Tim Cook's boldest moves at Apple have come behind the scenes. Can he use the company's sustainability mission to reinvigorate the brand and stop the bleed of under-30 buyers?
If you think Apple is off-base with its new-found enthusiasm for sustainability, clean energy, and environmental stewardship, then I'll sum up CEO Tim Cook's message for you:
Since taking over as CEO in 2011, Cook has drawn criticism for moving too slowly when it comes to Apple's product roadmap. However, Cook has made very aggressive moves behind the scenes in what the business world calls "corporate responsibility."
Leading examples include:
- Instituting a charitable matching program for employees up to $10,000/year
- 75% of all Apple buildings are now powered by renewable energy (up from 35% in 2011)
- Apple's massive data center in Maiden, North Carolina is 100% powered by renewable energy
- The company's supply chain has been cleaned up and made a lot more transparent, and hazardous substances have been removed from products—a move that drew praise from Greenpeace (which had previously given Apple a "bottom of the barrel" ranking in this department in 2007)
- Hired Lisa P. Jackson away from the U.S. EPA to run Apple's environmental program
However, this whole initiative became a source of controversy at Apple recent shareholder meeting when a group of investors from the National Center for Public Policy Research objected to Apple's attention to environmental issues as a waste of resources and useless pandering to overreaching government regulations.
At that annual shareholder meeting on February 27 in Cupertino, the NCPPR put forward a proposal that Apple's board of directors should no longer approve any environmental initiatives that don't have an impact on the bottom line. The NCPPR general counsel also became a thorn in Apple's side by getting up to speak three times on the issue during the meeting.
Their proposal was rejected in a shareholder vote and Cook eventually ran out of patience with the NCPPR representative. The Apple CEO stated, "We do things because they are right and just and that is who we are... When I think about human rights, I don’t think about an ROI. When I think about making our products accessible for the people that can’t see or to help a kid with autism, I don’t think about a bloody ROI, and by the same token, I don’t think about helping our environment from an ROI point of view."
Nevertheless, Cook vigorously defended the economic impact of Apple's environmental initiatives. Then, he told the NCPPR lawyer, "If you only want me to make things, make decisions that have a clear ROI, then you should get out of the stock." At that, the room full of shareholders erupted into applause.
While I have no reason to doubt Cook's sincerity about corporate responsibility—his decisiveness in this department compared to his caution in product development tells us that he's obviously passionate about it—we also shouldn't underestimate the business value of doing good. While altruism may be part of Cook's motive, there's also some business judgment involved as well.
Cook emphasized, "That is who we are."
More accurately, that's the kind of Apple that Cook wants to create and he's making some progress. Steve Jobs was so legendarily laser-focused that he had minimal concern for corporate responsibility or the environment or charitable giving. And clearly, that's the kind of Apple that NCPPR thinks Cook needs to return to, and judging by Apple's product performance under Cook's leadership it's easy to understand the concern.
However, Cook's broader worldview on these issues increasingly looks like perfect timing for a company where so much of the sales of its products are tied up in the image of its brand. While Apple has highly functional products, a lot of people buy Apple gear because of the image of the Apple brand, which generally stands for things like simplicity, beauty, and quality.
In 2013, Forbes once again named Apple the No. 1 brand on the planet, stating, "Apple is the most valuable brand in the world for a third straight time at $104.3 billion, up 20% over last year. It is worth nearly twice as much as any other brand on the planet by our count."
The bottom line is that people are drawn to brands. They prefer to do business with companies they like and trust, they prefer to buy products and services that they feel good about, and they prefer to align themselves with brands that confirm and amplify their values.
Apple's less-than-stellar reputation in corporate giving, the reports of Chinese workers in its supply chain being poorly-paid and badly-treated, and Greenpeace excoriating Apple in 2007 over toxic materials in the iPhone were all issues threatening to erode Apple's reputation over the past decade.
As the Forbes brand rankings show, Apple has continued to fly high despite the negative publicity on these issues. However, the next generation of consumers cares more about these issues than their parents and grandparents did.
According to KPMG research from December 2013, 70% of U.S. consumers under 30 years old now contemplate social issues before they make purchases. The report stated, "Young shoppers are focused more on social issues when considering big-ticket purchases such as automobiles, computers, consumer electronics, and jewelry as opposed to everyday items such as gasoline, toys, and food. A combined 41 percent of customers under the age of 30 'always' or 'frequently' consider social issues before buying a big-ticket item."
This makes the timing of Cook's changes in corporate responsibility pretty important. Apple has always made marketing to schools and youth a priority and there are recent signs that Apple has been losing steam with this demographic. A Washington Post / ABC News survey in June 2013 showed that Apple's favorability rating with 18-29 year olds had dropped to 71% from 81% just a year earlier.
Some of this is naturally tied to the fact that Apple as a company is no longer a quirky upstart taking on the evil empires, but is now the world's most valuable corporation. That automatically vaults it into the evil empire club.
One of the ways that evil empires traditionally try to balance their effect on the world is by donating resources to worthy causes and being transparent about the impact of their operations on their community, on human rights, and on the environment. This is the "corporate responsibility" arena and CR Magazine does an annual ranking of "The 100 Best Corporate Citizens." For 2013, there were 19 technology companies on the list, including AT&T (#1), Intel (#5) IBM (#11), and Microsoft (#29). Apple was absent from the list.
Lots of other publications and organizations do these "good corporate citizens" lists and Apple has appeared on a few of them from time to time. It was 32nd on the Business Ethics in 2001 and 77th on the Forbes list in 2009. However, this has never been a core part of the company's mission or one of the key aspects of its brand. Cook is vigorously working to change that.
Nevertheless, corporate responsibility (also sometimes called "corporate social responsibility") also has its naysayers. Their often-touted example is Pepsi, where CEO Indra Nooyi touted "Performance with Purpose" and a philosophy that the beverage company would "do what’s right for the business by doing what’s right for people and the planet." This earned Nooyi the title of "most powerful woman in business" from Fortune for five years in a row. But, as Pepsi focused on healthier products, it struggled for market share against its rival Coca-Cola. Some of Pepsi's critics blamed the company's struggles on Nooyi's focus on doing good rather than zeroing in on profitability.
Other companies have been much more successful at integrating their corporate responsibility work with their core business strategies—and seen strong gains from it. Lexmark (#55 on CR Magazine's 2013 list) evaluated its business a decade ago and realized that its customers were becoming much more environmentally-conscious (and cost-conscious) about printing. The whole printing business for Lexmark and its competitors was based on getting people to print more by giving them discounts based on volume. CEO Paul Rooke realized that his business was aligned against the interest of his customer
Rooke decided, "We should turn this headwind into a tailwind."
As a result, Lexmark ramped up its managed print services business, sold off its inkjet printing business, and focused on helping customers print less. The company talked to customers about how "the cheapest page is the page you never print," said Rooke. The MPS business grew 16% during 2013 and has been a key component of Lexmark's transition from a pure printing company to a software and services company focused on capturing and sharing information.
While unleashing the "Print less, Save more" campaign, Lexmark also got more serious than ever about its corporate responsibility initiatives, especially focused on the environmental impact of its products and its operations. In other words, it fully embraced sustainability in its product roadmap and baked it into the DNA of the company and the Lexmark brand.
John Gagel, the corporate manager of sustainability for Lexmark, said, "The approach to sustainability is a win-win-win. It's a win for us, it's a win for the environment, and it's a win for the customer."
In sustainability, Cook wants Apple wants to be a Lexmark.
- How Lexmark is helping companies print less, and growing its business in the process
- How Apple Went From Environmental Laggard To Leader (Forbes)
- Creating a class of 'do good' companies (Washington Post)
- How Companies Can Do Well While Doing Good (U.S. News & World Report)
- 6 Companies That Are Growing Rapidly While Doing Good (Fast Company)
- Compassionate Capitalism: How Corporations Can Make Doing Good an Integral Part of Doing Well(Amazon)
- When corporations fail at doing good (The New Yorker)