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Jan 7, 2020

Sneakernomics: Profiting with a Purpose

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Last year, I wrote about the emergence of purpose driven brands. As consumers continue to let their values and stances on social issues guide purchases, we are seeing mounting evidence that brands and retailers putting purpose first are actually winning in the stock market and in the consumer marketplace.

The 2019 Edelman Trust Barometer shows that while public trust in government remains low, trust in business has gone up. According to the global Edelman study, 76% of respondents say “CEOs should take the lead on change rather than waiting for government to impose it.” Those who hold this opinion say CEOs can make positive change in equal pay, prejudice and discrimination, and the environment. Among employees, 71% agree “it’s critically important for my CEO to respond to challenging times [which includes] industry issues, political events, national crisis [and] employee-driven issues.” Having a job with “a meaningful societal impact,” “trust[ing] the company behind the product,” and believing that a company can simultaneously “increase profits and improve the economic and social conditions in the communities where it operates” are other sentiments that rank very high, according to the report.

The Edelman study suggests that companies should lead change by being aspirational, empowering employees, solving problems locally, and living their values.

Millennials and Gen Z have both communicated their need to know brands’ values and they have high expectations on brands living their values. They expect brands to have a positive impact on society and don’t believe brands can do that if they remain neutral.

In recent years, we have seen brands and retailers carry this out in many ways. One broader example is the changing commercial emphasis on Black Friday. Several retailers closed their doors on this important shopping day, or donated proceeds from the day to causes that they support. Another relevant, more specific example is Patagonia taking its $10 million Trump tax cut in 2018 and donating it to environmental causes.

An ethical company behaves in a moral and consistent manner, regardless of the outcome. But more often than not, the outcome of ethical behavior is a positive one. A brand’s transparency on social issues is viewed positively by its core consumers. Doing good means doing well.

Over the summer, The Business Roundtable issued a statement on the “Purpose of a Corporation” in which they committed “to lead their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders.” Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co. and Chairman of Business Roundtable said, “Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.” The BRT essentially expanded its purpose beyond simply wealth creation for shareholders, to taking care of their employees and improving their communities.

As the younger generations demand that brands stand for something beyond just profit, the purpose driven brands will thrive. Consumers will make their consumption decisions based on how well a brand lives out its purpose. Brands cannot simply talk the talk, but must walk the walk as well – every day.

The importance of environmental, social, and governance (ESG) issues has a stock market aspect as well. A recent Deloitte study found, “Companies that are not harnessing the power of ESG transparency may be losing favor with investors or losing competitive advantage. They may also be at a disadvantage when attracting and retaining customers and employees.” The study went on to say, “Investor and shareholder interest has led to an increase in the attention companies are giving to ESG disclosure and transparency. The manner in which investors are analyzing an organization’s ESG disclosures is similar to that of their financial information assessment, because performance on ESG metrics can affect financial performance.”

Many companies still see ESG as just a fad that the young generations will discard as they age. But it is clear that more than previous generations, young people are shopping with their values in mind. Companies cannot speak in platitudes, with a veneer of ethics. Successful companies must fully accept and embrace the values of the new consumer.



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