Worried about social responsibility campaign blowback? Here's what not to do
By Yuan-Chi Li
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Executive Summary
According to Deloitte’s CMO Survey, consumer packaged goods (CPG) companies are one of the least likely of any sector to embrace corporate social responsibility (CSR) based brand engagement.
Research published in the Journal of Marketing suggests making “compensatory” measures creates a 10% sales swing for CPG brands vs launching a CSR campaign to support unrelated charitable causes simply to cultivate goodwill.
For many CPG companies, a 10% increase in annual sales exceeds even the extraordinary gains experienced during COVID-19 pandemic or several years of typical compound annual growth rate (CAGR). In the light of evolving consumer priorities concerning CSR, recommendations include aligning CSR activities more closely with the company's operational framework without necessarily altering operations themselves.
Implications for CPG industry: danger to lack of CSR focus
Brands and their marketing strategies play a pivotal role in the CPG sector, yet the social purpose marketing is decidedly behind other sectors. As revealed in the March 2023 CMO Firm and Industry Breakout Report, a collaborative effort by Deloitte, Duke University’s Fuqua School of Business, and The American Marketing Association (AMA), CPG sectors allocate an average of 22.61% of their company's overall budget to marketing expenses, a percentage that surpasses every other industry sector. Furthermore, Chief Marketing Officers of CPG companies more strongly considered brands to be an invaluable intangible asset than in any other industry sector.
However this spending allocation and attention to brand underscores the CPG sector's nascent social purpose marketing. The same March 2023 CMO Survey asked CMO’s how their companies embraced a brand promise based on a strong social purpose – CPG companies ranked slightly ahead of wholesalers and retailers on average, but well below consumer services, healthcare, and even banking/finance. In fact, on a 1 (not at all) to 7 (very highly) scale, CPG’s had the lowest percentage of 6’s and 7’s of just about every industry. CPG companies appear to be more at risk for misguided CSR marketing efforts that can potentially result in waste of marketing ad dollars and direct loss of sales potential.
Research: CSR campaigns bring positive (and negative) consumer response
Consumers are prioritizing CSR considerations when making purchasing decisions. A recent study published in the Journal of Marketing delves into the correlation between CSR initiatives and brand sales, drawing data from two primary sources: CSRwire, a repository containing an extensive collection of CSR-related announcements from 2002-2011, and the IRI data set, which offers comprehensive brand sales data. The study examined 55 CPG focal brands across 80 CSR initiatives, which they categorized as either “corrective”, “compensating”, or “cultivating”.
Corrective CSR involved direct actions to mitigate adverse impacts on society or the environment by making operational adjustments, such as when a bottled water brand reduces the amount of plastic used in the bottle-top. Contrarily, compensating CSR addresses negative externalities indirectly, without making changes to products or operations. This is often achieved through financial contributions, such as when a bottled water brand donates money to plastic recycling programs. Cultivating CSR refers to supporting unrelated charitable causes without changing products or operations, as seen when a bottled water brand donates money to literacy programs to impact general goodwill.
The study confirms that positive outcomes are associated with corrective and compensating CSR actions, aligning with the hypothesis that consumers prefer brands acknowledging and rectifying their shortcomings. On the contrary, cultivating CSR may appear insincere, as it often doesn't address the negative impact of a company's products or operations on society. Specifically, corrective CSR leads to approximately a 1.0% increase in sales, while compensating CSR results in a 3.05% increase. In contrast, cultivating CSR shows a negative impact of approximately -3.45% on sales. Furthermore, long-term sales stability surpasses short-term changes by a factor of 1.5 (approximately 1.5%, 4.6%, and -5.2% for corrective, compensating, and cultivating CSR, respectively).
The results expose a big swing to incorrectly messaging a CSR campaign: nearly 10% difference in long-term sales between a doing a compensating CSR message versus a cultivating CSR message. It also suggests compensating for negative externalities (ie not changing the product itself) is x3 better in sales returns than taking corrective measures (ie actually changing the product itself).
Moving forward: CSR campaigns that align with operational framework
In the realm of the CPG industry, a mere 10% swing in sales carries immense weight. The 2022 CPG Growth Leaders report, a collaboration between IRI and BCG, reveals a 2.7% CAGR growth from 2019 to 2022. This statistic serves as the backdrop for understanding the magnitude of a 10% swing. Three years of natural growth are required to match the impact of a single 10% swing achieved through CSR execution. Even in the exceptional 2019-2020 period, CPG companies only saw a 9.4% sales boost during COVID despite the never-before-seen spike in at-home demand for so many staple products, like canned food and toilet paper, according to the Consumer Brands Association.
This analysis underscores the significant role of CSR in influencing brand sales, and the relative risks associated with “insincere” CSR campaigns. For CPG companies embarking on a CSR strategy for their brand, the following actions are recommended:
Day One: Strategic CSR Alignment: Ensure that CSR activities align closely with your company's operational framework. Categorize past campaigns as compensating CSR actions that directly addressed business-related concerns or those that were efforts on unrelated environmental and social impacts.
After: In-depth Exploration: Delve deeper into the original paper. This comprehensive research offers detailed statistical evidence based on macro data, but these same types of distinction in CSR campaign type should also be tested in focus groups using your actual target consumers and their purchasing intent.
Finally: Acknowledge Consumer Priority: Recognize the evolving consumer preferences in purchasing decisions and the necessity to adapt is crucial. However, CSR initiatives aligning with consumer sentiments might not necessarily require a complete overhaul of your company's operational framework or product offerings.
By adhering to these recommendations, companies can navigate the intricate landscape of CSR, leveraging it effectively to positively influence brand sales, foster consumer trust, and drive meaningful growth. While these steps offer significant benefits, it is vital to acknowledge the study's limitations and continue to explore broader perspectives. Notably, the study's focus on individual CSR initiatives does not account for the multifaceted approaches companies often adopt by combining all three activity types. Additionally, relying solely on press releases might not ensure that consumers are fully aware of the CSR campaigns; this approach acts as a mere proxy, and successful recognition by consumers of actual CSR initiatives is not guaranteed.
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Yuan-Chi Li is a Master’s candidate in Sustainability and Development at University of Michigan and a member of the Michigan Graduate Consulting Club. The research applications proposed in this article are solely the views of the author and do not necessarily reflect the views of the original academic journal article authors nor any individual member of our Editorial Board.