Globalisation that is underpinned with the consumer capitalism arguably has changed the business behaviour worldwide. Globalisation of market which is indicated by shifting business behaviour from previously produced ‘customized item’ to ‘globally standardised products with advanced, functionally reliable and low priced’ feature[1] arguably has driven to the mass-production activity. On the other hand globalisation of production makes a company fragments their production to the country where production can be done with minimum cost while at the same time spread their ideas globally.[2] Further, the increasing of ‘consumer capitalism’ that manipulates the consumer demands through mass-marketing techniques has facilitated the selling of mass-production products worldwide.[3] Mass production, remoteness of production and globally marketed product consequently pushed an undertaking to transform itself from a ‘production-oriented’ company to become ‘market oriented company’ with reliance on branding activity. [4]
Some scholars argue branding triggers undertakings to escape from its social responsibility as it ‘commodify cultures and unaccountable.[5] The pro-brand proponents argue otherwise. A Brand is accountability tools as it signifies an undertaking and pushes to become transparent.[6] The personification of Brand as an asset arguably makes undertakings put more effort to maintain and protect Brand from bad publicity. On the other hand, the increasing awareness of consumer to ethical social and environment issue arguably affects the level of involvement of undertakings to Corporate Social Responsibility (‘CSR’). An undertaking which has reputable brand will ensure their brand has a good image and free from bad, irresponsible stigma. Therefore the proponent of brands argues branding can push undertakings to adopt CSR initiative. However, the scale of that adoption is still in question, whether they adopt in a minimum degree or it pushes them to adopt greater CSR initiative.
This essay will explore how big the pressure given by branding to undertakings to adopt greater CSR. The exploration will consist of two discussion chapters and conclusion. The first chapter will discuss how branding can serve as an effective communication tool for undertakings which finally can be valued as an asset. The second chapter will examine the scale of pressure given by Brands based on empirical studies in marketing field and ‘shared value’ of CSR. This essay stands with the idea that branding does not create pressure to adopt greater CSR, rather, it just push undertakings to react to any publication pointed to their brands through public relation mechanism or minimum adoption of CSR.
Many scholars argue branding activity which creates ‘Brand’ is the most suitable tools to facilitate ‘marketing-oriented’ business as a result of globalisation.[7] Branding is an unique tool because it works and affects more than what an ordinary advertisement can do. It is not only ‘represent a composite of information’ of a product [8] but also serves as tools to signify and guarantee of ‘unitary control’ of one undertaking. In economic framework, the ‘unitary control’ derives from ‘self-enforcing’ feature which means undertakings voluntarily ensure their products to have a consistent quality to ensure their consumer satisfied.[9] Chicago School considered this as an important feature to serve society reducing risks namely ‘search cost’ and ‘assymmetry information’ that can led to the ‘adverse selection’ risk of a consumer.[10] The risk can be reduced because consumer receives ‘signal’ of quality, feature and function of the products as well as the ‘likelihood’ of commitment from an undertaking to maintain its product quality.[11] Griffith argues, Brand can ‘stimulate or strengthen demand for the branded products’ and consequently build consumer appeal to the products’. Through ‘transmission’ mechanism Brands generates an ‘appeal’. Appeal’ is important for business because it becomes the first step whereas the consumer can trust and loyal to products and can make the undertaking enjoying an ‘excessive market power’.[12] Brands which affects the emotional and psychological level of consumer[13] makes the consumer feels associated with a ‘social status’, ‘self-expression’ or a sense of community[14] created by branding. An example of this phenomenon can be seen in in DHL T-Shirt selling which although be sold in prohibitive price and raised a lot of critics but it still sold out.[15]
Arguably, the ‘unitary control’ also stems from the legal framework. In the European Union regime as an example, although ‘Brand’ is not recognized by Intellectual Property Law, however Brands that are signified by Trade Mark enjoys ‘second tier’ of Trade Mark protection.[16] ECJ considered Brands have ‘investment’ function which can ‘acquire or preserve a reputation capable of attracting consumer and retaining their loyalty.’ Arguably, the legal protection given to the brand is one of the strong reasons an undertaking invest more in branding activity as it can hamper a new competitor to enter the market. However, this kind protection does not come along the way, in General Motors v Yplon the ECJ ruled that to be protected, Brands should reach a minimum level of recognition or ‘knowledge threshold’ to satisfy of having ‘a reputation’.[17] The ruling adopted by ECJ is also recognized in another jurisdiction such as Indonesia. Under the Indonesian Law, a Brand that is signified by Trade Mark enjoys protection under ‘popular brand’ regime. In assessing such ‘popularity’, the national court will appoint a survey institution.[18] What can be canvassed from this assessment is, the Court wants to ensure that undertakings put investment to make their Brands are recognizable and sticked on public and therefore worth to be protected.
- PRESSURE CREATED BY BRANDING : MINIMUM ADOPTION OF CSR
The increasing awareness to social and business ethic in the late of 1950s has dragged company from private to public area and generates a concept named Corporate Social Responsibility (‘CSR’).[19] CSR has revolved on a concept an undertakings voluntarily take responsibilities to society and environment beyond their economic and legal obligation.[20] The imposition of social responsibility to undertaking is affected by Dodds’s notion in 1932 which seen a company as ‘legal entity’ that is different with its founders and therefore should have same responsibility as individual entity.[21] The fact that undertakings’s activity may affect or be affected by its surrounding has strengthen the notion that undertakings should contribute to society. Griffith argues the term ‘voluntary basis’ highlights the common perceptions that an undertaking focus less on profit maximisation and use their power to create a broader set of social, ethical and philanthropic objectives.[22] However, Friedman disagrees with CSR concept and consider it as ‘fundamentally subversive doctrine’. According to Friedman social issues should not be a domain of business people.[23] Dragging company to solve social problem will distract the main focus of business which is to create more profit for its shareholders.[24]
To follow Friedman argument in millenial generation might make an undertaking less competitive than its counterpart that adopt CSR initiatiative even in the minimum degree. This is because a Brand associated with CSR will likely get attention from the consumer. A well transmitted CSR activity through branding will enhance the image of undertaking, therefore experts in marketing tools has suggested undertaking to use CSR as a branding tool.[25] In term of organizational behaviour, branding matters with regard to the relation of parents company and subsidiary company[26] Parents company may change its branding to shield their subsidiary company. Philip Morris changed its branding to become ‘Altria’[27] to protect their subsidiary from bad publicity addressed to Philip Morris as bad tobacco company. While in Rana Plaza tragedy and NIKE labor scandal, Brands pushed the upstream to take responsibility for its downstream (supplier, supply chain and so forth). Although the fabric and the labor were not the responsibility of an undertaking, however, that tragedy pushed the upstream management to adopt CSR initiative. Primarks signed ‘The Bangladesh Accord on Fire and Building Safety (the Accord), a legally binding agreement between brands and trade union to support good working condition. While NIKE has created a hotline on labor right violation conducted by their downstream.[28] Arguably, these initiatives were taken to protect their Brands from bad publicity or any boycott from their consumer. Despite the fact that some people may doubt about the underlying motives of the implementation of this CSR initiatives, these shows the social function of Brands. Brands signifies the undertaking as the upstream of irresponsible in the supply chain process and therefore it works as ‘accountability’ features. This features consequently make Brands become more transparent on their production process.
However, Klein argues sweatshop tragedy happens because of undertakings behaviour and power. Put another way, those tragedies will not happen if the undertakings does not act pragmatically as ‘bargain hunters in search of the best deal in the global mall’. [29] At the same time the power of Brand to give jobs to developing countries has created a ‘Fear Pervades Zone’. A satanic cycle whereas the governments of the third country where the manufacturing is located are ‘afraid of losing their foreign factories, the sub-contractor are afraid of losing their brand-name buyers, and the workers are afraid of losing their jobs’.[30] This condition has been exacerbated by the poor law enforcement both domestic and international. While the undertakings enjoy a privilage in term of free from burdensome obligation to labor, environment and so forth.[31] Klein, therefore, pointed out ‘Brand’ as a bad instrument that help brand owner escapes from their social responsibility.
In Rana Plaza tragedy as example, the initiative of the Accord did not come from an undertaking but came from campaigner, and it took a long time to make the undertakings sign it. Further, current development shows that the realisation of such agreement is stagnant because some undertakings are not fulfilling their obligation at the reasonable pace.[32] This shows the adopted CSR as a result of branding pressure is just in minimum degree compare to what those undertakings can do. The pressure created by branding is limited to ‘campaign’ and ‘publicity’ as a part of Public Relation strategy to response some ‘hot issue’ [33] This phenomenon arguably driven by three factors namely: 1) consumer behaviour toward etchical products; 2) lack of enforcement; 3) company orientation to get profit. CSR Report has been regarded as one of effective tools in CSR branding strategy. KPMG Report in 2013 shows that ‘almost all the world’s largest 250 companies report on Corporate Responsibility (CR).[34] However, this report arguably does not affect to adopt greater CSR as shown by the Global Reporting Initiative report in 2015, although CSR report is increasing, but the negative environmental and social impacts of business persist.[35] In British Petroleum (BP) case, as response Gulf Mexico oil spill bad publication, BP changed its company logo and launched ‘Beyond Petroleum’, campaign.[36] It also invests $45 million in solar energy company called Solarex. However, it does not change BP business orientation since BP investment to oil drilling portfolio outperformed its investment in solar energy. [37] The investment is just worth less than 0.1% of the business.[38]
Moreover, an empirical study shows that although the Band is tainted, it does not considerably affect their profit.[39] Walmart has bad reputation in organising working behaviour by using undocumented labor and forbidding labor-union, however that company is still settled in term of financial return.[40] Exxon suffers bad publication because of Valdez oil spill but it still becomes the most profitable companies according to Fortune 500 during 2012-2015.[41] What is interesting from Exxon also is, its Board has rejected a proposal to ‘curb greenhouse gas emissions, to increase renewable energy research, and to develop alternative fuel’.[42] The society and consumer may hate Walmart or Primark but if they can get cheap price compared to responsible Brand, they will still go to that shop.[43] IPSOS MORI Research supports this notion on their research released in 2014. It shows that although 39% of consumer in Britain considering theirselves as ‘ethical consumer’ however only 28% say that their buying decisions have been influenced by ethical issue. Just under 38% agrees that they will try to buy products from undertakings that act in ethical way even if it means spending more.[44] While if the price of unethical products is more expensive than the ethical product, they will likely to buy the unetchical ones. [45]
This shows that there is a dynamic relationship between CSR and branding. For the undertakings, adopting greater CSR only based on pressure created by branding is arguably a blatant business decision. Polonsky and Jevons argued adopting greater CSR may alienate such segment of consumer as well as an investor that are not oriented toward such CSR activity. Although this problem can be minimised by targeting CSR consumer segment, however, this shows that the broad issues of CSR have created a communication problem to undertakings.[46] Therefore, the rational business person will prefer to respond the pressure created by branding as a ‘damage control’ to protect their Brands rather that to take strategic CSR strategic initiative. This condition is exacerbated by the fact that to date no legal instrument can push an undertaking to adopt greater CSR initiative to their business as well as no instrument that can describe what is mean by appropriate CSR to business.[47] The complexity to define the scope of undertaking over the misconduct of its supply chain also remains a weak spot.[48] What is promoted by current international instruments just to encourage the undertakings to conduct due diligence toward their business activity effect to human rights.[49] However, this standard still cannot overcome the ‘issue complexity’[50] of CSR. Nestle already launched a series of CSR initiatives ranging from water, environment etc. However, it still faced a bad publicity as well as boycott to their performance on their CSR. Ruggie Principle tries to fill that lacuna by introducing ‘due diligence’ mechanism whereas an undertaking is expected to conduct a CSR initiative based on due diligence result to see the most affected stakeholder with their business activity. [51] However, it does not provide any sanction toward the failure of an undertaking to exercise the CSR. Arguably, This condition makes undertakings feel do not need to pressure to adopt greater CSR initiative eventhough they already got pressure from bad publicity to their Brands.As long as the CSR can remedy or stop their Brand from being cursed by public the undertaking does not has any further interest to conduct beyond that.
It can be said, the cogent reason that can drive a company adopt more CSR is, if there is a ‘shared value’ resulted from ‘corporate-financial relationship.[52] Shared value is an idea whereas using CSR to create economic value for a company and the society. This notion is in line with the ‘Enlightened Shareholders Value (ESV)’ which take into account CSR as an instrument to maximize profit of shareholders.[53] Europen Commission arguably adopted this CSR by determining two primary purpose of CSR, namely: 1) to maximize ‘shared value’ to shareholders and ensuring benefit to stakeholders; 2) to prevent and mitigate adverse impacts from business activity to the society. [54]
By following this mechanism the undertakings will not face any conflict of interest when they are trying to adopt more CSR as it will also increase the performance of a company and in line with their duty to promote the success of the company.[55] Following this scheme, an undertaking also will be able to put more attention to their CSR programme rather than a sporadic and reactive action. The Hindustan Unilever’s Project Shakti is one successful example of ‘shared value’. Under this project the undertaking recruit and train woman to become their agent distributor to remote area in India.[56] This project not only empowered local economy but also eliminate the high cost conventional on wholesaler-to-retailer distribution. This project also provides local with with access to microfinance loans, and trains women in selling daily need products. The lack of this approach is, undertaking may not adopt CSR if it not gives benefits to them.
- CONCLUSION
Brands is a valuable asset for a company because it can make the undertakings gains ‘excessive market power’ whereas they can sell a product that the quality is same with unbranded product but with higher price. Apart from that, Brand also serves as communication tools from undertakings to transmit their commitment on product quality and likelihood to maintain it. This transmission is received by consumer, increasing trust and loyalty. Furthermore, the increasing awareness of social, environment, human rights has been rising the concept of CSR. CSR becomes attractiveness elements to consumers and even investor. This condition makes more and more undertaking put CSR to their marketing strategy. However, this essay concludes that Branding does not push an undertaking to adopt higher CSR initiatives, rather it just push undertaking to adopt minimum CSR to protect their brand from bad publication. In this condition, branding serves as ‘accountability’ features which makes public easily recognize the undertaking and its downstream behaviour. The downstream may be in form of subsidiary company, distributor, supplier, and so forth. This can be seen from Rana Plaza tragedy whereas the initiatives to sign the Accord petition did come from that undertakings while there is als the delay of commitment. While in oil company such as BP, the bad publication does make them change their business orientation or make them seriously manage their investment in renewable energy. Further, the fact that bad publication to the Brands does not automatically make undertakings loss considerable profit as shown in Exxon and Walmart makes undertakings feels do not need to adopt greater CSR. As long as the bad publication can be tackled by Public Relation mechanism or by adopting minimum CSR initiatives, undertakings less likely to adopt greater CSR. Global Reporting reports show that the increasing of CSR Report prepared by undertakings (which is one of branding strategy) does not directly influences their decision-making to adopt greater CSR. While the consumer behaviour which not take the ethical value as their consideration to buy product and the absence of international legal instruments which can push undertaking to adopt more CSR also become the reason of minimum CSR adoption. Arguably, undertaking will be more interested in adopting greater CSR if there is a ‘shared value’ between CSR and business which means there is a positive relationship between CSR and profit making activity.
[1] Levitt Theodore, ‘The Globalization of Market’ [1983] Harvard Business Review 1
[2] Gordon H Hanson, ‘The Globalization of Production’ [2001] The National Bureau of Economic Research 1
[3] Wofgang Streeck, “Citizens as Consumers: Considerations on the New Politics of Consumption” (2012) 76 New Left Review 27-47
[4] Geraldine E Willigan, ‘High Performance Marketing: An Interview with Phil Knight’ (1992) Harvard Business Review <https://hbr.org/1992/07/high-performance-marketing-an-interview-with-nikes-phil-knight > accessed 11 April 2017
[5] Deborah Doane, ‘An Alternative Perspective on Brands: Markets and Morals’ in R Clifton (ed) The Social Value of Brand (Economist 2009) see also Klein Naomi , No Logo (Flamingo, 2000)
[6] Ibid
[7] Andrew Griffith, An Economic Perspective on Trade Mark Law (Edward Elgard Publishing Limited 2011) 127; see also Rangan Kash, Lisa A Chase and the others ‘Why Every Company Needs a CSR Strategy and How to Build It’ (2012) Working Paper Harvard Business School 1
[8] Pat Auger, Timothi M Devinney and the others, “The Importance of Social Product Attributes in Consumer Purchasing Decisions: A Multi-Country Comparative Study” (2010) 19 International Business Review 140
[9] William Landes & Richard A Posner, ‘Trademarks Law: An Economic Perspective’ (1987) 30 Journal of Law and Economics 265
[10] Griffith (n 7) 37
[11] Ibid
[12] Ibid 37
[13] Ibid 35
[14] J B Swann and the others, ‘Trademarks and Marketing’ (2001) 91 Trademark Reporter 787
[15] Lauren Cochrane, ‘Scam or Subversion? How a DHL T-Shirt Became This Year’s Must-Have’ (20 April 2016) The Guardian <‘https://www.theguardian.com/fashion/2016/apr/19/dhl-t-shirt-vetements-fashion-paris-catwalk> accessed 17 May 2017
[16] L’Oreal v Bellure [2009] ETMR 987
[17] General Motors v Yplon [1999] ETMR 950
[18] Indonesia Trademarks Law No.11 of 2001 Article 6
[19] Archie B Carroll and Kareem M Shabana, ‘The Business Case for Corporate Social Responsibility: A Review of Concepts’ (2010) 12 International Journal of Management Review 85
[20] Ibid
[21] E Merrick Dodd, ‘For Whom Are Corporate Managers Trustees?’ 1932 Harvard Law. Review 1365
[22] Andrew Griffith, ‘Trade Marks and Responsible Capitalism’ (2011) 43 International Review of Intellectual Property & Competition Law 798
[23] Milton Friedman, ‘The Social Responsibility of Business is to Increase its Profits’ (1970) The New York Time Magazines < http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html> accessed 17 April 2017
[24] Ibid
[25] Michael E Porter and Mark R Kramer , “The Competitive Advantage of Corporate Philanthropy” (2002) 80 Harvard Business Review 5; Kash Rangan, Lisa A Chase and the others ‘Why Every
Company Needs a CSR Strategy and How to Build It’ (2012) Working Paper Harvard Business School
[26] Michael Polonsky and Colin Jevons, ‘Global Branding and Strategic CSR: An Overview of Three Types of Complexity’ (2009) 26 International Marketing Review 327
[27] Smith A Elizabeth and Malone E Ruth, ‘Altria Means Tobacco: Philip Morris’s Identity Crisis’ (2003) 93 American Public Health 553
[28] Max Nisen,’How Nike Solved Its Sweatshop Problem’ (2013) <‘http://www.businessinsider.com/how-nike-solved-its-sweatshop-problem-2013-5?IR=T> accessed 01 May 2017. See also Jill Esbenshade, Monitoring Sweatshops Workers, Consumers, and the Global Apparel Industry (Temple University Press 1992
[29] Naomi Klein, ‘No Logo, No Choice, No Jobs: Taking Aim at The Brand Bullies’ (Flamingo 2000) 195-229
[30] Ibid
[31] Ibid
[32] Ethical Consumers, ‘Aftermath of Rana Plaza: Rana Plaza: Two Years On (December 2015) <http://www.ethicalconsumer.org/ethicalreports/fashionindustry> accessed 15 March 2017
[33] Maurizio Zollo “Philanthropy or CSR: A Strategic Choice” (2008) 24 Strategic Decision Journal 18
[34] KPMG International, ‘The KPMG Survey of Corporate Responsibility Reporting 2013 (2013) KPMG Report 1
[35] Global Reporting Initiative, ‘Sustainability and Reporting Trends in 2025 Preparing for the Future’ (2015) GRI’s Reporting 2025 Project: First Analysis Paper 1
[36] Anne Landman , “BP’s ‘Beyond Petroleum’ Campaign Losing Its Sheen” (3 May 2010) <www.prwatch.org/node/9038> accessed 12 March, 2017
[37] Ibid
[38] Doane (n 5)
[39] PR Daily, ‘The most-profitable companies have terrible reputations <https://www.prdaily.com/Main/Articles/The_mostprofitable_companies_have_terrible_reputat_11583.aspx > accessed 16 April 2017; see also Bill Quinn, How Walmart Is Destroying America (and The World) and What You Can Do About It (Ten Speed Press 2005) xi
[40] Quinn (n 39) xi
[41] PR Daily (n 39)
[42] Tricker Bob, Corporate Governance Principles, Policies, and Practices (2nd edn, OUP 2012)
[43] PR Daily (n 39), this statement is given by Lorra Brown, an assistant professor of Public Relations at William Paterson University.
[44] IPSOS MORI, ‘Public View on Ethical Retail’ (2014) IPSOS MORI Public Opinion Research Conducted by IPSOS MORI on Behalf of the Department for Business , Innovation and Skills <https://www.ipsos-mori.com/Assets/Docs/Polls/reputation-ethics-in-retail-charts-2014.pdf > accessed 17 March 2017
[45] Ibid
[46] Polonsky and Jevons (n 26)
[47] Radu Mares, ‘The Limit of Supply Chain Responsibility: A Critical Anaysis of Corporate Responsibility Instruments’ (2010) 79 Nordic Journal of International, 193
[48] Ibid
[49] Ibid
[50] Polonsky and Jevons (n 26)
[51] The United Nation Guiding Principles on Business and Human Rights
[52] Kash Rangan, Lisa A Chase and the others ‘Why Every Company Needs a CSR Strategy and How to Build It’ (2012) Working Paper Harvard Business School 1
[53] King Report, ‘The King Report on Corporate Governance for South Africa’ (2009) King Committee on Corporate Governance’ Institute of Directors in Southern Africa para 12. See also Jill Solomon, Corporate Governance and Accountability (John Wiley and Sons 2013) 20
[54] [54] Europen Commission, ‘Corporate Social Responsibility: A New Definition, A New Agenda for Action’ (2011) Memo/11/730 European Commission < http://europa.eu/rapid/press-release_MEMO-11-730_en.htm> accessed 30 April 2017.
[55] United Kingdom Company Act 2006 s 174
[56] Raghav Narsalay, Ryan T Coffey and the others, ‘Hindustan Unilever: Scaling a Cost Efficient Distribution and Sales Network in Remote Markets: Case Study’ (2012) Accenture Institute for High Performance 1
source of image: http://www.ferpi.it/rp-e-responsabilita-sociale-dimpresa-quali-affinita/
