Corporate Responsibility and Competitive Brand Positioning for Shareholder Value

By Elliot Weiss

Sustainable development initiatives for your corporate brand have direct implications on your firm’s competitive brand positioning. Sustainability brands are known for their products and services, branded to signify a special added value in terms of environmental and social benefits to the customer and their context thus enabling a strong significance of values. During the first quarter of 2018, a wave of public reports and new articles have identified large corporate initiatives focused on achieving “sustainable” environmental brand development and/or social “impact” initiatives.  

On March 22, 2018, in an article entitled AB InBev Taps into Demand for Sustainability, the Financial Times reported that “Anheuser-Busch InBev, the world’s biggest brewer, has set out a series of sustainability goals that will see all of its beer sold in returnable or recycled packaging and all of its electricity coming from renewable sources by 2025.”^1 “The initiative marks the latest attempt by a global brand owner to stay ahead of consumers’ demands for big businesses to make a positive contribution to society, at a time when brands such as Budweiser have lost market share to smaller rivals branding themselves as natural or artisanal alternatives to bland consumer staples.”^2 When asked for a direct quote, AB InBev took the opportunity to address the critics by stating “sustainability is not necessarily something we have to do, that will have a cost that doesn’t help the business. Sustainability is our business. If there’s no water, there’s no beer; it’s that simple.”^3 “Our consumers and our people also want to know where we stand on those issues.”^4 

We believe that the foregoing statements from AB InBev seek to undercut any claims that insinuate that financial resources utilized to address and benefit environmental/ social sustainability initiatives are not accretive to the financial operating results, will result in corporate waste, or constitute a dereliction of duty owed to corporate shareholders. Instead, it appears that AB InBev not only sees environmental sustainability as a way to connect with consumers but also as a corporate capital expenditure or operating expenses that are fundamental to the operating business. We believe that this continuing trend of corporate responsibility is here to stay and that corporate operators should take notice. After all, historically AB InBev has been known for its aggressive management style in costs cutting and expense management. Having been formed from a series of bold acquisitions driven by the Brazilian founding partners of 3G Capital, the private equity group, and famed value investors, AB InBev is a continuing example of how corporate responsibility has a direct correlation to financial performance.

On March 26, 2018, the Financial Times released an article entitled Partners Group launches $1bn Social Impact Fund to Meet Investor Demand. The focus of the article demonstrates that environmental sustainability initiatives as well as the social impact is not just isolated to the consumer goods industry but is also highly relevant within Wall Street circles, the general financial industry and within private venture capital fund formation. The key takeaway from this article is that the continuing and developing interest in corporate responsibility is not only relevant to general consumers but also financial investors, with the inference being made that if the consumers require corporate responsibility in exchange for brand loyalty, then so does Wall Street. 

As directly quoted from the article “growing demand from institutional investors for funds tackling environmental and social challenges is leading to new global products offered by leading managers and private equity groups.”^5 Individual sources to the article stated that the “Partners Group, the second largest private equity group by market capitalization, has become the latest buyout group to launch such a fund, creating a global $1bn social “impact” fund aimed at investing in line with the UNs sustainable development goals.”^6 “The launch comes as the number of funds focused on socially responsible investments has grown. Latest figures from the Global Sustainable Investment Review show that the global impact fund market totaled $23tn at the start of 2016.”^7

Our team here at Chai Gate supports and agrees that environmental sustainability and social initiatives are a necessity for a firm’s competitive brand positioning. This point is well illustrated in the words of Larry Fink, Chief Executive Officer of BlackRock, Inc., writing in a letter to large companies predominantly in the US, UK, France, and German, “to prosper over time, every company must not only deliver financial performance but also show how it makes a positive contribution to society.”^8 We agree.

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    References:

      AB InBev Taps into Demand for Sustainability, Companies and Markets, Financial Times, March 22, 2018.
      2 AB InBev Taps into Demand for Sustainability, Companies and Markets, Financial Times, March 22, 2018.
      3 AB InBev Taps into Demand for Sustainability, Companies and Markets, Financial Times, March 22, 2018.
      4 AB InBev Taps into Demand for Sustainability, Companies and Markets, Financial Times, March 22, 2018.
      5 Partners Group launches $1bn Social Impact Fund to Meet Investor Demand, Companies and Markets, Financial Times, March 26, 2018.
      6 Partners Group launches $1bn Social Impact Fund to Meet Investor Demand, Companies and Markets, Financial Times, March 26, 2018.
      7 Partners Group launches $1bn Social Impact Fund to Meet Investor Demand, Companies and Markets, Financial Times, March 26, 2018.
      8 Partners Group launches $1bn Social Impact Fund to Meet Investor Demand, Companies and Markets, Financial Times, March 26, 2018.


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