Corporate Social Responsibility vs. Ethical-by-Design (Shared Value)

Buy One Degree Organic Foods' products at your local Whole Foods Market | Anna Seacat | SociallyMindedMarketing.com

Buy One Degree Organic Foods products at your local Whole Foods Market | Anna Seacat | SociallyMindedMarketing.com

I first noticed the One Degree Organic Foods’ brand on the shelf at my local Whole Foods Market, because, unlike most products, its packaging displayed a rather large QR Code.  When I picked up the brand’s 3 pound bag of quick oats for closer examination, what I saw inspired me to put back the oats I usually purchase and buy not 3 pounds, but 6 pounds of One Degree Organic Foods’ offering.  In the  article below, I will explain how One Degree Organic Foods’ ethical-by-design approach is an example of “Shared Value” (Kramer & Porter, 2011) and has the potential to disrupt the understanding of CSR (Corporate Social Responsibility).

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In 2005, Ying Fan, of the Brunel Business School in Uxbridge, UK, proposed that it was a critical mistake to measure and define brand equity along the lines of economic performance without considering ethical measures as well.  Fan’s proposition was supported through his findings, which demonstrated that “an ethical brand enhances the firm’s reputation; such a reputation reinforces the brand in turn.  On the other hand, any unethical behavior will severely damage or even destroy the intangible asset.”

Since 2005, members of academe along with business leaders have continued to explore the link between ethics and corporate branding.  For instance, the famous Michael Porter of Harvard, who is the undisputed authority on strategy, has unequivocally pronounced that although CSR initiatives and ethics programs serve as forms of reputation management, shared value (what this article refers to as ethical-by-design) can actually increase the competitiveness and profitability of a company (Kramer & Porter, 2011, p. 16).  Nevertheless, major corporations, such as General Mills, have invested hundreds of millions of dollars into a formal ethics planning process, which focus on CSR rather than shared value.

The misunderstanding of shared value among giant corporations has created an environment where new breeds of business start-ups are gaining market share.  Rather than take away resources from the business to use towards ethical programs, these new organizations are designing their business model from the ground-up to be ethical.  Thus,  what it means to be an ethical firm is being redefined.  For example, whereas General Mills is attempting to evolve within a modern society that is demanding greater corporate social responsibility, smaller, more nimble start-ups in the food industry, such as One Degree Organic Foods, intend to take the giants’ market share by creating an entire business around the concept.  Below, Adam Turteltaub’s components of an ethics business process model will be applied to form a comparison between General Mills’ formal ethics planning process and One Degree Organic Foods’ ethics-by-design approach.  It will be postulated that the ethics-by-design method has a greater potential to be a competitive advantage.  Additionally, common metrics of an ethics process model will be recommended for use by One Degree Organic Foods.

Comparing the Old Way and the New Way

turteltaub

Adam Turteltaub outlined three key areas that companies should consider when examining the creation of business process around ethics. Source: Open Compliance & Ethics Group: GRC 360. Corporate Legal Times

Adam Turteltaub, a respected attorney and Vice President at the Society of Corporate Compliance and Ethics, outlined three key areas that businesses should consider when examining the creation of business processes around ethics: people, process, and technology (2005).  Turteltaub explained that in order to “reap the rewards of an ethical culture, companies understand they must have a complete grasp on the people, processes and information necessary to assess the underlying health of the company” (Turteltaub, 2005, p. 8).  These areas will be used as the organizing force behind the comparison between General Mills and One Degree Organic Foods.

People

Turteltaub explained that an organization must manage the extent to which ethical conduct is entrenched in the day to day activities of its employees and suppliers (2005, p. 8).

General Mills’ formal approach to involving people in its ethics business process model was covered in the corporation’s eighty-eight page 2013 Global Responsibility report, wherein multiple references to the involvement of its suppliers in ethical matters were mentioned.  For example, General Mills stated that it is using a “Supplier Sustainability Scorecard to track our portion of a supplier’s energy, water, waste, and GHG [Green House Gass] emissions” (p. 52).  Although the corporation explained that this method is only being currently used as a means to collect data, General Mills declared “in the future, we plan to collaborate [with our suppliers] around reductions.”  Compliance by suppliers with this ethics program is the responsibility of General Mills’ Chief Compliance and Risk Officer and the Ethics & Compliance group (p. 58).

Arnold Schmidt

Image/photo courtesy of Sondra Houghton and One Degree Organic Foods | 2013 | http://www.onedegreeorganics.com/

One Degree Organic Foods’ methods of involving people in its ethical approach to business are far less formal than that of General Mills.  This informal approach, however, is not to be confused with ineffectiveness.  Unlike General Mills, which does not even include all of its suppliers in its Supplier Sustainability Scorecard (only its “top 100 U.S. suppliers in four main categories” were graded) (General Mills Global Responsibility, 2013, p. 52), One Degree Organic Foods goes above and beyond the typical ethics planning process to integrate its suppliers into its ethical business model.

Filming at the Pierce Farm

Image/photo courtesy of Sondra Houghton and One Degree Organic Foods | 2013 | http://www.onedegreeorganics.com/

For example, every farmer that supplies One Degree Organic Foods with raw ingredients is not only listed on its website, but the Vice President of marketing, Danny Houghton, and his team go to great lengths to tell and illustrate a transparent story about the farm through rich media and photographic essays (D. Houghton, personal communication, November 14, 2013).  The One Degree Organic Foods’ storytelling tactic adds real value to its ethical business model in three ways.  First, it provides a visual and written document for consumers to explore and critique.  Second, but perhaps more importantly, One Degree Organic Foods’ stories give the farmers a voice in an industry that otherwise silences them.  Last, the act of One Degree Organic Foods showing up at their suppliers’ farms with video cameras and producers in tow certainly demands a high-level of accountability and transparency on the farmer’s end – the farmer has to deliver on her/his claims.

Process

The second key area that Adam Turteltaub recommended for companies to examine during the creation of an ethical business model centered around process.  He pointed out that several world-class corporations have integrated traditional processes, such as Six Sigma, to measure, analyze , and improve ethical performance (2005, p. 8).

An example of General Mills’ formal approach to integrating a process to measure, analyze, and improve ethical performance is in its founding and continued usage of the HACCP (Hazard Analysis and Critical Control Points) process.  The process, which General Mills claimed has become the food industry’s gold standard measures, analyzes, and improves food safety (General Mills Global Responsibility, 2013, p. 24).   General Mills credits this process to its ability to pass inspections, which are conducted by “numerous local, state, federal and/or provincial regulatory agencies.”

veganic is better

Veganic is better than organic, because it does not allow animal byproducts to be used as fertilizer. For more on this superior growing process, visit: http://www.veganic.com/

One Degree Organic Foods’ suppliers must pass the same, if not more difficult (due to the USDA organic standard) inspections General Mills is subject to, however the start-up decided to make its processes to ensure food safety more stringent than what was required by law.  Houghton explained that there are fundamental flaws in the processes that organizations use to become certified USDA organic growers (D. Houghton, personal communication, November 14, 2013).  Namely, the USDA organic law is ambiguous about whether or not animal manure from non-organic livestock can be used as a way to enrich organic soil.  Therefore, because it is believed that manure fertilizers “may contain antibiotics, hormones and other chemicals” (Company Backgrounder, 2013, p. 2), One Degree Organic Foods’ requires that their suppliers adhere to a strict veganic growing process, which does not allow for the use of “chemicals, compounds or animal inputs of any kind” (Veganic Defined, 2013).  This business process is One Degree Organic Foods’ way of ensuring a safer food supply.  However, because no government agency or consumer activist group regulates “veganic” as a legal standard for a growing process, Houghton and his team at One Degree Organic Foods have embraced the challenge to police the burgeoning movement (D. Houghton, personal communication, November 14, 2013).

Technology

onedegreetech

With One Degree Organic Foods’ free smart phone app , you can unlock stories and learn the wholesome truth about every ingredient in a One Degree product. To learn more, visit: http://www.onedegreeorganics.com/iphone

The third and final key area that Turteltaub recommended for companies to examine during the creation of an ethical planning process was technology.  Turteltaub’s discussion on technology in terms of ethics in business was about how new, digital platforms should be used by organizations “to gain real-time visibility into every activity associated with governance, ethics, and compliance” (2005, p. 9).

At General Mills, technology is utilized in several areas of its ethics planning process.  For instance, in 2012 the corporation invested in a technologically advanced platform, which can be accessed by mobile devices and designed to “track all workplace incidents – even those near-misses that did not result in an injury” (General Mills Global Responsibility, 2013, p. 62).  The purpose of the innovative software is to provide leaders and their staff with real-time reports and ways to document incidents and communicate status of steps taken to reduce future incidents.  Technology-based ethics programs, such as this, are intended to “mitigate risk, improve efficiency and correlate data on an enterprise-wide basis” (Turteltaub, 2005, p. 9).

LentilGrain_Stand_US_small

Image/photo courtesy of One Degree Organic Foods | 2013 | http://www.onedegreeorganics.com/

As a start-up, One Degree Organic Foods, has not yet implemented any technology-based enterprise level safety programs.  But, the business does effectively use technology to enhance its position as an ethical firm.  For example, on each of its products’ packaging, One Degree Organic Foods incorporates QR and Alphanumeric Codes, which can be scanned in-store with a smart phone or entered on a website “for immediate access to a detailed life story of each ingredient and its producer via video and photo essay” (Company Fact Sheet, Ingredient Truth section, 2013, p. 1). Houghton explained that incorporating technology platforms that consumers are familiar with is a key to his business’s success as a transparent and ethical firm.  He said that regardless of whether or not a customer ever scans a QR code with her/his smartphone, One Degree Organic Foods has taken the proactive initiative to share its entire business model and details of its suppliers readily with anyone who is interested (D. Houghton, personal communication, November 14, 2013).

Metrics

One Degree Organic Foods is less than two years old, so it has not yet implemented formal metrics that track and measure its ethical planning process.  However, it is clear that its ethics-by-design approach is affecting its product management, as well as the firm’s interaction with people and technology.  In the future, One Degree Organic Foods could begin to use metrics to measure, analyze, and track the effectiveness or lack thereof of its ethical programs.  For instance, it might be beneficial for the One Degree Organic Foods’ brand to develop a third party administered process that investigates and certifies the veganic growing process or develop a scorecard system for its suppliers, similar to the aforementioned program implemented by General Mills.  However, it is important to note that because One Degree Organic Foods has embraced the shared value concept by designing its business model around ethics, it may not be necessary to separate typical metrics used to discover the financial health of a business from ethics metrics.  In other words, since One Degree Organic Foods business model is ethical-by-design, if it is financially healthy, it is also succeeding in ethical areas and vice versa (Kramer & Porter, 2011).

The Significance of this Analysis

OneDegree_logo_tagline_RGB_GRY

Image/photo courtesy of Danny Houghton and One Degree Organic Foods | 2013 | http://www.onedegreeorganics.com/

Even though global corporations have used CSR as a form of reputation management, this method could be significantly challenged if new entrants redefine consumers’ baseline expectations in corporate ethics.  As shown above, in every area, people, process, and technology, One Degree Organic Foods’ approach was nontraditional when compared to General Mills’ methods.  Nevertheless, it could be argued that this nontraditional approach is more meaningful to consumers, hence having more potential to create a competitive advantage.  For example, it is easy to see how a consumer would be more apt to comprehend a video diary of a farmer than a Supplier Sustainability Scorecard.  Likewise, regardless of how robust and stringent General Mills’ food safety process, HACCP, is, it would not be hard to imagine how One Degree Organic Foods’ educational material on its website, Veganic.com, is easier for a consumer to digest.

Pushing its way into the picture: Will the big yellow box be bumped by socially minded businesses that are ethical-by-design and embrace "Shared Value?" | SociallyMindedMarketing.com | Anna Seacat

Pushing its way into the picture: Will the big yellow box be bumped by socially minded businesses that are ethical-by-design and embrace “Shared Value?” | SociallyMindedMarketing.com | Anna Seacat

If this postulate is true, a prediction could be made that smaller, more nimble businesses, which were designed from the core to be ethical, will have a greater competitive advantage over older, traditional corporations that have attempted to evolve into an ethical-like firm.  Despite the very small size of One Degree Organic Foods’ market share when compared to General Mills, the start-up’s cereal is being sold on the same shelves as General Mills’ offering.  This is significant because only time will tell if General Mills’ formal ethics planning process can remain viable when challenged by disruptor brands that are ethical-by-design.

References

Company Backgrounder. (2013). One Degree Organic Foods Press Kit. Retrieved on October 14, 2013 from http://s3.amazonaws.com/images.onedegreeorganics.com/assets/5353/One_Degree_Company_Backgrounder.pdf

Company Fact Sheet. (2013). One Degree Organic Foods Press Kit. Retrieved on October 14, 2013 from http://s3.amazonaws.com/images.onedegreeorganics.com/assets/5356/One_Degree_Company_Fact_Sheet_v1.2.pdf

Kramer, M. R. & Porter, M. E. (2011). Creating Shared Value: How to Reinvent Capitalism — and Unleash a Wave of Innovation and Growth. Harvard Business Review. Retrieved from http://www.hks.harvard.edu/m-rcbg/fellows/N_Lovegrove_Study_Group/Session_1/Michael_Porter_Creating_Shared_Value.pdf

Fan, Y. (2005). Ethical Branding and Corporate Reputation. Corporate Communications: An International Journal, 10 (4), 341-350.

General Mills Global Responsibility. (2013). Global Responsibility 2013. Retrieved on October 14, 2013 from http://www.generalmills.com/~/media/Files/CSR/2013_global_respon_report.ashx

Turteltaub, A. (2005). Ethics as a Business Process. Open Compliance & Ethics Group: GRC 360. Corporate Legal Times, 8-9.

Veganic Defined. (2013). Retrieved on October 14, 2013 from http://www.veganic.com/veganic-defined

2 comments

  1. “Nevertheless, it could be argued that this nontraditional approach is more meaningful to consumers…”
    It sure is more meaningful to me. In my kitchen, you will find One Degree Organic products, but absolutely ZERO General Mills products. This great essay highlights a big reason why that is.

    1. Thank you for sharing your appreciation for One Degree Organic Foods’ meaningful approach to attracting consumers. I’m sure the food in our kitchens are very similar. It is always so nice to meet a fellow socially minded consumer. I hope you will join us in our next ethics-based marketing discussion.

      @AnnaSeacat | plus.google.com/+ANNASEACAT | seacatanna@gmail.com | SociallyMindedMarketing.com

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Ethan McCarty

Digital strategy | Social business | People-centric biznology

Alana Harris Photography

some of my favorite photos and their stories

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A Friendly Debate about Modern B2B Marketing

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