The last few years have seen a number of brands at the center of environmental crises. Some have handled the pressure better than others. So how should brands affected by an environmental crisis react and what is their role in mitigating the situation?
To begin, we need to distinguish three groups: brands with specific responsibilities in a crisis, a wider group of brands impacted but without direct responsibility, and the few brands that seize the initiative by turning adversity into opportunity.
Brands with specific responsibilities in a crisis
When brands have specific responsibilities in a crisis, there is often significant impact on brand value. The global energy giant BP and the Japanese power utility TEPCO were both at the center of unprecedented environmental disasters. For BP, it was the Deepwater Horizon explosion in the Gulf of Mexico, which became the biggest accidental marine oil spill in history. For TEPCO, it was the Tohoku earthquake and tsunami that led to the Fukushima Daiichi meltdown, the second largest nuclear accident in history.
In these circumstances, the normal rules of crisis management—acknowledge the error, take remedial action, and then let everyone know of the action—are hard to apply. Environmental disasters unfold over a prolonged period, involve complex interactions, and often lie at least partly beyond human control. These factors combined with months of 24-hour news coverage make positive outcomes difficult. In fact, both BP and TEPCO appear to have increased distrust among consumers through their handling of their respective crises, and both stand accused of similar failings: a lack of openness, little sympathy for victims, and a history of negligence. Indeed, BP, valued at US $3,716 million in 2009 dropped off the Best Global Brand list following the oil spill. Meanwhile, TEPCO, though not a Best Global Brand, was valued at US $785 million just months before the nuclear disaster and is likely to also decline in value.
And yet, while some negative impact is inevitable, if brands uphold their core values and have a strong crisis management plan mapped out prior to the crisis, they are likely to see less long-term damage than those that are weak. BP and TEPCO continue to suffer because of frailities that existed even before the crises. Only a small portion of BP’s business, for example, lived up to its “beyond petroleum” positioning and it was already criticized for its lack of credibility and commitment to its bold vision. These shortcomings were then compounded by misplaced remarks and equipment glitches. Meanwhile, prior to the disaster, TEPCO already had a reputation for ignoring or disregarding concerns, which was further aggravated by the trouble it had in communicating a clear message to the public. The unexplained disappearance of the chief executive in the midst of the crisis is only the most obvious example of the brand’s recent failure to understand expectations.
Living with a strategic disconnect at the core of the brand may be possible in good times, but weaknesses are magnified when faced with a disaster. For both companies, unforeseen events dramatically exposed their flaws. Clearly, the time to strengthen a brand is before a crisis, not during one.
Brands impacted by crises but without direct responsibility
For the wider group of brands affected by a disaster but not directly at fault, the impact can be significant while the response can be complicated by the fact that these brands only have limited control over the situation. Depending on the scale of the disaster, the list can cover local businesses, competitors, companies in adjacent categories, global brands with facilities or vendors in the area, brands perceived to originate from the area, entire regions, nations, and even governments. The impact may even be felt far from the center of the crisis—the Green Party’s triumph in Baden-Württemberg elections following the nuclear disaster in distant Fukushima, for example.
In the case of Japan’s March 11 earthquake, tsunami, and subsequent nuclear disaster, there was a direct impact on Japanese brands and “Brand Japan” itself. In May, several months after the disaster, Interbrand conducted a survey in the U.S., U.K., and China. The results showed, unsurprisingly, that overall perceptions of Japan fell following the disaster. More revealingly, there was a clear divide by geography and by category—perceptions dropped more dramatically in China than in the U.S. or the U.K.
These results likely had to do with China’s proximity to Japan and fears that radiation might affect their country directly or occur via contaminated products. At the time nearly 50 percent of Chinese respondents said they were “very worried about the effects of the nuclear accident on their country. Again, somewhat unsurprisingly, durable goods were less affected than consumables like food or cosmetics. It is also worth noting that perceptions of the disaster affected brands that were not actually Japanese; in the U.K. and U.S. nearly half of respondents identified Hyundai as a Japanese brand when, in fact, it is a Korean brand.
These findings go to show that when considering the impact of a disaster on a wider group of brands, a more complex set of factors needs to be considered. It is important to understand that brands will not be impacted equally in all regions. It is also worth remembering that a brand does not exist in isolation; it exists through the relationships it creates and the communities it is part of. Taking the time to understand a brand holistically will help clarify what responsibilities it has and how it can build stronger bonds through its response—not just how it can minimize the damage to its reputation.
Brands that turn adversity into opportunity
This leads to a third, select group of brands that seek to understand their wider role. In Japan’s ongoing crisis, the telecom operator Softbank stands out as a much talked about example. Before the crisis many may not have been aware that the corporation’s vision is “Information Revolution—Happiness for everyone.” However, now the brand has surely moved beyond discussions of network coverage.
Within two weeks of the disaster, the group’s CEO, Masayoshi Son, had visited the Fukushima region. In early-April, on top of promising a 10 billion yen personal donation, he pledged his remaining lifetime salary. These dramatic, human gestures eclipsed all the major Japanese corporations who committed substantial financial aid or made enormous contributions in other ways. Then in May, Softbank announced it would enter the energy market, supporting the development of renewable energy across Japan.
This has positioned the company at the forefront of conversations about the future of Japan. Softbank has laid out a clear vision that shows optimism and an understanding of how the brand touches communities. Its actions, if carried through, reflect its core beliefs and could ultimately help create meaningful change in the world.
The right course of action
As recent events have revealed, environmental crises are a reality for brands. To avoid long-term risk, companies need to think beyond just a crisis plan and ensure that their brands are strong and are consistently delivering on their core promises. Most importantly, they need to realize that environmental sustainability is a growing concern among consumers and any action taken to mitigate damage must sincerely reflect a brand’s core beliefs and its role in the community.
ABOUT ALEX MURRAY
Alex Murray is Senior Consultant, Strategy for Interbrand in Tokyo. Alex has a background in verbal identity, consulting, and account management. He was instrumental in bringing Interbrand’s Best Global Green Brands to life.