Marketing Chapter 17 This Agreement Sets Binding Targets For Industrialized

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CHAPTER 17

LEADERSHIP, CORPORATE SOCIAL RESPONSIBILITY, AND

SUSTAINABILITY

Chapter Outline

A. Leadership

1. Recognizing Marketing Challenges and Dilemmas

B. Corporate Social Responsibility

1. What Is the Responsibility of Business?

2. Defining Corporate Social Responsibility

C. Sustainability

1. A Sustainable Future?

2. Sustainable Practices

D. Curative Marketing

1. Truthfulness

2. Simplicity

Chapter Objectives

This chapter begins by describing the key role that marketing leaders must play in

addressing the evolving and varying needs and requirements of constituencies in global

Suggestions for Teaching

• The instructor could ask the students to discuss about a recent bailout which they found

justifiable or unjustifiable.

Chapter Summary

A. Leadership

1. Recognizing Marketing Challenges and Dilemmas

Changes have made life more complex both for marketers and those to whom they

market. As economic growth in emerging and developing markets allows millions of

people to enter the middle class, it brings great new opportunities for them to

experience and enjoy a better quality of life with goods and services that help them in

How consumers, marketers, and societies manage that dilemma in international

markets will need to be resolved on a country-by-country and culture–by-culture basis.

All too often cultures are insufficiently studied or wrongly interpreted by newly

entering outsiders.

2. The Increased Role of Government

Today, there is a substantial transformation characterized by the response of

governments to the failures and weaknesses in the global economy and financial

system that triggered the economic crisis in 2008. In the developed economies, public

anger and frustration that arose from the crisis led to massive government

interventions to prevent systemic collapse, stabilize financial markets, and

reinvigorate economic activity. Political pressures to correct currency and trade

imbalances have also increased in many countries.

Leaders of the G20 nations have pledged to work together to grow the global

economy, avoid protectionism, and strengthen international systems and institutions.

They intend to focus on the private sector. In the November 2011 G20 Leaders

Summit, France, the leaders specifically pledged to work together to reform the

financial sector and enhance market integrity. Increased government involvement will

also be manifested in interrelated efforts to tackle climate change, energy

consumption, environmental damage, poverty, malnutrition, and food security. The

G20 leaders have specifically committed to “improving energy markets and pursuing

the fight against climate change.”

3. Trust

The size and scope of global corporations in the twenty-first century is unprecedented.

Global corporations have vast reach and enormous economic power. With such

economic power comes greater expectations for corporate governance, responsibility,

and ethics across many fronts from many stakeholder audiences. Businesses do not

have impunity in the global economy. Business does not enjoy carte blanche at any

time and especially when societies evidence distrust in the truthfulness and

responsibility of business to perform for the greater good.

conclude that trust in business is generally stronger when a greater number of people

are realizing the benefits of business. The level of trust in businesses in the developed

economies was severely shaken by the economic disruptions caused by the financial

crisis and recession. Trust in business in developed economies reached a nadir in the

depths of the crisis in early 2009 with less than 40 percent of Informed Publics in the

United States, Germany, and France indicating that they trusted business “to do what

is right.”

4. The Leadership Challenge

There are strong forces at work demanding government action, as evidenced by the

Occupy Now protest movement that spread across cities around the globe in 2011 or

Bankers and international marketers must develop a greater understanding that

“business as usual” will inevitably be altered as a result of public pressure and the

advocacy of other ethical forces. The Vatican has called for specific policies on

business in 2011. The Vatican’s proposal has led to calls for a financial transactions

tax on equity, bond, currency, and financial derivatives transactions in the European

Union and the United States.

5. Aligning Strategy, Products, and Societal Interests

Companies like IBM, GE, and Siemens are aligning their corporate strategies as well

as their product offerings with societal interests and the global trends that are

impacting societies. Many of their largest customers are national, state, and municipal

governments that are confronted with complex challenges.

B. Corporate Social Responsibility

1. What Is the Responsibility of Business?

In his famous 1970 New York Times Magazine article, Milton Friedman attacked the

concept of “social responsibilities of business in a free-enterprise system” in his

The other end of the spectrum maintains that the corporation has multiple roles and

effects in society other than wealth creation. The corporation exists and operates in

nations and communities, employs individuals, uses community resources, creates

waste and byproducts through its manufacturing and operations, and has multiple

integral relationships with society. For the sake of their own advancement,

2. Defining Corporate Social Responsibility

Corporate social responsibility (CSR) carries different meanings to different

audiences. In a 2007 study in the United States by the public relations firm Fleishman

Hillard and the National Consumers League, most respondents identified either

Corporate social responsibility is a broad term that includes many specific corporate

practices. The European Commission defines it as “a concept whereby companies

integrate social and environmental concerns in their business operations and in their

interaction with stakeholders on a voluntary basis.” The broader meaning of the term

is also captured by other expressions used by many corporations and individuals such

as corporate citizenship, corporate philanthropy, or sustainability. Corporate

citizenship refers to the fact that, historically, many companies have supported their

local and national communities through a variety of roles, including support for

nonprofit organizations vital to a community’s social development. These associations

include board memberships, employee volunteer programs, and charitable donations.

3. Strategic Focus

Early corporate citizenship initiatives were often directed at supporting community

causes ranging from charitable organizations to cultural institutions. Michael E. Porter

and Mark R. Kramer have argued that a company needs to choose its social initiatives

strategically. They have advanced the concept of shared value, which they define as

4. CSR Reporting

Porter and Kramer distinguish between shared value and corporate social

responsibility by claiming that the latter mostly focuses on corporate reputation rather

than on directly improving a company’s profitability and competitive position. This

1. A Sustainable Future?

Sustainability carries multiple meanings to different audiences. Inevitably, groups and

organizations that are interested in specific issues related to the environment tend to

define the issue in narrow terms. The 1986 World Commission on Environment and

Development (Brundtland Commission) definition of sustainable development could

Community for reducing national levels of greenhouse gas emissions. The United

States declined to join this agreement because it excludes major developing economies

like China, India, and Brazil, which are also major greenhouse gas emitters.

International marketers will need to pay attention to multiple regulations governing

the environmental impact of products. The EU has implemented REACH

(Registration, Evaluation, Authorization, and Restriction of Chemical substances), a

set of broad-reaching regulations on the use of chemicals, to motivate businesses to

exclude dangerous chemicals like cadmium in products such as personal computers

and cell phones.

2. Sustainable Practices

Irrespective of the many disagreements that exist in relation to the green movement,

3. Sustainable Consumers

In the years leading up to the 2008 recession, there was a significant increase in

sustainable or green products. In 2009, Advertising Age reported that new packaged

goods products with claims such as “sustainable,” “environmentally friendly,” and

“eco–friendly” had doubled in 2008 over the previous year. At the same time,

One example of governments working together to resolve confusion is the cooperation

between the United States, Japan, Korea, Australia, and the European Union to create

ENERGY STAR, a voluntary appliance–specific label governing energy efficiency for

office equipment. The EU also has voluntary labeling programs that international

marketers of products such as consumer appliances, detergents, and paints need to

4. Greenwashing

A factor that contributes to consumer confusion and even cynicism about green

marketing is that of “greenwashing,” or marketers making overblown environmental

5. Growing Importance of Marketing

In the long run, sustainability will be important to international marketers because it

will also be important to governments, to consumers, and to employees. While

D. Curative Marketing

Curative international marketing restores and develops international economic health and

may be the next step up for marketing. “Restore” indicates something lost that once was

there. “Developing” refers to new issues to be addressed with new tools and frames of

reference. “Health” in turn positions the issue as important to overall welfare. Marketers

must deliver joy, pleasure, fulfillment, safety, personal growth, and advancement towards a

better society.

International marketers need to focus on past errors and mistakes inflicted by international

marketing and sweep these out from under the carpet in the spirit of Wiedergutmachung, or

restitution.

Consumers’ interest in and preparation for marketing are not evenly distributed. Negative

effects may result from marketing’s misleading of consumers or simply from unawareness

or neglect. It is the obligation of international marketers to understand local conditions and

to anticipate and limit possible ill effects.

A second key concern is the future outlook: how can marketing set things right again? Four

core areas are international marketing’s pillars for a shining position on the hill:

1. Truthfulness

Marketing must base itself on fact rather than emotion, on insights rather than

2. Simplicity

Marketing must find new ways to simplify life because simplicity adds value.

3. Expanded Participation

International marketing needs to be truly international in its outlook. Inclusiveness

4. Personal Responsibility

Personal involvement is crucial in international marketing, where distance can also

mean abdication of responsibility. The best international marketers take things very

seriously and actively work as responsible citizens to improve conditions. They know

Key Terms

Marketing dilemma: Its two dimensions are: (1) What if the customer wants something that is

not good for him or her? (2) What if the product or service, while good for the customer, is not

good for society or other groups?

Corporate social responsibility: It can be defined as “commitment to community” or

“commitment to employees”. Other meanings include “responsibility to the environment” and

Corporate citizenship: It refers to the fact that, historically, many companies have supported

their local and national communities through a variety of roles, including support for nonprofit

organizations vital to a community’s social development. These associations include board

memberships, employee volunteer programs, and charitable donations.

Corporate philanthropy: It has a narrower context specific to the philanthropic or charitable

1. Why has trust in business dropped in developed countries but remains high in countries like

China and India?

The level of trust in businesses in the developed economies was severely shaken by the

economic disruptions caused by the financial crisis and recession. Trust in business in

2. Is there a need for increased regulation of financial services product marketing to

consumers?

Answers may vary.

Students should base their answer on the following points:

• The more trusted industries tend to be more marketing oriented than the banks and

financial services companies, which rank at the bottom of the list. Perhaps the financial

3. Will a financial transactions tax on equity, bond, currency, and financial derivatives

transactions in the EU and the United States serve a greater social purpose or be bad for

business?

Answers may vary.

Student answers should be based on the following points:

4. Do you agree with Milton Friedman’s contention that the only responsibility of business is

“to use its resources and engage in activities designed to increase its profits so long as it

stays within the rules of the game”?

Answers may vary.

Students may be asked to give reasons to substantiate their answer.

5. Why should business be concerned about carbon emissions?

6. Should international marketers embrace a curative international marketing approach and

accept responsibility for problems that marketing has generated?

Answers may vary.

Student answers should be based on the following points:

• Curative international marketing restores and develops international economic health and

• Global problems require a global approach. Curative international marketing needs to

draw on fields like jurisprudence, cultural anthropology, philosophy, and history.

• International marketers need to focus on past errors and mistakes inflicted by

international marketing and sweep these out from under the carpet in the spirit of

Wiedergutmachung, or restitution.

• A second key concern is the future outlook: how can marketing set things right again?

1. Identify 10 non-European-headquartered companies belonging to CSR Europe. Go to

2. Identify a firm that proves its leadership in sustainability in an industry of your choice. For

example, go to the sustainability reports on the websites of leading global brewing

companies and compare their metrics for important performance indicators.