hear a case, but four out of the nine were excluded due to conflicts of interest. Three of the justices held shares in at least one of the companies accused, whilst a fourth had a family member who serves as a senior executive in one of the companies. As a result, the court was only able to uphold a lower court ruling allowing the lawsuit to go ahead.

Amongst the companies targeted by the suit are BP, Exxon Mobil, Citigroup, Deutsche Bank, General Motors and Ford. The plaintiffs are seeking damages of more than $400bn, arguing that the companies broke international law by assisting the apartheid regime in South Africa.

The case is likely to be difficult to prove under US law, but the companies will not welcome being required to testify as to their practices in South Africa during the period.

Anti-corruption enforcement strengthens but problems remain

Anti-corruption measures have become stronger around the world, according to nearly 70 percent of executives surveyed for a new report, however around a third say that corrupt business practices are still getting worse.

The report by Ernst & Young gives evidence that regulatory authorities and law enforcement are cooperating more frequently over cases of corruption. Companies are also recognising the risks of corruption and doing more to combat it, although confusion over relevant anti-corruption legislation undermines compliance in a number of areas.

According to the report, the US Foreign and Corrupt Practices Act (FCPA) has become the de facto international standard regarding bribery and corruption given the US authorities' more aggressive use of it. The majority of business executives, however, have yet to attain a good knowledge of its provisions.

More than half of companies are increasing training on corruption, with 45 percent carrying out anti-corruption due diligence before making corporate acquisitions.

CSR FEATURES from the Internet

Two sides to the corporate coin - 13 May 2008 FROM The Standard (Hong Kong)

It is often said that self-interest best moves commercial corporations. As such, the trend toward corporate responsibility is argued to be best developed not by laws, but by allowing businesses to sort it out for themselves, in reference to their market peers and their stakeholders.

It's a nice fuzzy ideal. If only it were true. China, on the other hand, quite the interventionist in relation to corporate affairs, has made some gains on the corporate responsibility front.

Read full story

Recent entries from Mallen's blog

Another success for the blog critic - 23 May 2008

By the way, I note that Air France are in some difficulty now. They have all sorts of explanations, of course, but can it be coincidence that it is only weeks since I launched my caustic but satirical attack on their competence? I think not. Read more

A puzzle - 23 May 2008

OK - I have an interesting parable on measurement. Last night, I went to bed moderately fit. This morning I woke up and I was very fit, with nothing having happened during the night other than a good's night sleep and having aged a few hours. What's more, if I tell the truth, things are all wrong. If I want to make them right again, I have to tell a lie. The explanation? Read more

Will you give or deny? - 20 May 2008

I heard this tonight at a discussion at the Social Marketing Network meeting - I can't find a separate reference for it, so it is offered here as a second hand, but fascinating snippet. According to one well informed source at that discussion, when Americans are asked whether or not illegal immigrants should be given access to emergency health care, a majority say 'no'. On the other hand, when Americans are asked whether or not illegal immigrants should be denied access to emergency health care ... the answer again is 'no'. Read more

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Book review: Case studies in Sustainability Management and Strategy

Review by Mallen Baker

Imagine the following scenario. You run a company that sells household products branded as natural, targeted at the health-conscious environmental consumer. A key supplier says that they will no longer produce one of your products, baby-wipes that don't use some of the chemicals used by other baby-wipes, because it takes too long to switch the product process from the one to the other, and it isn't profitable. You have to decide what to do.

Having reviewed the standard products, and noted that although there are chemicals that you tend to avoid, there are no hazardous chemicals, you have continued product using standard chemicals whilst you think what to do. After all, if your brand disappears from the shelves, competitor products will take the space and it may be hard to get that space back again. But some of your customers have begun to notice the change in formulation, and are complaining about you switching and not telling them.

So what next? Do you keep going with the standard formulation, whilst working on a new product that can be more easily produced? Or do you pull the existing product from the shelves whilst doing this, and absorb the commercial hit from the loss of shelf space? This is the dilemma faced by the company Seventh Generation in the first of the case sudies contained within this book.

This is a book that is very much focused on the needs of educators, with case studies devised for use in the classroom rather than as part of the general information of a business audience. Nevertheless, I found them interesting because - as someone that has spoken and written pretty often about how the heart of corporate social responsibility these days is about how companies resolve dilemmas, these cases - twelve of them - go into great detail about the natures of different dilemmas that businesses might face, the context around these dilemmas, and the potential benefits or pitfalls that may attach to each of the likely decisions.

For the educator, the book is a great resource - with additional material available free of charge and on request to support the use of the cases in a teaching environment.

For the casual student of socially responsible business, the cases provide great examples of how companies are faced with problems that do not neatly fit within the easy 'win-win' range of options that are most often the subject of what passes for case studies out there in the general literature.

My one frustration is that each of the stories is left hanging at the key decision point - great for generating discussion - but not so satisfying in terms of finishing the story, seeing what the company actually chose to do, and what were the consequences. There is no reason why this information couldn't have been included to great effect.

Book Review: Case Studies in Sustainability Management and Strategy:
The Oikos Collection (Hardcover)

Publisher: Greenleaf Publishing (30 Sep 2007)
Price: 25 UK pounds (currently 16.50 at Amazon.co.uk)
Read more details

The marketing that dare not speak its name

Article by Mallen Baker

In 2002 Sony Ericsson paid actors to pose as tourists, who would ask passers-by to take their photograph with the company's new camera phone. Whilst doing so, the actors would rave about how great the phone was, without disclosing their affiliation. It was just one of the more blatant examples of what has come to be called 'stealth marketing'.

The world of marketing is undergoing a huge transformation, with customers utilising technology in ever more sophisticated ways to avoid the marketers attempts to interrupt them with their advertising pitches. At the same time, the internet is making new forms of marketing possible, based on permission marketing (where customers opt in to receiving highly relevant messages) and discussions between consumers where ideas, campaigns and products get spread by word of mouth often at a staggering speed.

The power of these changes have been laid out by marketing gurus such as Seth Godin (see 'Permission Marketing' and Meatball Sundae'). If you can create a relationship of ongoing trust with influential bloggers, then over time you might get them to talk about what you aim to do. If you can produce an idea, a campaign or a product just so remarkable that people will want to talk about it, the technology will allow that idea to spread far and wide and very quickly.

Unfortunately, some have seen the mechanisms, but not the spirit of these changes. At the surface level, influential bloggers complain that they get bombarded with free product offers, many of which are from people they've never heard of and of product times completely unconnected with the subject for which they have become known.

At the other level, some companies have gone underground to try to fake some of those relationships of trust. A new article by Kelly D Martin of Colorado State University and N Craig Smith of INSEAD highlights some of these in the latest edition of the Journal of Public Policy and Marketing. Principally, they focus on the 'Fake Tourists' promotion referred to above, and 'Wal-Marting Across America'.

The Sony Ericsson campaign ran in 10 cities across the United States and engaged with hundreds of unsuspecting consumers who were given hands-on experience of the new phone. Other aspects of the promotion included actresses engaging people in conversation in lounges and bars whilst using the phone, and pairs of actresses playing an interactive version of the game Battleship on their phones at either end of the bar.

The campaign was outed, through an article in the Wall Street Journal and on the television programme '60 Minutes'. Under fire at the time, the then marketing director for the company defended the scheme, arguing that customers would not be offended. He also claimed that the actors had been told to say that they were working for the company if asked - which funnily enough it never occurred to anybody to do.

One of Sony Ericsson's vice presidents remained unrepentent two years later, saying "for the kind of money we spend, these campaigns are very effective".

'Wal-Marting Across America' was a different story. In 2006, Wal-Mart's public relations firm Edelman launched a folksy blog website, sponsored by an organisation set up by Edelman and funded by Wal-Mart called "Working Families for Wal-Mart". The blog followed the adventures of a couple, Laura and Jim, who travelled across America in a recreational vehicle (RV) stopping at Wal-Mart locations to interact with employees, and to camp out at Wal-Mart parking lots.

BusinessWeek eventually identified Wal-Mart's sponsorship of the site, which generated a surge in criticism from consumers that the site was a fake. The lack of any sour notes from the adventures recounted - all the Wal-Mart employees were happy, and the tone was relentlessly upbeat about all the company was doing - added to the suspicions.

As it happened, Laura and Jim were 'for real' and the idea had surfaced when they had realised that RVers enjoyed free parking in Wal-Mart's lots. The couple sought permission from the Working Families from Wal-Mart group who then offered support for the trip. However, that didn't alter the fact that the company sponsorship had ensured a biased viewpoint, contrary to the spirit of these sorts of blogs.

Richard Edelman took responsibility for the mistake, saying " I want to acknowledge our error in failing to be transparent about the identity of the two bloggers from the outset. This is 100% our responsibility and our error; not the client's."

Corporate sponsored fake blogs even came to have their own term - 'flogs' as a result of this, and others such as Dr Pepper's Raging Cow blog.

From an ethical standpoint, nobody was harmed by the examples given above. Nobody died.

On the other hand, both of them took mechanisms of trust and used them to tell lies. Word of mouth feedback from other customers has grown as a device through the use by internet companies like Amazon. To fake that in order to deliver commercial advertising is not only wrong (and stupid since the chances of getting caught out are pretty high) but also damaging to the networks of trust that are important to society as a whole. If nobody trusts anybody any more, that is not a good thing.

Most marketing associations have an ethical code which mentions honesty and integrity.

Of course, one could argue that there is dishonesty in most marketing. That model in the ad, for instance, has been professionally made up, and then photoshopped to add those touches that no real human being has yet matched up to, in order to look more attractive than any person you're likely to meet. And that plate of food, or that car, has been shot in a certain way to look as good as possible too.

But most people do know that this will be the case - although many may be surprised just how big a difference it makes. They still know that this is a pitch for a product, and are free to discount what they see accordingly.

According to an approving article published by the California Management Review: "Stealth marketing attempts to catch people at their most vulnerable by identifying the weak spot in their defensive shields ... [Stealth marketing] is considered to be a viable alternative to conventional advertising because it is perceived as softer and more personal than traditional advertising."

"Catching people at their most vulnerable" - what a charming catch phrase.

Are there stealth marketing campaigns taking place out there today, even as you read this? Possibly, although you would hope the cautionary tales above at least persuaded companies that this is a risky thing to do, even if not everyone has taken on board that it is an unethical thing to do.

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In the news from the latest issue

Nepal: Relatives of killed workers sue US firm KBR for trafficking

US: Proposed Alaskan mine survives people's vote

Merck accused of dressing marketing up as science

Australia: Business lobby group warns over carbon trading

India: Tata Motors threatens pull-out from West Bengal

US: Climate change resolutions making impact on companies

Japan: Details of carbon labeling confirmed

Canada: Wal-Mart has union contract imposed

India: Rising protests against factory building

US: Fraud will cost firms $994bn this year

US: American Airlines accused of safety breaches

Ghana: Call for companies to help clear up electronic waste

US: Disneyland demonstration over hotel worker benefits

Uzbekistan: Major retailers call for end of child labour in cotton

... more news stories

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Business Respect - most recent edition added on 17th August 2008