Protecting the Right to Market
Many years back, as a manager in Cefic (the European Chemical Industry Council), I was working on a product stewardship position paper within the changing landscape post-REACH. I recall a conversation with an industry sherpa who felt that product stewardship’s continuous improvements did not matter if a company could not earn the right to market a product. What mattered to his company was something he called market stewardship.
Product stewardship focuses on continuously developing the production process, innovating, improving and reducing a product’s impact on consumers and the environment. If a company is not a good product steward, they will lose business.
Market stewardship looks at how markets (consumers, stakeholders and regulators) accept a company and its products. As a corporate citizen, what is the company or industry doing to earn the right to exist on the market. (NB: There is another unrelated use of the term market stewardship describing government use of public services.)
Reflecting on that distinction now, nearly 20 years later, products or substances that have been forcefully banned had, for the most part, faced social or ethical issues. Their products might have been popular and profitable; they might have been safe; but somewhere in the process, they lost the right to market. They lost market trust.
Part 6 of the La Jolla Tobacconization Playbook series looks at how the corporate world needs to respond to challenges to their right to market their products or to exist as a stakeholder.
Reputational (Righteous) Risks
Companies facing reputational risks need to understand it within an entirely different risk framework. Public campaigns by outraged stakeholders can do more damage to a company’s bottom line than any economic, production or trade issue. Tort lawyers need to destroy a company’s trust and respect in order to get the jury angry enough to award substantial punitive damages.
A company like Monsanto fought existential risks by concentrating on its clients but the wider market risks debilitated the organization. The name Monsanto, after a long history, was quietly “legacied”. Volkswagen paid a heavy price for the public outrage following DieselGate. Meta (formerly Facebook) was not prepared for the fallout from the Cambridge Analytica scandal and its reputation has not fully recovered.
Once the reputational risk subsides, these companies still carry a taint of public outrage making any trust restoration practically impossible and leaving them vulnerable to further public attack. Lawyers would find it easy to convince a jury to award unrealistic punitive damages on a company deemed ethically reproachable. Monsanto staff were banned from the European Parliament and the same tactic was tried against ExxonMobil.
This is something I have referred to as a “righteous risk”: an ethical attack on a company’s right to exist. Any corporate product manager needs to pay close attention to this. The tobacco industry knows too well how this public outrage can be mobilized to act against them with little support from scientists, lawmakers or other industries. But the point is that all other industries are being tobacconized (including recent attacks on food, cosmetics and pharmaceuticals industries).
Hammering away at the Right to Market
A recent Firebreak article looked at how hundreds of millions of dollars in charitable foundation funding was funneled into tort law firms like Sher Edling, so they would continue to file useless, spurious lawsuits against fossil fuel companies. While it could be considered a waste of donors’ money that could have gone to helping the poor, providing health care in developing countries or helping researchers fight diseases, in reality the purpose of giving wealthy tort lawyers millions to keep industry in the courts (and in the news) is to continuously hammer away at their right to market.
They play the long game. While industries often only focus on the impact over the next quarter, most anti-corporate campaigns span out over the next quarter century. Providing facts to prove that the activist claims are false may be easy but their campaigns still leave a lingering stench, undermine trust and leave companies vulnerable to any oncoming reputational onslaughts.
Protecting Market Rights
So how should companies be good market stewards? This is a challenge in a competitive arena where one company’s misfortune can lead to another’s good fortune.
Circle the wagons: Companies need to join together to protect their markets rather than seek opportunity when a competitor’s product is attacked. A company might think they have a market opportunity by promoting their cosmetic product as, say, “paraben-free” but the consumer then makes the association that all cosmetics contain chemicals and are thus dangerous. Today it’s parabens, tomorrow it could be ethylene glycol.
Empower Trade Associations: Often industry trade associations are more like quasi-diplomatic institutions. They will raise their glasses at policy events, saluting regulators while the proposed laws are squeezing their members dry. Industries cannot protect themselves if they don’t empower their association to get into the mud, undermine the threats and, if necessary, walk out of regulatory processes.
Don’t Give them an Inch: Some companies cave in at the first whiff of an activist campaign against them and assume that if they open a dialogue with NGOs, both sides will benefit. This strategy might have worked in the 1990s but today, NGOs are committed to eliminating industry from the dialogue process, they are funded to achieve that and have no interest in compromise. Don’t give them an inch.
Innocent until Proven Guilty: The La Jolla Tobacconization Playbook is designed to overwhelm a company with lawsuits forcing them to settle out of court. Companies seeing billions temporarily wiped off of their stock valuations may panic and fear a shareholder revolt if they don’t stop the bad news. But in most cases, share prices are quicker to recover than the impact of any long-term reputational risk campaign. A company like Chevron, that has frequently dragged lawyers into debt without settling, is rarely harassed again.
Market stewardship is a key element in a company’s strategy to protect against reputational risk. But today companies seem incapable of acting, of fighting, to defend their product and their market. So we see pesticide companies applying for derogations to keep their product on the market for a couple more years. Fossil fuel companies are trying to delay the transition but their timeline is shrinking. The automotive industry has embraced EVs far faster than their consumers.
If companies want to protect their right to market over the long term, then they need to be more aggressive. Market stewardship takes courage and leadership.