Climate change and the brand: legislative aspects and costs

The previous columns looked at the circumstances and knowledge surrounding climate change, the impacts and aspects of consumer branding. To recap, climate change is having severe impacts on most facets of life, consumers are developing varying degrees of awareness and preference for environmentally sound brands but price premiums and resource scarcity complicate the process.

In the previous column, I noted several legislative aspects that have impact on environmental branding. As much as environmental brands will be driven by consumer demand, they will also be shaped from the top down in legislative processes and regulation.

The regulatory aspects come with implicit costs. These costs are in the form of increased costs directly assigned to consumers, and costs to the company that are indirectly passed on to the consumer. These costs can be in the form of operational costs or penalties and levies.

The cost that is passed directly on to the consumer will generally take the form of the cost assigned to usage. A number of countries have environmental and recycling regulations in place. For instance, in Germany, taxes are assigned to aerosols and, in Switzerland, fines are levied if the consumer does not separate the label from the bottle and dispose of the paper and the bottle in separate rubbish bags.

In other words, the consumer will pay through increased effort in using and disposing of the product and this should be taken into account in product design and manufacturing. Once again this is a cost to the consumer. However, if the product is designed well, the consumer may accept the premium to offset the value of his or her time and effort.

The cost to the company will be in the form of levies and fines, for instance the levies on emissions in the manufacturing process, or fines for non-compliance with regulations on emissions. As an example of control of pollution, consider new legislation implemented in the UK, which requires the IT industry to recycle a considerable percentage of used computers and their components. Fines need little explanation.

The implication of this is that technology and processes for mitigation of environmental damage will become necessary items in the accounting of the organisation.

The two aspects that become critical in the equation are the mitigation of cost to the consumer and mitigation within the regulatory environment.

Product design will have to take into account not only the consumer's needs in terms of ease of use, but also the consumer's wants. In this way the premium will be justified. The costs of the regulatory environment can also be mitigated to a degree, however.

Two of the more interesting aspects of brand equity are the facts that a high degree of equity improves the ability of the brand to attract investment, as well as the ability to smooth the way within the legislative landscape.

By developing an environmental positioning that entails clear communication on environmental aspects, brand equity can grow. The ability to measure the benefit will depend, however, on the sophistication of the accounting.

From a communication point of view, consumer communication needs to make clear reference to correct usage and benefits. If specific disposal processes or even outlets are available, these should be clearly stated. Attention to these aspects should work towards justifying the premium.

From the regulatory point of view, the environmental approach and mitigation of damage should parallel or be incorporated into reporting on governance. A number of organisations routinely state environmental factors in annual reporting and this is also in line with the King Report. This will also allay potential pressure from environmental groups.

However, no organisational process operates in isolation and there is always the requirement for outsourcing. The next column will take a look at aligning elements of the supply chain.