The scandal that erupted recently around Volkswagen’s “diesel” pollution scam is going to reverberate across the corporate world − and so it should. All around the world surveys have shown that a majority of consumers care about whether the companies they buy from are “green” and “good.” Yet those same surveys show that consumers are confused as to whether the companies they buy from really are good and skeptical of company claims in this regard. Studies from places such as the Reputation Institute suggest consumers believe only about 16 percent of what they hear already. Companies getting put over the coals for false claims is becoming ever more commonplace.
The lessons of VW’s misstep are several. First, there is a price to pay for betraying the trust of consumers and the price is higher than it has ever been. Not only is VW’s stock declining but it is now talking about having to reduce investment in key parts of the business from the fallout. There are already 227 lawsuits against the company, and likely more to come.
The promise of being “green” and the subsequent breaking of that promise will exact a tremendous toll on the company. The company will hardly be a magnet for top talent and conscientious consumers will shun it for years. Besides, as one friend said to me, “If they are lying about this, what else might they be lying about? Maybe safety!”
Consumers have always cared about companies being good but the price for not being good used to be very low. When the Exxon Valdez spilled oil all over the Alaskan coast it was a PR nightmare for the company, but the stock price barely declined. Thirty years later when BP spilled oil across the Gulf, its stock price was cut in half, as was that of Halliburton. To this day, consumers likely think of only one thing when they see the BP sign.
Dr. John Izzo
will discuss
Faith-Based Communities
as Drivers of
Sustainability in Business
at
SB '15 London
But it’s not just VW that will pay a price this time. This scandal is likely to fuel consumer belief that companies are more interested in greenwashing and doing the occasional good deed or project than changing their core values. Every company that calls itself good or makes “green” claims will now have a harder time convincing an already skeptical consumer base that the claims are more than marketing ploy.
This is a wake-up call for any company making good or green claims that are not in fact true or represent partial truth. It also means that trust in corporate communication is likely to go lower than it already is making the job of corporate communicators even tougher.
A colleague and I have recently been involved in a project to interview CEOs of large publically traded companies who we feel really “get it” in terms of a deep commitment to CSR. Our goal is to understand the anatomy of true CEO commitment to sustainable brands and to find out how to generate more such commitments. The process of trying to both identify these CEOs and get them to agree to be interviewed has been most revealing. What we have discovered thus far is a real reluctance on their part to put themselves out there on these issues in such a personal way. It may be, in part, because once you do so any misstep or gap between the “talk” and the “walk” could be very harmful. One Chief Sustainability Officer at a Fortune 50 company even told me that they are prohibited from doing interviews for media about their sustainability efforts even though I know he “gets it” and he says his CEO definitely “gets it.”
Every time a BP touts itself as “beyond petroleum” or a VW/Audi that tricked us into thinking that it isn’t “easy going green” betrays our trust and we discover that under the surface the apple isn’t so shiny, it is going to make it much harder for companies to communicate their story – it will make other CEOs and companies more nervous about making claims and make consumers all the more skeptical of what we try to tell them in the CSR space.
There is an upside to this scandal, however: It may help separate the wheat from the chaff. Those companies who are walking their talk will persevere and work even harder to prove their claims. Those who are tempted to greenwash may think more than twice about making false or misleading claims. Consumers will be even more likely to look to third parties to confirm green and good claims. The heavy price VW is paying may also bring some housecleaning within companies, as CEOs and even internal whistleblowers seek to make sure claims are real.
On the other hand, even more CEOs and companies may become reticent to position themselves as responsible brands and to take a leadership role. Even those companies that are making real progress may have a harder time wooing customers to choose them based on their sustainability efforts. The whole CSR movement will begin to look like a Hollywood façade, and not a very convincing one at that.
This is growing-up time for the CSR movement. Until now we have been able to skate along with nice platitudes and high claims. But the BP and VW scandals have brought reality right into the face of the movement. Be real, go deep or don’t even try to play this game. Time will tell if consumers really punish VW for their sins. For the sake of the movement to create more responsible brands, let’s hope they do.