Ketchum_Return On Purpose_Report_FINAL

A Ketchum Global Business Study
with Carol Cone ON PURPOSE

A Future
Driven by
Purpose

Companies that have a defined purpose – standing for and taking
action around something bigger than their products and services – are
growing, prospering, attracting the best talent, and staying competitive
in a challenging economy. Their purpose initiatives are the inspiration
for their employees to rally, the reason their customers want to engage
in business and their lens for making strategic decisions.

Companies, organizations and experts refer to the concept of purpose
with a number of different terms – sustainability, CSR, shared value,
community relations, social impact, stewardship and purpose.
Throughout this document, we will use the terms ‘sustainability
and social impact’ and ‘purpose’ interchangeably, but they all refer to
how companies engage with society for business and social impact.

We know consumers and employees are continually making demands
on businesses to play a stronger role in being good stewards of our
planet and people. However, Ketchum, in partnership with Carol Cone
ON PURPOSE, wanted to understand more deeply why retailers and
manufacturers invest in sustainability and social initiatives and to
foster a more robust conversation across the entire supply chain.

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

The Manufacturer / The Ketchum Global Business
Retailer Dynamic Return on Purpose Study in
partnership with Carol Cone ON
The Ketchum Global Business “Return on Purpose” Study takes an PURPOSE surveyed senior leaders
innovative look at the dynamic between retailers and manufacturers as it within retail and manufacturing
relates to their purpose-driven initiatives in the environment and society. It durable consumer goods
is one of the first studies to explore the perceptions of purpose by retailers organizations in the US, UK,
and manufacturers in the context of their supply chain relationship. It Germany, mainland China and
also highlights the complex relationship and engagement in investment Korea in April 2016 to better
decisions around social and environmental issues and offers an initial understand how they make
understanding of where they align and differ on drivers and barriers, decisions and measure the
stakeholders and desired outcomes of purpose. success of these programs.
The study looks at the interdependence of retailers and manufacturers in
their purpose commitments and the reputation and business value that
these initiatives deliver to them. It reveals that retailers and manufacturers
are conflicted about how much influence end consumers should have –
recognizing their importance but not always making them a priority – and
that employee opinions for both segments are vastly undervalued.
Ultimately, we believe that by examining the outcomes of this study,
companies on both sides of the supply chain will realize better returns on
their purpose investments and initiatives.

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Committed
to Purpose

Not surprisingly, the study shows that retail and manufacturing executives across the globe are committed
more than ever to investing in sustainability and social initiatives. What is surprising, however, is that while
they are influenced by consumer and employee expectations, the reasons for continued investment are
focused more strongly on a complex set of business drivers guiding their purpose initiatives for themselves
and their relationships with each other.

There is near-universal recognition in the manufacturing and retail sectors that sustainability and social
initiatives have taken on critical importance in the areas of operations, sales and reputation. Nearly
all of the respondents in both sectors consider it to be very or somewhat important – 94 percent of retailers
and 98 percent of manufacturers. And 93 percent of both groups expect purpose-driven initiatives to
increase in importance over the next two years.

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Both sectors strongly agree that purpose is critical for any business “Corporate reputation
looking to thrive beyond the next 100 years. Manufacturers and retailers is a key point but
agree on this point almost equally – 64 percent for retailers and 69 percent
for manufacturers. This belief is generally held most strongly in the United it’s an outcome, not
States, with 68 percent of retailers and 73 percent of manufacturers a driver. At Procter
weighing in. & Gamble we drive
Confirming common beliefs about differences between Europe and the US, sustainable solutions
the study shows that the United Kingdom (UK) and Europe hold purpose because it’s smart
in higher esteem than the United States (US). Eighty percent of UK and 70 business. It is true for
percent of European retailers consider it to be very important – versus only our manufacturing
64 percent of US retailers. In manufacturing, the pattern is consistent, with
76 percent of UK and 74 percent of European sector execs ranking it as operations
very important – against only 53 percent of the US manufacturing leaders. (energy and water
This geographic commitment is consistent with the popular notion that conservation is good
Europe’s engagement in sustainability has been embedded for a longer for the planet and
time and thus is more ingrained in the fabric of business than in the US. good for our bottom
This pattern tends to be more strongly realized by manufacturers line) but we have
on a region by-region basis than for retailers. In the US, retailers and also many commercial
manufacturers say that they have had initiatives in place for a relatively examples where
equal length of time, while in Germany, retailers believe they have been
undertaking sustainability and social impact programming longer than their there is a clear
manufacturing colleagues. intersection between
the business and the
MEDIAN DURATION OF SUSTAINABILITY AND SOCIAL INITIATIVES (YEARS) sustainability needs.”

UK 3 VIRGINIE HELIAS
5 GLOBAL SUSTAINABILITY

EUROPE 3.5 BRAND DIRECTOR
4 PROCTER & GAMBLE

US 5
5

GERMANY 4
3

ASIA 3.5
5

RETAILERS
MANUFACTURERS

“It is very importantthat everybody across
all functions understands the core values
and philosophy of our brand and its direct
connection to CSR and responsible behavior.”

HEAD OF CSR AND SUSTAINABILITY
GERMAN MULTINATIONAL

ELECTRONICS MANUFACTURER

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

RETAILER DURATION OF PURPOSE INITIATIVES 38% THIRTY-EIGHT PERCENT OF EUROPEAN AND 48
PERCENT OF UK RETAILERS REPORTED PROGRAMS
10% 48% OF LESS THAN A YEAR IN EXISTENCE VERSUS ONLY 10
< 1 YEAR PERCENT OF US RETAILERS REPORTING THIS LEVEL
OF NEW PROGRAMMING. INSTEAD, US RETAILERS
28% REPORTED PERIODS OF 1 TO 4 YEARS DURATION (36
PERCENT) AND 5 TO 9 YEARS DURATION (30 PERCENT).
42%

1-4 YEAR 36%
5-9 YEAR 30%
28%

32%
29%

30% US

16% EUROPE
12%
UK
20%
21% GERMANY

ASIA

This pattern is even more pronounced with manufacturers.

MANUFACTURER DURATION OF PURPOSE INITIATIVES

2% 28% FORTY PERCENT OF UK AND 28 PERCENT OF
EUROPEAN EXECS REPORT PROGRAMS LESS
< 1 YEAR 16% 40% THAN A YEAR OLD VERSUS ONLY 2 PERCENT
7% OF US MANUFACTURERS REPORTING PROGRAMS
THAT NEW. INSTEAD, INITIATIVES RANGING FROM
29% 42% 1 TO 4 YEARS OR FROM 5 TO 9 YEARS IN LENGTH
24% WERE REPORTED BY 29 PERCENT AND 24 PERCENT
OF US MANUFACTURERS, RESPECTIVELY.

1-4 YEAR

60%

41%

5-9 YEAR 24% US
22% EUROPE

28% UK
GERMANY
16%
11% ASIA

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

“Funding can It is feasible that European executives don’t even recognize some or many
sometimes be a of their initiatives as purpose-based programs because they have been
challenge, especially in place for so long and are fully woven into the fabric of their culture, as
when the payback alluded to on page 5.
is longer than Their US-based counterparts may be more conscious of these efforts
our traditional being purpose-based – perhaps because of either their relative newness or
investments. This because of nomenclature used by their colleagues.
is where creative It is clear too that the financial, legal and regulatory structure and
partnerships can constraints of companies in Europe, Asia and the US differ, thus creating
help to de-risk the unique sets of challenges and opportunities for companies to fund and
investments and be support sustainability and social initiatives. For example, in the US,
a win-win for all corporate-sponsored foundations must exist as separate entities from
stakeholders.” a company, making it more challenging for the foundation to fund
purpose initiatives.
VIRGINIE HELIAS In the UK, a charity or NGO is funded through multiple mechanisms –
GLOBAL SUSTAINABILITY government, lottery, EU, donations and corporate partnerships. Being
a separate entity means that they don’t have to pay VAT and get some
BRAND DIRECTOR reductions/exemptions on certain expenses and can also benefit from
PROCTER & GAMBLE gift aid, which means donors don’t pay tax on donations. UK-domiciled
companies make donations freely and there is no limit/restriction on the
marketing of said donations.
In China, there are multiple mechanisms of funding of (Chinese-managed)
charities and NGOs, including government, lotteries, private and corporate
donations. However, a distinct difference is that major charities and
foundations in China are state-controlled or affiliated. Therefore, many
Chinese-owned corporations and multinationals alike prefer to create
foundations or work with existing foundations under the large umbrella of
state-run charities. This way, they can operate the fund freely and benefit
from the state’s favorable policies.

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Another measure where the US is outpaced by the UK and Europeans in
both channel sectors is in the expectation of the growth in importance of
purpose initiatives over the next two years. For instance, less than half as
many manufacturers in the US than the UK believe it will be much more
important (29 percent to 64 percent).

THE IMPORTANCE OF SUSTAINABILITY AND SOCIAL IMPACT WILL
BECOME “MUCH MORE IMPORTANT” OVER THE NEXT TWO YEARS

UK EUROPE GERMANY
52% vs. 48%
72% vs. 64% 62% vs. 56%

US ASIA RETAILERS
MANUFACTURERS
40% vs. 29% 29% vs. 52%

Finally, both sectors see expansion of purpose in environmental and
social initiatives. The manufacturing sector across all geographies for
the most part expects a broader approach to both environmental and
social programs – more so than growth in greater depth of existing
programs or in geographic expansion. US manufacturers and UK
retailers are the two groups that most expect increases in funding
for sustainability and social impact work.

ANTICIPATED EXPANSION OF SUSTAINABILITY AND SOCIAL INITIATIVE
SCOPE OVER NEXT TWO YEARS

BREADTH OF 53%
ENVIRONMENTAL
ISSUES 66%

DEPTH OF 51%
CURRENT IMPACT 52%

BREADTH OF 44%
SOCIAL ISSUES
59%

LEVEL OF 40%
FUNDING
52%

GEOGRAPHIC 39%
SCOPE 45%

OTHER 2% RETAILERS
4% MANUFACTURERS

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Driven by Reputation
and Business Return

When it comes to purpose, retailers and manufacturers across all regions consistently and fairly evenly
acknowledge a wide variety of business growth factors ascribed to purpose programming. The top drivers
of why social and environmental efforts are integrated into operations, products and services include
reputation enhancement, business results and competitive advantage.

Manufacturers are driven most by the potential to build reputation, while retailers see it mainly as a way

to remain competitive. Retailers also see ROI for reputation gain and improvement of business results.

Manufacturers recognize the opportunity to improve business results as well, but also see purpose as core

to who they are – an alignment with their business purpose. This alignment was cited in the 2014 McKinsey

Sustainability study, which identified a progressive year-over-year increase on businesses aligning their work

with their sustainability and social programming – with it becoming

“a more strategic and integral part of their business.”* THE RETAIL ENVIRONMENT IN THE US IS INCREASINGLY
FOCUSED ON ‘LOCAL.’ THIS IS DRIVEN BY A NUMBER
In that study, 43 percent – the largest share – said that companies OF FACTORS – INCREASED RESEARCH SHOWING THAT
seek to align sustainability with their overall business goals, LOCALLY OWNED BUSINESSES CREATE COMMUNITIES
mission and values. THAT ARE MORE PROSPEROUS, ENTREPRENEURIAL,
CONNECTED AND GENERALLY BETTER OFF ACROSS
A WIDE RANGE OF METRICS; LOCALLY SOURCED
MATERIALS ARE INCREASINGLY IN DEMAND.

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Our “Return on Purpose” study TOP DRIVERS OF PURPOSE EFFORTS 73%
finds that end consumers/retailer
customers are not the primary TO REMAIN 64%
drivers for sustainability and COMPETITIVE IN
social initiatives – meeting their MARKETPLACE 70%
expectations or demands ranked SEE ROI IN 66%
6th and 7th out of the 8 study BUSINESS
motivators for manufacturers and RESULTS 68%
retailers respectively. Consumer/ SEE ROI IN 75%
customer demand is the least CORPORATE
important reason for investment REPUTATION 67%
by both US groups compared SEE ROI IN 64%
to other geographies – with SOCIETAL
US manufacturers considering RESULTS 65%
customer demand or requirement 67%
only slightly more important than CORE TO WHO
retailers (57 percent versus WE ARE 62%
50 percent).
In what might seem like a PASSION 47%
contradiction, when asked who PROJECT FOR
has “a lot” of impact on their THE LEADER(S) 56%
companies’ purpose strategies, CUSTOMERS* 60%
manufacturers put consumers in REQUIRE/
the middle of their consideration DEMAND IT 40% RETAILERS
set - 5th out of 10, following EMPLOYEES 38% MANUFACTURERS
company leadership, board of REQUIRE/
directors, retail consumers and DEMAND IT
regulators. For retailers, consumers
rank second behind company * IN REFERENCE TO RESPONSES FROM RETAILERS,
leaders for influence on purpose “CUSTOMERS” EQUALS “CONSUMERS.”
programming.

Consumer
and customer
satisfaction
rank high among
retailers and
manufacturers
as a measure

of ROI.

*SEE TOP BARRIERS TO MEASUREMENT LINKED
TO MEASUREMENT, LACK OF COMMUNICATION
CHART, P. 14

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

“We found that our Yet conversely, the study identifies that consumer and customer
sustainable living satisfaction rank high among retailers and manufacturers as a measure of
brands - those with a ROI. Given the traditional factors for consumer and customer satisfaction
sustainable product are price, quality and design, we believe this finding could be an indication
attribute and purpose that purpose is emerging as a key driver of satisfaction.
- grew significantly This is further supported by the claim that when manufacturers and
faster than the rest retailers are developing their purpose strategy, they are doing this based
of our business last on the need to address competitive pressure and/or customer/consumer
year and delivered demand. This is especially true for US manufacturers.
Disturbingly – and against a great deal of other survey data and qualitative
almost half our evidence – a relatively low percentage of manufacturers (38 percent) and
growth. As we truly retailers (40 percent) rated demands and/or expectations from employees
embed sustainability, as a key driver. In fact, it is the lowest reported factor for both groups. This
may be because the study also found that the human resources function is
the business case not well represented in the decision-making process around sustainability
for driving it – more and social initiatives.
growth, lower costs,
less risk, more trust MAJOR IMPACT OF PURPOSE EFFORTS ON DIMENSIONS OF REPUTATION
- has become more
CUSTOMER 56%
sharply defined.” LOYALTY
50%
PAUL MATTHEWS
VP MEDIA RELATIONS VALUE 52%
EXTERNAL AFFAIRS 48%
DIGITAL CHANNELS & REPORTING
LEADERSHIP 52%
UNILEVER 47%

QUALITY 50%
51%

INNOVATION 48%
45%

EMPLOYEE 48%
MORALE
HOW THE COMPANY 38%
IS VIEWED BY PEERS
AND/OR RANKINGS 43%
EASE OF 45%
HIRING
26% RETAILERS
26% MANUFACTURERS

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Measurement
and Communications
Are Top Barriers

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Barriers to implementation vary by respondent group. Manufacturers put a stronger
emphasis on obstacles than retailers and predominantly see measurement to be their top
barrier. Retailers appear to see communications and business ROI as the key reasons that
purpose activities are not taking on greater importance. For manufacturers, low ROI,
lack of sufficient measurement approaches to show impact, and the difficulty of
measuring ROI on business all combine to stand in the way of momentum.

The distance between the manufacturer and the consumer end of the value chain
may contribute to the sense that this group cannot easily quantify the impact purpose
strategies have on their business. Many measures start with the consumer and have
difficulty working their way back to the manufacturer in a meaningful and documentable
way. Many programs are also driven locally and manufacturers may have a more difficult
time capturing the business value of many of these initiatives.

The study shows that manufacturers and retailers are looking for increased and sustained
consumer demand for purpose products and services. We know that many manufacturers
are undertaking these initiatives and bringing the consumer on board by including
them in their marketing efforts. At the same time, manufacturers are trying to leverage
their sustainability and social efforts to generate deeper relationships and engagement.
However, retailers are still focused on providing products that deliver against price,
quality and design, and not purpose. According to the study, they think consumer
demand is low because they (the retailers) are unable to communicate effectively what
they are doing and how it impacts the consumer.*

*IMPORTANT TO HAVE PURPOSE INITIATIVES
IN PLACE (ASIA) CHART, P. 25

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

TOP BARRIERS TO PURPOSE LINKED TO MEASUREMENT,
LACK OF COMMUNICATION

ORGANIZATION DOESN’T 51%
TALK ABOUT IT ENOUGH
TO OUTSIDE WORLD 39%

TOO HARD TO MEASURE 44%
THE ROI TO BUSINESS 48%
LACK OF SUFFICIENT
MEASUREMENT 40%
APPROACHES TO
SHOW IMPACT 50%
PEOPLE DON’T
CARE AS MUCH AS THEY 39%
CLAIM TO
47%
THE ROI IS
TOO LOW 36%

IT DOESN’T STAND 48%
OUT FROM WHAT
OTHERS ARE DOING 32%
IT ONLY DRAINS MONEY, 36%
IT DOESN’T DRIVE
PROFITS 30%
IT’S GREENWASHING, 33%
NOBODY
BELIEVES IT 22% RETAILERS
22% MANUFACTURERS

Retailers emphasize not talking enough about purpose efforts to outside
stakeholders as well as communications that don’t come across as genuine
and authentic as being top barriers.
This group also considers business ROI too hard to measure and
measurement techniques insufficient, but to a lesser extent than
manufacturers.
With that said, there are notable examples of retailers not only doing a
great job at communicating their purpose activities but also taking a lead
in creating and driving measurement and measurement standards. One
is an American retailing giant that released a platform for sustainability
dialogue inside and outside the company. Its locally-sourced food initiative
impacts local economies and delivers environmental benefits. This platform
has driven real change and had a major impact on sustainability measures
across its entire supply channel.
Another is a major UK multinational retailer whose sustainability
model changed the way retailers reported their success and goals, and
communicated with other businesses and consumers on purpose initiatives.
The company is transparent about sourcing (via an interactive supply chain
map), the energy efficiency of its stores and the community work it does. Its
sustainability model is a huge hit with the City of London as well. It is clear
that the retailer put society and the environment at the heart of its plan.

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

A final example is a leading global tea marketer that in 2010 co-funded
the development of a community center on a tea estate in China’s Yunnan
Province, where a substantial portion of the company’s tea is grown. The
community center provides health, nutrition and farming education to the
communities that grow and pick the tea. The company had found that with
the huge influx of young workers migrating to China’s cities, the resulting
labor shortage caused older farmers to overuse fertilizers and pesticides,
creating environmental problems, soil degradation and reductions in
product quality. The tea marketer responded to a need to alleviate poverty
while at the same time improving working conditions, environmental
outcomes and general quality of life throughout the supply chain.
On another positive note, both greenwashing and purpose as a
cost-driving expense received the lowest scores as barriers.
Both give us some indication that purpose efforts are making very real
headway as a bona fide business strategy that aligns with both missions and
business goals.
Finally, one of the key opportunities to improve communications for all
organizations is to better share their annual summary of the progress of
purpose – whether it is embedded in the annual report or a separate CSR
or sustainability report. While this practice is gaining in both popularity
and rigor, of those polled, only 49 percent of all manufacturers publish a
comprehensive report, while 38 percent of retailers reported doing so.

49% 38% REPORTING SUSTAINABILITY
AND SOCIAL IMPACT
INITIATIVES

RETAILERS
MANUFACTURERS

PUBLISH A COMPREHENSIVE 47% 44%
CSR/PURPOSE REPORT

20% 35%

DO NOT REPORT FOLLOW GRI GUIDELINES

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

The European Landscape

While 2015 may have been a landmark year for sustainability and social impact following
the launch of the Sustainable Development Goals and COP21, 2016 also brings
significant change. For instance, by the end of 2016, the EU Directive on the Disclosure
of Non-Financial and Diversity Information requires disclosure of non-financial data
(e.g., environmental, social, and governance-related information) on a regular basis
by more than 6,000 large companies in EU member states. In reality that means
companies with an average number of employees greater than 500, a balance sheet
total of 20 million euros or a net total of 40 million euros, and that are listed on an EU-
regulated exchange market, will need to begin reporting on activity beginning January
1st, 2017. So we will have our first reports under the new legislation published in 2018.
While it had been argued that additional reporting of this nature, covering everything
from environmental matters to human rights, anti-corruption and bribery to diversity of
the board of directors and employee welfare, would be too much of an administrative
and financial burden, most companies of the size the directive covers report in some
way or another already.
This EU legislation comes at a time when many influencers in the sustainability and
social impact field are demanding greater transparency. For manufacturers, customers
are demanding full transparency of the supply chain, often setting high expectations
and expecting third-party certification of quality. Many manufacturers currently use
recognized reporting guidelines, such as the UN Global Compact, GRI or the OECD
guidelines for multinational enterprises, all of which would be sufficient to meet the
EU Directive’s requirements. EU retailers should be as responsive to their suppliers.
Legislation and consumer expectation is changing, transparency is key and those who
don’t embrace it in the purpose arena are likely to be forever playing catch up with
those who build it into their brands’ reputation now.

Increased CSR Reporting in China

In the last decade, there has also been a significant increase of CSR reporting in China,
driven by government regulation and policy. The significance of CSR reporting has
been consistently highlighted in top-level official documents, in speeches by senior
government officials and most recently, prominently featured at the 13th Five-Year Plan
in March 2016, explicitly citing that CSR reporting in China will focus on innovation,
transparency, globalization and environmental protection in the near future.
The question is moving from “Should we show our commitment?” to “How well are we
showing that our commitment aligns with government priorities and social needs?” This
conversation is growing, but there is still room for improvement. While more companies
are publishing China-focused corporate citizenship reports, less than 8 percent are
translated into Chinese. For Chinese companies in general, CSR programs still tend to
be seen as an add-on, rather than central to value creation. But that is changing quickly.
According to the China WTO Tribune, the number of CSR reports published in China
rose from one to 898 in just 10 years (2001 to 2011).
Both Chinese companies and foreign businesses operating in China are being held to
higher standards. Recent laws, such as the Environmental Protection Law, have brought
corporate responsibility to the regulatory forefront. It is no wonder, as air pollution
continues to be a top-of-mind concern for the country. In December 2015 Beijing
issued the first ever red alert for air pollution, which saw the closure of schools and the
temporary suspension of construction work, and brought to the forefront the severe
environmental impact caused by China’s rapid economic development.

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Risk Mitigation
and Measurement

Both retailers and manufacturers agree that purpose initiatives can help
an organization mitigate risk. Eighty-one percent of all manufacturers
agree on this, as do 73 percent of all retailers. Manufacturers in the
US and UK put the highest value with 82 percent and 84 percent

respectively. Seventy-eight percent of Asian manufacturers also agreed.

Interestingly, though, across the board legal and regulatory
leadership are not part of the decision-making process.

PURPOSE INITIATIVES VIEWED
AS WAY TO HELP MITIGATE RISK

82% 84% 78% 80%
78% 72% 71% 68%

US UK ASIA GERMANY

RETAILERS MANUFACTURERS

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Support Thwarted by Funding,
Leadership and Measurability

Not surprisingly, money is an issue. The biggest challenge to getting
purpose programming implemented is a lack of funding – as reported by
73 percent of manufacturers and 64 percent of retailers. Manufacturers
assigned more blame to funding than retailers across all geographies.
A recent study of nearly 500 respondents by the Ethical Corporation
(Sustainability in North America – Top Trends 2016) found that only 9
percent of the subjects in its survey had social and sustainability budgets of
$1MM or more while 27 percent had budgets of less than $10K.

Once we get past funding, lack of clear measurement, as noted in
the section beginning on page 14, gets identified next, followed by senior
leadership support – both identified earlier as critical to getting purpose
projects off the ground and implemented. Both manufacturers and retailers
cite a lack of meaningful measurement and senior leadership support
as the notable obstacles to implementation and expansion of purpose-
driven initiatives.

FUNDING IS BIGGEST CHALLENGE TO IMPLEMENTATION
OF PURPOSE EFFORTS

LEVEL OF 64%
INVESTMENT
73%

CLEAR 60%
MEASUREMENT
OF IMPACT 69%
LACK OF
UNDERSTANDING 58%
OF ROLE/ 54%
IMPORTANCE
SENIOR 53%
LEADERSHIP 60%
SUPPORT

TIME TO 53%
MARKET 55%

RETAILERS MANUFACTURERS

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Measurement, Intent
and Expectation

C-Suite Leadership Ranked
Highest as Strategy Influencers

Corporate leaders are considered the most influential within an organization for driving sustainability and
social strategies by both manufacturers and retailers. Operations leaders and marketing/external relations
teams come in behind the C-suite for both groups as well. Manufacturers also give credit to legal and
regulators for instigating purpose programming. Once again HR is not given credit for driving purpose –
recognized by only 55 percent of manufacturers and 56 percent of retailers – the lowest ranked group under
consideration. Confirming this point of view, only 32 percent of retailers and 30 percent of manufacturers
credited employees for having a lot of impact on a company’s purpose strategy. Company leadership is ranked
first by 52 percent of retailers and 59 percent of manufacturers.

GROUPS RESPONSIBLE FOR DRIVING STRATEGIES 73%
80%
C-LEVEL/
LEADERSHIP 72%
75%
OPERATIONS 57%
MARKETING/ 51% 70%
EXTERNAL 73%
RELATIONS 56%
SALES/ACCOUNT 72%
MANAGEMENT 56%
LEGAL/ 55%
REGULATORY
HR/EMPLOYEES

RETAILERS MANUFACTURERS

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Operational Efficiency * IN REFERENCE TO RESPONSES FROM RETAILERS,
and Customer Satisfaction “CUSTOMERS” EQUALS “CONSUMERS.”
Are Top ROI Measures

We know that retailers and manufacturers across all regions struggle
with a return on investment for their purpose programs, with measurement
being a major impediment. Globally, retailers still hold consumer
satisfaction as the top metric (60 percent), which may be due to a lack
of additional metrics that can further illustrate results and impact tied to
social purpose. Manufacturers rank operational efficiencies and customer
satisfaction equally as the top metric (66 percent across all regions).
In the US, however, operational efficiencies is ranked highest for both
retailers (62 percent) and manufacturers (80 percent).
It is feasible that both groups struggle with measuring purpose in bottom-
line financial terms. The combination of not having a clear understanding of
the role/importance of sustainability and social impact efforts (58 percent
manufacturers and 54 percent retailers) with the distance between B2B
players and consumers likely adds to the frustration of internal champions.
Managing communications of the value and/or benefits through second or
third parties or taking on direct-to-consumer communications is a challenge
more manufacturers are considering. However, organizations increasingly
recognize the value it brings to consumer and customer perceptions and
their own reputation.
Notable outliers on this question were US manufacturers and UK retailers
– they ranked operational efficiencies and employee morale as the most
important metric respectively to measure ROI for purpose initiatives.

CONSUMER SATISFACTION IS TOP WAY TO MEASURE ROI OF PURPOSE
INITIATIVES FOR RETAILERS; FOR MANUFACTURERS, CUSTOMER AND
OPERATIONAL EFFICIENCIES TOP CORPORATE REPUTATION

CUSTOMER* 60%
SATISFACTION 66%

OPERATIONAL 52%
EFFICIENCIES
66%

PERCEPTION/ 52%
REPUTATION 58%

EMPLOYEE 44%
MORALE 47%

SALES 44%
40%

COST 39%
REDUCTION
49%

TALENT 23%
RECRUITMENT
31%

DON’T MEASURE 2%
THE ROI 2%

OTHER 1% RETAILERS
5% MANUFACTURERS

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Retailers and Manufacturers “As a manufacturer,
Want a Symbiotic Relationship when it comes to

Both groups are aligned on what measures are important to get and share sustainability, we’re
from each other’s perspectives. Retailers want data from their suppliers in the middle and need
(manufacturers) that demonstrates customer satisfaction across all regions.
US and Germany rated this value higher than other regions, with 64 percent to strike a balance;
rating it very important. Asia had far fewer “very important” ratings – sometimes we need to
only 54 percent. And UK retailers put perception/reputation higher than address the business
customer satisfaction – with 76 percent very important vs 60 percent need to innovate and
rating customer satisfaction very important. find new sustainable

VERY IMPORTANT FOR SUPPLIER REPORTING-RETAILERS solutions, which is
presented by clients
SALES 52% US seeking new products
48% EUROPE or ways of working.
48% Other times we need
48% UK to help push clients
46% GERMANY in the right direction
by offering the right
50% ASIA products and services.

PERCEPTION/ 58% 76% In this space we
REPUTATION see some clients as
40% mature, who break
42% boundaries, and then
we have the rising
CUSTOMER 64% stars, with whom we
SATISFACTION 62% work to help them
60% achieve new heights.”

64% FATIMA ZOUNDRI
54% PROGRAM MANAGER
QUALITY FOR LIFE™
While manufacturers also consider it very important to deliver customer
satisfaction data on purpose initiatives to the retail channel, they feel it DSM
is equally important to deliver reputation/perception data. These two
measures are equal when all regions are combined – with the UK and Asia
placing customer satisfaction measures in the forefront and the US, Europe
and Germany putting a greater emphasis on perception/reputation.

VERY IMPORTANT WHEN REPORTING TO 50% US
B2B CUSTOMERS-MANUFACTURERS EUROPE
40%
29% UK
SALES GERMANY

PERCEPTION/ ASIA
REPUTATION
60%
CUSTOMER
SATISFACTION 48%

57%
56%

40% 72%
44%

44% 53%
54%

64%
63%

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

WHAT MATTERS TO RETAILERS
IN SUPPLIER REPORTING

RETAILERS PRIORITIZE CONSUMER SATISFACTION

DATA FROM MANUFACTURERS REPORTING ABOUT

THEIR PURPOSE EFFORTS, FOLLOWED BY IMPACT

ON SALES AND REPUTATION

30% WRITTEN AND/OR CUSTOMER 55%
35% VISUAL STORY TELLING SATISFACTION 54%
42% EMPLOYEE PERCEPTION/ 41%
44% ENGAGEMENT 38%
49% EMPLOYEE REPUTATION 32%
52% MORALE 30%
61% IMPACT ON ISSUE SALES 26%
AND OUTCOMES
IMPACT ON ISSUE
SALES AND OUTCOMES
EMPLOYEE
PERCEPTION/ ENGAGEMENT
REPUTATION EMPLOYEE
CUSTOMER MORALE
SATISFACTION
WRITTEN AND/OR
VISUAL STORY TELLING

WHAT MATTERS TO
MANUFACTURERS IN
SUPPLIER REPORTING

MANUFACTURERS PRIORITIZE CUSTOMER

SATISFACTION, CLOSELY FOLLOWED BY

IMPACT ON REPUTATION

*IN REFERENCE TO RESPONSES FROM RETAILERS,
“CUSTOMERS” EQUALS “CONSUMERS.”

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Manufacturers’ Purpose
Initiatives Meet Customer,
Leader and Shareholder
Expectations

Even though manufacturers are not working directly with consumers, their
customers are. And that relationship is still important. The manufacturers’
purpose initiatives help not only create a better reputation and relationship
with the retail channel, but they also help build and maintain the
manufacturers’ brand reputation, which will enhance value and stimulate
sales. Manufacturers deliver on sustainability and social requirements in
a large part to meet the demand from both customers and the consumer.
They also recognize their leadership’s mandate and, in the case of the US,
acknowledge demand from investors and shareholders.

WHY MANUFACTURERS MAINTAIN GUIDELINES/ REQUIREMENTS
FOR DOING BUSINESS WITH PARTNERS

41%

DEMAND 28%
FROM THEIR 32%
CUSTOMERS/
CONSUMERS 24%

56%

MANDATE 20% 59%
FROM THEIR 12% 52%
LEADERSHIP
28%

61%

DEMAND 28%
FROM THEIR
INVESTORS/ 36%
SHAREHOLDERS
20%

44%

CRITICAL TO 46% 57%
DELIVERING ON 56%
THEIR VISION/
MISSION 36%

44%

67%

PRESSURE 42%
OR SCRUTINY
FROM ACTIVISTS/ 28%
ADVOCACY
GROUPS 56%

67%

US EUROPE UK GERMANY ASIA

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

HOW MANUFACTURERS USE INITIATIVES IN DISCUSSION
WITH PROSPECTS

SHOWCASE 68%
COMMITMENT TO 66%
CORPORATE SOCIAL
RESPONSIBILTY/
CITIZENSHIP
DEMONSTRATE
COMPLIANCE ON KEY
ENVIRONMENTAL AND
SOCIAL ISSUES

ADD DIMENSION/ 61%
DEPTH TO
CORPORATE
REPUTATION

DIFFERENTIATE 57%
FROM COMPETITORS

PROVIDE 49%
ADDITIONAL
EXAMPLES OF
INNOVATION

Manufacturers also use purpose when building business with new prospects
in the B2B channel. They use these initiatives to showcase commitment to
corporate responsibility/citizenship (68 percent), demonstrate compliance
on key environmental and social issues (66 percent), add dimension/depth
to corporate reputation (61 percent), and to differentiate from competitors
(57 percent).
In the US, manufacturers are much more likely to share their commitment
to purpose during business development pitches.

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Sky-High Channel
Expectations

Retailers have high expectations of manufacturers… while
manufacturers have high expectations right back. Both

consider purpose initiatives pretty close to mandatory. Sixty-
one percent of all retailers polled considered sustainability and
social initiatives mandatory for manufacturers to have (a score
of 4 or 5 out of 5, where 5 is labeled mandatory). On the same

scale, 58 percent of all manufacturers consider it mandatory
for their customers – the retailers – to have purpose initiatives

in place. Most regions are fairly well aligned on these
expectations.

However, Asia has even higher expectations for their B2B
counterparts – with 75 percent of Asian retailers rating the
expectation 4 or 5 out of 5 and a whopping 85 percent of Asian
manufacturers holding retailers to that level of compliance.

Germany is the least stringent – with only 40 percent of
retailers and 44 percent of manufacturers calling purpose

initiatives mandatory.

IMPORTANT TO HAVE PURPOSE INITIATIVES IN PLACE (ASIA)

85% 75%

B2B CUSTOMERS FOR SUPPLIERS FOR
MANUFACTURERS RETAILERS

Environmentally sound operations – measures like carbon
emissions and water usage – top the list of areas of focus that
are included in retailers’ purpose requirements. This is especially
true in Asia, with 67 percent reporting inclusion. That measure,
as well as community-focused initiatives such as charitable
donations and volunteerism, are equally and more frequently
included in manufacturers’ requirements.
Social impact initiatives that tie to a company’s focus are also
measured by a large percentage of retailers but not as much
by manufacturers. In the US, environmental measures – those tying
in with a purpose focus and operational measures – are measured
more often than the global average by retailers, and even more so
by manufacturers.

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Key Differences
Between Markets

IMPACT ON SUSTAINABILITY AND SOCIAL IMPACT STRATEGIES 52% BOARD OF DIRECTORS AS STRATEGY
SETTERS-MANUFACTURERS
COMPANY 59%
LEADERSHIP BOARD OF DIRECTORS

CONSUMERS 46% ASIA
70%
37%
EUROPE
CUSTOMERS 44% 44%
41%
US
BOARD OF 43% 39%
DIRECTORS 48%

REGULATORS/ 35%
LEGISLATORS 39%

PARTNERS/ 34%
SUPPLY CHAIN 35%

EMPLOYEES 32%
30%

INVESTORS/ 23%
WALL STREET 23%

ADVOCACY 22%
GROUPS 22%

FRIENDS/ 20% RETAILERS
FAMILY/PEERS 14% MANUFACTURERS

INFLUENCERS ON STRATEGY DIFFER FROM THOSE WHO ACTUALLY DRIVE STRATEGY. PURPOSE EFFORTS ARE
INFLUENCED BY COMPANY LEADERSHIP, FOLLOWED BY CONSUMERS (FOR RETAILERS) AND BOARD OF DIRECTORS
(FOR MANUFACTURERS); THE BOARD OF DIRECTORS IS A LEAD INFLUENCER FOR EUROPEAN AND ASIAN
MANUFACTURERS.

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

STRONGEST AND WEAKEST DRIVERS LEGAL/REGULATORY
OF PURPOSE STRATEGIES INFLUENCE ON

MANUFACTURERS’
PURPOSE STRATEGIES

C-LEVEL SALES / LEGAL / SALES / US
LEADERSHIP ACCOUNT REGULATORY ACCOUNT 90%
MANAGEMENT MANAGEMENT
80% 90% EUROPE
54% 51% 60%

RETAILERS MANUFACTURERS ASIA
59%
US

OPERATIONS LEGAL / C-LEVEL SALES /
68% REGULATORY LEADERSHIP ACCOUNT
MANAGEMENT
66% 74%
46%

RETAILERS MANUFACTURERS

EUROPE

OPERATIONS SALES / C-LEVEL HR /
88% ACCOUNT LEADERSHIP EMPLOYEES
MANAGEMENT
85% 56%
58%

RETAILERS MANUFACTURERS

ASIA

STRATEGY AROUND A
COMPANY’S PURPOSE IS
DRIVEN AT THE EXECUTIVE
LEVEL, FOLLOWED BY
MARKETING/EXTERNAL
RELATIONS AND OPERATIONS;
US AND EUROPEAN
MANUFACTURERS ALSO
CITED LEGAL/REGULATORY
AS TAKING A LEAD ROLE.

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Implications:
How to Increase
Your “Return
on Purpose”

This study serves as a starting point for conversations between retailers and
manufacturers about the role that purpose plays in the supply chain relationship
dynamic. When retailers and manufacturers align expectations and partner to
evolve environmental and social efforts, together they will realize a higher return
on their investments in purpose.

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Purpose Today Is Critical for
Business and Relationships

Purpose initiatives are no longer being driven as nice-to-do responses to
vocal consumer demand. Instead they are based on addressing strategic
business factors like enhancing reputation, delivering results and nurturing
growth. For manufacturers, the top reason for integrating purpose into the
business is ROI on corporate reputation (75 percent). Retailers do it to stay
competitive in the marketplace (73 percent). Consumer demand ranked 7th
out of 8 drivers for retailers and 6th of the 8 for manufacturers. With that
said, the consumer is still at the center of many of these business objectives
– just in a much more strategic way – driving business results.

Cross-functional Support
and Culture Drive Success

Purpose strategies start at the top, but must also engage key players across
the company and be embedded into culture. While C-suite leadership and
investment continue to be critical to success, it’s now equally important
to engage a cross-functional team to achieve the full potential of these
programs. At least 70 percent of global retailers and manufacturers say
C-level executives, marketing, external relations and operations drive
purpose strategies. But fewer than 6 in 10 retailers include HR/employees
and legal/regulatory as drivers of purpose integration – even though these
functions are often at the front lines of building support for implementation
and managing potential risks to reputation.
Employees are under-represented and under-appreciated in this study.
Manufacturers and retailers will be well served to consider ways to increase
the role staff plays in developing purpose strategies and bringing them to
life for their organizations. These players are the front-line ambassadors
and the company’s overwhelming face in the community. There is also much
research that shows that purpose initiatives increase the value employees
place on their workplace, such as the Deloitte Millennial Survey 2016.
And if they are embedded in the development, execution and showcasing
of a purpose agenda, their pride in doing so will drive real value to the
organization.

Communicate
Progress and Results

Your company must prioritize more transparent and consistent
communications to all audiences about the impact of the organization’s
purpose-driven efforts on business and on society. A top barrier to
integration of purpose into a company, particularly for US and European
retailers and manufacturers, is lack of communications to external
audiences. The functions responsible for communications, marketing
and sales should be engaged in the purpose-driven strategies to ensure
that results and progress – both successes and challenges – are shared
with key stakeholders. The end goal is to increase understanding of the
value of social purpose-driven investments on sales and society, and with
understanding increase the valuation of the company and its reputation.

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

Consumers Still Matter

Don’t jump to the conclusion that the end-consumer isn’t critically
important. Despite the surprising findings in this study, the end consumer
still matters and cares – especially as we see the marketplace increasingly
dominated by millennials and Gen Z, both of which put purpose at the
center of purchasing and employment decisions.
Retailers will be looking to manufacturers for ways to increase the
integration of purpose into their offerings, without sacrificing margin
or profit. This means manufacturers will need to find ways to build social
purpose into goods and services, versus adding on a feature that delivers
minimal value for both retailer and consumer.

Measure Purpose Initiatives

Retailers and manufacturers across all regions are frustrated by
measurement. While 64 percent of retailers believe purpose-driven
initiatives are critical to long-term growth, 4 in 10 say it makes sense to
invest only when measureable ROI can be delivered. Your company should
focus the scope of its purpose-driven initiatives on social and business
impacts that are meaningful to the organization and stakeholders, and then
clearly define measurement criteria before starting each engagement. As
partners in the supply chain, retailers and manufacturers need to work
together to define and prioritize shared metrics to increase relevance and
return for both parties. Given that consumer satisfaction is cited as a top
metric, and that both retailers and manufacturers prioritize other drivers
well above consumer demand, there is room to convene a discussion on
shared benchmarks and measurement methods across the supply chain –
including measuring consumer satisfaction.

Partner Across
the Supply Chain

Both retailers and manufacturers recognize that social purpose drives
business growth and societal impact. And both face similar drivers and
barriers to implementation and results. The next step for both parties
is to reach across the supply chain and work together to identify shared
goals, assets and approaches. Dialogue and partnership between retailers
and manufacturers will increase relevance, providing the foundations
to integrate and amplify the power of purpose strategies beyond the
boundaries of each individual organization.

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Methodology

Ketchum Global Research & Analytics worked with Braun Research
to facilitate a telephone survey between April 4, 2016 and April 25,
2016 among senior leaders (C-Suite, EVP, SVP, Partner, VP, Director or
Senior Manager) in retail and manufacturing (durable consumer goods)
organizations. The sample is a 50/50 split between these two segments.
Two complementary parts of this research – a quantitative survey and
qualitative interviews – were conducted with more than 250 senior leaders
at retailers and manufacturers predominantly from the consumer durable
goods sector in the US, Europe (UK, Germany) and Asia (mainland China,
South Korea).
Respondents were selected based on having responsibility for developing,
informing, approving or evaluating sustainability, social impact or CSR
policies with regards to purchase decisions and procurement practices.
Markets included in the study: United States (100 completes), United
Kingdom (50 completes), Germany (50 completes), Mainland China and
Korea (25 completes each).

Research Leads

ABOUT KETCHUM
Ketchum is a leading global communications firm with operations in more
than 70 countries across six continents. The winner of 17 Cannes Lions and
an unprecedented five PRWeek Campaign of the Year Awards, Ketchum
partners with clients to deliver strategic programming, game-changing
creative and measurable results that build brands and reputations.
For more information on Ketchum, a part of the DAS Group of Companies,
visit www.ketchum.com.
However your brand defines its purpose, at Ketchum we believe
companies have an opportunity to showcase progress and successes –
and even address challenges – in a responsible, factual and honest manner.
Ketchum’s Purpose practice provides strategic counsel on defining vision,
gathering and reporting results and making a greater impact.
For more information, visit www.ketchum.com/ketchum-purpose.
ABOUT CAROL CONE ON PURPOSE
Carol Cone ON PURPOSE is a 21st Century consultancy whose mission
is moving purpose to the center of business and brand strategy. At its
core is the Purpose Collaborative, a group of 31 firms representing 300
professionals with deep expertise in organizational and brand purpose,
CSR and sustainability strategy and programming
(www.purposecollaborative.com).
CONTACT
Monica Marshall
Senior Vice President
Director, Ketchum Purpose
+1 646 935 3982
[email protected]
@monicaLmarshall

© COPYRIGHT KETCHUM 2016. ALL RIGHTS RESERVED.

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RETURN ON PURPOSE: A KETCHUM GLOBAL BUSINESS STUDY

CAROL CONE
ON PURPOSE