A California lending company that specializes in financing the purchase of collector cars—a tricky business because many collector cars have more “emotional” value than real value—prominently notes on its website and in all email correspondence the following: “For Every Loan We Make, We Plant a Tree.”
While indeed admirable, will this example of business responsibility carry the day for this lending company, helping it grow and be more profitable?
As much as I would like to say yes, the answer, and one all young entrepreneurs starting new business ventures should know, is no. In fact, placing too much attention and emphasis on sustainability initiatives, at least in the formative years of a business, could result in the company fizzling.
This does not mean these entrepreneurs should show no social responsibility or, worse, not incorporate sustainability initiatives into their business ventures from the start. Nor does it mean consumers will not take notice of their sustainability initiatives and value them. In fact, most studies find this is increasingly important to consumers as well as to future employees and vendors.
It just means these steps alone will not build the brand and the success of the company. This is important to know, especially for younger people, many of whom start their businesses with the idea of making the world a better place as a core business principle. Again, admirable, but it may not ring the cash register.
What comes first is the brand. You create a “brand” by offering and marketing a product or service of value, one that addresses customer needs, at a competitive price. A good example and one that paid off big time for its young founders is Google. The company started in 1998. At the time, Yahoo was the search engine most people turned to. Twenty years later, Yahoo is ranked third and Google is first—and by a wide margin—on the top 10 list of search engines by market share. [source: https://searchenginewatch.com/2016/08/08/what-are-the-top-10-most-popular-search-engines/]
Google became so successful for many reasons, but most agree that it found new and innovative ways to organize information and help visitors find more precisely the information they need, faster and better than any other search engine. In other words, it built its brand on quality.
Innovation is also an important word at Google. The company is continually innovating and has done so more than any of its competitors. Further, we would be remiss if we did not mention that Google uncovered several innovative ways to monetize its services. All of these steps combined, and likely many, many more, helped the company report more than $80 billion in earnings last year.
So Google made it big. And as the brand grew, its focus could and did turn to social responsibility and building a reputation as a socially responsible company. In 2015, Institute Reputation, a research and advisory firm that helps companies measure their reputation performance, ranked Google number one when it comes to reputation, mainly because of the many socially responsible and effective sustainability initiatives it has implemented over the years.
The company could not have achieved this and its other socially and environmentally responsible programs without first building a successful brand. But here’s what happens next.
Once a company does become a success, brand and reputation become very tightly intertwined. If the company’s products or services falter, so will its reputation, no matter what socially responsible programs it is involved with. Similarly, if for example, allegations of sweatshop labor or discriminatory practices are leveled at the company, the quality of service no longer matters. The company’s reputation will slide and with it, the brand.
So what’s the bottom line here?
Building a strong brand has never been more important to a company’s success than it is today. This is due primarily to the Internet. Years ago, a company could get away with business mistakes, a faulty product, or some unhappy customers, with little public attention. Not any longer. In the Internet age, one bad review can appear all across the cybersphere and be very difficult to recover from. Building the brand on high-quality products and services must be a pillar of every business model.
But once the brand is strong, the company has the opportunity to reach out to the hearts and minds of consumers, which will, coincidentally, further advance the brand. And the most effective way to do this is by building a reputation as a socially responsible organization.
Stephen Ashkin is president of Sustainability Dashboard Tools, Inc., and known in the professional cleaning industry as the leader in turning sustainability into cost savings. He can be reached through his website at https://www.green2sustainable.com/