Lion’s top marketer: CFOs have to understand that brands can’t charge more for doing their job on ESG; drinks giant eyes aligned supply chain
Lion's new top marketer Anubha Sahasrabuddhe says charging consumers more to fund sustainability and comply with ESG targets is "the worst possible thing" brands can do. She says marketers are urging CFOs to instead greenlight offsetting approaches – finding cost savings from initiatives that also reduce environmental impact – to fund further sustainability initiatives. She says brands can't keep kicking the can down the road. "Until you climb that hill and suck up the reality of those costs, we're never going to get the cost down in order to make [sustainability] business as usual."
What you need to know:
- Anubha Sahasrabuddhe, Consumer & Brand Director at Lion, says trying to charge customers more to fund decarbonisation is “the worst possible thing” brands can do.
- She says marketers are trying to convince CFOs to greenlight offsetting – sustainability initiatives that save the business money – to fund further measures.
- Lion has to “get its own house in order” but will then align with partners with similar ESG agendas.
We are trying to get CFOs to understand that doing good doesn’t mean charging more. That is the worst possible thing from a consumer perspective and certainly the organisation’s perspective.
Lion’s top marketer has warned that brand finance chiefs are “delusional” if they think they can pass on costs of sustainability and decarbonisation onto customers.
Anubha Sahasrabuddhe, Consumer & Brand Director at Lion and former senior international marketer at Mars, Wrigley and Coke, said brands globally are grappling with environmental, social and corporate governance (ESG) requirements, increasingly part of financial reporting obligations.
But they are struggling to balance the cost of creating sustainable businesses with the need to deliver short-term shareholder returns.
”I’ve experienced this at Coke and Mars, and now at Lion; there is a recognition that ‘for the long-term, this makes a lot of sense’. And then the acuteness of the short-term financial deliverables over the one to three year period is what gets in the way,” she told Mi3 (via this podcast).
Sahasrabuddhe said that creates a “chicken and egg” situation. Meanwhile, corporates are coming under increasing pressure from both investors and local, national and international governments to take action.
“In order [for corporate sustainability initiatives] to achieve any scale, you need to start somewhere. And the reality is our suppliers and vendors and everything we need to make that happen are not yet at scale either. So the cost is naturally quite high in the first years. But until you climb that hill and suck up the reality of those costs, we're never going to get the cost down in order to make [sustainability] business as usual.”
“So it feels like ‘business unusual’, because of these exorbitant costs; to do good costs money in the short-term. But over the long-term, the benefits continue to prove themselves out.”
We need to get our own house in order. But my expectation is the partners I do business with are going to hold themselves to the same standard. And we are building the right partners around us as we speak.
Fund ESG through sustainable cost savings
Sahasrabuddhe agrees with CMO peers that the way forward is to find “short-term mitigation through other means” to get the ball rolling, i.e. offset costs by finding solutions that reduce carbon footprints while saving the business money.
Telstra CMO Jeremy Nicholas has taken that approach, telling Mi3 the marketing team is driving major cost savings – upwards of 50 per cent for initiatives like packaging – while contributing to the telco’s zero emissions targets.
Sahasrabuddhe said that is where finance departments can enable genuine sustainability initiatives while balancing profit margins and operational costs.
“CFOs enabling us to be able to find offset costs in other parts of the business to fuel doing good in the long term is really where the conversation has got to,” she said.
An offsetting approach, added Sahasrabuddhe, means businesses can avoid what she termed “the second delusion of CFOs”.
“We are trying to get them to understand that doing good doesn’t mean charging more. That is the worst possible thing from a consumer perspective and certainly the organisation’s perspective – to think that you have the right to charge more because you're doing the right thing for the long-term,” she said.
“That is not the case. So I think we [marketers] have done some good work to shift the debate around the frankly simplistic view that charging more is the way to do this, because that's quite insulting to the consumer. They shouldn't have to pay more to have less waste or less packaging or less harm done to the environment.”
But while the likes of Telstra – and GroupM global chief Christian Juhl – have outlined plans to ultimately withhold marketing spend from media supply chain partners that do not align with their decarbonisation agendas, Sahasrabuddhe said Lion is not yet at that stage.
“We need to get our own house in order [first]. But my expectation is the partners I do business with are going to hold themselves to the same standard,” she said. “And we are building the right partners around us as we speak.”
