How Can Businesses Be More Charitable And Profitable At The Same Time?
Thursday, September 17, 2009
How can businesses be more socially responsible, and increase profitability at the same time? We speak to participants from a USD conference on "Increasing Market Share through Social Branding."
The second annual Summit on Peace and Prosperity through Trade and Commerce will take place at USD this Friday. This year's theme is "Increasing Market Share through Social Branding."
MAUREEN CAVANAUGH (Host): I'm Maureen Cavanaugh. You're listening to These Days on KPBS. During his lifetime, movie star Paul Newman gave a long list of memorable performances. The ironic thing is, what he may become most remembered for is his venture, late in life, into an endeavor which combined business and charity. The Newman's Own brand, on products ranging from salad dressings to popcorn, combine a promise of quality ingredients, with a commitment from the company to donate their profits to charity. The enterprise has been a smashing success, donating more than $235 million since 1982. Now, it could be said the modern trend toward social branding began with the success of Newman's Own products. Now more companies are becoming eager to link their products with social causes, the donation of a percentage of the sales go to help charities. It's a trend that many advocates of social justice are encouraging. The second annual Summit on Peace and Prosperity through Trade and Commerce will take place at the University of San Diego tomorrow, and this year's theme is "Increasing Market Share through Social Branding." To tell us more about this growing market concept, I'd like to welcome my guests. Patricia Marquez is director of the newly created Responsible Enterprise Initiative at the University of San Diego, and one of the organizers of tomorrow's USD summit. Welcome, Patricia.
PATRICIA MARQUEZ (Director, Responsible Enterprise Initiative, University of San Diego): Thank you.
CAVANAUGH: And Priya Haji is founder and CEO of World of Good. Priya, welcome.
PRIYA HAJI (Founder/CEO, World of Good): Thank you.
CAVANAUGH: Now I'd like to start out by asking you, Patricia, tell us a little bit more, would you, about this concept of social branding?
MARQUEZ: Yes. Well, the idea that we have in mind is to be able to explore the power that brands have over different societies worldwide, and by now we know have an immense power in terms of creating identity, in terms of spreading meaning about what business are bad, what can they do? So the idea is can we use that power, those meanings, to instill in people the idea that creation of economic value can go hand-in-hand with the creation of social value and, again, also environmental value. So that's the idea that we're trying to discuss because it's not just this but how can it be done?
CAVANAUGH: And what is the goal of tomorrow's conference? Is it to get more people aware of what you just said?
MARQUEZ: It's not just to create the awareness but also to provide best practices because here we're going to have leaders and entrepreneurs who are doing it. So we want to share how they are doing it so that not only inspires and creates awareness but it also gives useful knowledge for those who are trying to figure it out, how can it be done?
CAVANAUGH: Share with us, if you would, how some of the specific social branding issues that you're going to be discussing tomorrow (sic).
MARQUEZ: Okay, so what we're going to be discussing tomorrow are examples. For example, we have two smaller companies and we have bigger companies like Starbucks and we have a big campaign Red Product. So what we want to be able to see is, is the way to go through small enterprises. Can they have more power in creating a new identity where business goes hand-in-hand with social and environmental concerns, or are the big companies the ones who are going to have the leadership, or a combination. We also want to show the different ways of thinking about this. I mean, some companies are doing it through their products. Other companies are doing it through their processes like OneHope. Or other companies are doing through alliances with nonprofit organizations. So we want to show the wide spectrum of possibilities. And then people in different parts of the world have to decide, you know, what is it that I want to do and how it can be done.
CAVANAUGH: Priya, I wonder where you would put World of Good in that spectrum of big companies to small ventures and so forth. Where would your organization fit?
HAJI: So World of Good is actually kind of a strategy where we're trying to take ethical products that are all made by women's artisan communities that are benefiting small communities and are fair trade products, but help them get to a much wider mainstream audience and generate a large volume of sales. And the way we've actually done it is through partnering with large companies so we partnered with eBay and we built worldofgood.com by eBay, which is now an ethical marketplace that actually helps almost 300 organizations in 70 countries and is doing millions of dollars of sales that are now benefiting communities. And those listings are available on eBay and they're also on worldofgood.com by eBay. And so that's an example. We've partnered with Whole Foods and Hallmark and Disney where we're placing sections of product in their stores where all the products come from small communities. It tells the story, how it benefits those communities. So I think it's an interesting point that Patricia's making, are the larger companies going to generate these initiatives on their own or are they going to partner up with examples like World of Good where we were really an initiative pulled together of these communities. I did my MBA at Berkeley, started thinking about the idea, but we realized that to reach a much wider consumer base one small company trying to set up its own stores or trying to create its own approach might be very difficult just like getting these small organizations to market. But by partnering with eBay, by partnering with Whole Foods, by partnering with Hallmark, with Disney, we could grow this much more quickly and make it easier for millions of people in the United States to shift their purchasing power. So now if you want to shop for a great gift, you can actually buy something that you know helps the community where it came from.
CAVANAUGH: And one other organization that certainly has done an awful lot of partnering with the large corporations is Product Red. And on the line with us right now is Colin Brady. He is Chief Operating Officer of Product Red. Colin, good morning.
COLIN BRADY (Chief Operating Officer, (RED)): Good morning. Thanks for having us.
CAVANAUGH: Well, tell us, for people who are not aware, what is Product Red?
BRADY: Sure. Product Red is essentially a brand. It's a brand that was created in 2006 by Bono and Bobby Shriver. And the idea behind the brand was that it would engage businesses, as we've been talking about, in this case large, iconic brands, to join an initiative to help eliminate AIDS in Africa. And by working with those large brands, we knew that we would reach a lot of consumers and draw a lot of people into the initiative.
CAVANAUGH: Well, tell our listeners what kind of products they may have seen that have that red logo on them but they might not know what it means.
BRADY: Sure. So we partner with products – we partner with partners like Apple, Starbucks, the Gap, Converse, Dell, Hallmark, Armani, even American Express in the U.K. So if you've ever worn, or seen someone wearing, an Inspired tee shirt by the Gap, if you've ever seen someone with a red iPod tucked into their pocket, or if you've even used a red Starbucks card to buy your daily coffee at Starbucks, the exciting thing is that you've been a part of an amazing change where you've helped people in Sub-Saharan Africa get – who are living with HIV-AIDS get access to medicine they wouldn't have without your purchase.
CAVANAUGH: And how much money have the (RED) products from all these different franchises generated for the global fund?
BRADY: Sure. So the (RED) was started in 2006 so we're still a pretty young organization but to date $135 million, a little more than $135 million has gone directly into the global fund to help buy medicine. And no overhead is taken out of that money so if you've ever purchased a (RED) product or you're thinking of it, it actually creates an enormous impact.
CAVANAUGH: And, Colin, what's in it for the businesses that partner up with (RED)?
BRADY: I'm glad you asked that. The whole idea behind this, and I think this is really part of what this conference is about, is to use business as a way to get to sustainability. The idea here was to create a sustainable flow of money to the global fund that would go on in addition to the public funds that go into the global fund. And the way to do that is to make it good businesses – to make it good business for the partners. And so if you take a partner like the Gap, when we partnered with the Gap in 2006, obviously it's a great brand. But when they did, and when they do, those beautiful window advertisements that they do, helping people understand that if they buy this tee shirt it'll help save someone's life, more people come into the store. Their sales go up, and that's an actual fact. That's an effect that we've seen. And they actually make more profits even though they're helping to put up to 50% of the gross profit into the global fund to help buy this medicine. So at the end of the day, everyone is sort of better off; you get a great tee shirt, the product has to be great. That's something we learned from Newman's Own that you started the segment with. The Gap gets the sales that they wanted to get and these people that weren't involved any – before get medicine they wouldn't have otherwise.
CAVANAUGH: Colin, thanks so much for talking with us. We really appreciate it.
BRADY: Thanks for having us.
CAVANAUGH: That was Colin Brady from Product Red. He's Chief Operating Officer of the group. Patricia, I wanted to ask you, you know, some people have criticized efforts like Product Red saying, you know, we don't need a middle man. If we want to give to charity, we can give to charity, and if we want to buy a product, we can buy a product. What is the argument in support of social branding like this?
MARQUEZ: Through a partnership? Again, I think when you think about companies such as Gap and Dell and Apple, what he was telling us just a minute ago is that it has such a power over consumers worldwide so for the business perspective, is really convenient because it might, again, sort of entice consumers to even feel better about the products that they're buying. But at the same time, for these organizations, like nonprofit organizations who wanted to reach larger scale, this might be a more effective and immediate way of doing it than doing it on their own. And we have seen how, since 2006, Product Red has been able to present itself to the world. I mean, even you hear of Bono being sort of possibly a candidate for the Nobel Peace Prize. And it's just telling you the scale that it can reach when different actors that have the power to move consumers worldwide, even in ways that we couldn't imagine ten years ago, are doing so. So for the nonprofit, this might make a lot of sense in terms of adding to their credibility, it terms of replicability of their initiative, in terms of the scale, in terms of the awareness, in terms of the movement they can create through very powerful businesses.
CAVANAUGH: And Priya.
HAJI: Well, one thought I had is that, you know, your point was that do consumers lose their choice by having these kinds of initiatives, and what I would say, as sort of a social activist or entrepreneur, is that what I hope happens is that it exposes more people to these ideas. People who are going to be philanthropists already, people who are going to make a contribution, were going to do that anyway, and that's powerful. What this does, I think, is create a window of opportunity for many more people to engage. And I think what's also really powerful is it's creating a new dynamic of what we call inspired competition among companies. So if you're competing only on the dimensions of how do you grow your profits and how do you grow your business and how do you build the biggest brands, that's a form of competition, certainly. But when you insert the ideas of, okay, do you have an ethical supply chain? Do you source organic products? Do you donate to charity? You insert new standards into consumer expectations and when you do that, you create a new environment where companies now have to compete not only on the basis of building a great, relatable, loveable brand, but really building something that has value and impact. And I think what's really powerful and, you know, it's interesting because Starbucks will be at that conference tomorrow, and Starbucks is recognized and also, by some people, you know, there's a certain stress around the idea, you know, have they done good things for coffee farmers? Has it harmed coffee farmers? But what's powerful is because of what Starbucks did and the way they've integrated fair trade and they've created this kind of idea, it's inspired competition. But it's inspired competitive frameworks around who can do more good and how do you communicate that good and how do you empower consumers to do good? So I think the power of this is engaging new people and changing corporate behavior through a new competitive framework. And that is why I chose, as an activist, to really engage in this arena because if we're going to lift millions of women's – out of poverty, which is really the goal of World of Good, it's only going to happen if companies source differently, behave differently, and if we, as consumers, demand it to be done differently.
CAVANAUGH: Let's talk with another person involved in social branding through his company. Jake Klober – I'm sorry, Jake Kloberdanz is on the line. He's CEO of OneHope Wine. And, Jake, welcome to These Days.
JAKE KLOBERDANZ (CEO, OneHope Wine): Thanks. I appreciate it.
CAVANAUGH: Now what makes OneHope Wine different from other California winemakers?
KLOBERDANZ: Well, the big thing about OneHope Wine and just say out front, make it known we're OneHope as a brand but OneHope Wine being the vehicle that we first came to the market. OneHope Wine donates 50% of profits from each different write-off to a partner's nonprofit. So our chardonnay goes to breast cancer, our Merlot goes towards AIDS, cabernet towards autism, our zinfandel towards the Families of Fallen Troops, and then the Sauvignon Blanc towards the environment, and we are launching a new reserve tier that's going to go towards different causes as well with the Mondavi family coming up here. And so that's one of the things that separates what we do, is the donation sides and then the awareness sides of our packaging we believe to be kind of a separate but equal, socially conscious movement by our wine company. And then, lastly, what separates us is the grassroots side of it, what we actually do with the nonprofit organizations that we work with so not just a check at the end of the year but – and semi-annually, but also getting involved in their walks, in their rides. For example, five of our eight founders did the AIDS Life Cycle Ride last year and we will continue to do it, and just participating in these different causes so…
CAVANAUGH: So, Jake, I wonder, what has giving to charity done for your business? Has that actually, do you think, increased sales?
KLOBERDANZ: Oh, certainly, yes. Wine, particularly, happens to be a kind of a luxury product and a luxury industry and so we're kind of trying to build a luxury brand that's about the luxury of giving back. And just like some of the other speakers talked about, not passing that donation on to the consumers as much as making it a part of our culture in our company. So we donate on our end but we don't ask the consumers to pay more than the value of the wine. We just – There's a lot of margin in wine and we save a lot of money on marketing and advertising. So, essentially, if you look at our financials and what we've been able to do over the last couple of years in our look, rather than marking it up and trying to make two times the margin and then giving half of it to charity, we've just tried to expand two times as fast.
CAVANAUGH: And – Yeah.
KLOBERDANZ: And we've certainly done that, so…
CAVANAUGH: I'm wondering, Jake, what's – what are the next steps for OneHope? You said something about Mondavi coming up there. What did you mean by that?
KLOBERDANZ: Yeah, Michael Mondavi and Rob Mondavi, Jr., the grandson of the Robert Mondavi family and 'the' Robert Mondavi is actually starting to blend reserve grade Napa apelated wines and so they've started to partner with us on a wine that we're releasing here in the next couple of weeks. As far as our California blends that we have always done, it's – we've done extremely well in competitions and continue to get accolades and we're starting to spread out into, you know, noticeable chains like Safeway and Vons that we launched into, Ralphs and on down the line, Albertsons, so on and so forth. And then as far as a movement for OneHope, like a lifestyle brand, we started much like (RED) and some of the other brands that we kind of mentioned. We're trying to partner up with for-profit companies and some of them being companies that you wouldn't necessarily expect it from. So a specific product that we're coming out with here in the next couple of weeks is a flash drive and at first glance you'd think that was a kind of a random product but we're partnering with Wintec Industries, which is one of the largest women companies in the nation and they've committed to donating 50% of the profits to Dress For Success, which is an organization that gets suits for underprivileged women…
KLOBERDANZ: …or homeless women to get off the streets and get a job and interview and also mentor them on how to do it. So a big part of what we're doing is leveraging our brand for them to come out with their own cross products but as well also educating them on how cross branding helps increase sales and then also motivate their own employees and people in-house.
CAVANAUGH: Jake, thank you so much for speaking with us today.
KLOBERDANZ: You bet.
CAVANAUGH: I've been speaking with Jake Kloberdanz. He's CEO of OneHope Wine. I'm wondering, Priya, I'm just mulling this over in my head while we're talking about it, I wonder if people automatically assume that your products are going to cost more?
HAJI: I think that's always a challenge for what I would consider ethical or responsible brands. I think the interesting thing that's here is, first of all, I think customers in this current day and age, and especially in this economic environment, are really cautious about what they're spending, and they're being thoughtful about what they spend. So as a result, I think, they're actually expecting all of the great things from a product plus when a product does something good or benefits a community or is organic or fair trade, those attributes are considered as additional sort of intangibles that come with their product but they do still want that product to deliver at a competitive price. And so this is shown to be a consistent challenge, I think, for brands that are doing this kind of work and I think what the gentleman from OneHope Wine said just indicates that as well. So I think what World of Good has really had to help the artisans and the communities do is that you have to generate a product that is some way – demonstrates it's quality product, and the kinds of content that's in the product. I think Newman's Own has shown that. So, in fact, what you find is these are typically higher grade, higher quality products and it's the quality that justifies any pricing position, and the product itself has to meet up to anything that's of equivalent quality. And so I think that's really what we've all learned how to do. You will have a very difficult time delivering a ninety-nine cent, extremely cheap little thing that also has a social benefit. On the other hand, if it's going to be a ten, twenty, thirty or forty dollar item, it has to compete with any other ten or twenty or thirty dollar item. And I think that's really what we've all learned how to do in this.
CAVANAUGH: Patricia, we heard from Product Red and Priya's World of Good and from OneHope Wine, different kinds of social branding, all of them. But – So I guess my question is in your forum and your summit tomorrow, are you going to go through the different ways that people can engage and do this kind of thing in their own business model?
MARQUEZ: Yes. Again, through the sharing best practices that we will see in these different companies, that's one of the ways we're going to do that. But we also have an introductory section that's going to post some of the key questions that are still lingering in the air, either if you are a believer or your are a skeptic. And these are questions that will be discussed throughout the summit and I think they're really important questions such as, I mean, is this really a way to heighten your competitiveness? Is this a way to really make you distinct? Is this – How effective is social branding in really engaging people who weren't engaged before? How effective is it? Is it really effective in creating not just the awareness but the willingness to act and to consume in a different way? So we are going to do the two things tomorrow. Obviously, it's only one morning so some people might feel like, well, we would like more. And that's part of what we're trying to do at the University of San Diego, we're trying to create spaces to have an ongoing dialogue because there's so many questions. But at the end is what Priya was saying, the idea of a new business ethos, a new business imagination, particularly with young generations that are growing up or becoming adult in this time of crisis. How can they think about business in a different way, in a way that does what it did in the past, create economic wealth, but at the same time creates social value and environmental – a positive environmental impact in a world that is already stressed enough.
CAVANAUGH: I'm wondering, besides going to the summit tomorrow, are there any – one or two tips in the short time we have left that you might give someone who's perhaps thinking about involving, getting some social responsibility in their businesses right now?
MARQUEZ: Well, one possibility, again, is there is so much information out there. I mean, and technology allows us to connect with each other. Another one is that many universities, University of San Diego and many others even in the region in San Diego, are very engaged in creating these spaces so I would encourage them to be close to these areas of new thinking.
CAVANAUGH: I want to thank my guests. We've run out of time. Patricia Marquez is director of the Responsible Enterprise Initiative at the University of San Diego, and she's one of the organizers of the USD summit tomorrow. Priya Haji is founder and CEO of World of Good. And we also spoke with Colin Brady, and Jake Kloberdanz. And I want to let everybody know about this summit tomorrow, the second annual Summit on Peace and Prosperity through Trade and Commerce will take place at USD tomorrow, it's free. This year's theme is "Increasing Market Share through Social Branding." And for more information, you can go to our website, the These Days page on KPBS.org, and you can post your comments about this segment at KPBS.org/TheseDays. Thanks so much for being here.
MARQUEZ: Thank you.
CAVANAUGH: And stay tuned for the second hour of These Days coming up in just a few minutes here on KPBS.