The Rise of the Conscious Consumer
For multinational businesses to reverse the trend of dwindling value growth, business leaders should look beyond quarterly returns and gear their companies towards corporate social innovation
Here’s a startling perspective: the humble local company now has the upper hand over the multinational corporations (MNC) that were once at the top of the business food chain.
In Southeast Asia, a 2016 Nielsen report states that local and regional companies are experiencing higher value growth (13 percent and 23 percent respectively from 2012 to 2014) compared to their MNC counterparts (five percent).
“For the past 10 years, multinational businesses have grown slower than their local counterparts and their return on equity has also been lower than homegrown competitors,” Mr Patrick Cescau, the non-executive chairman of global hotel group InterContinental Hotels, confirms
“One of the reasons is that the internet and globalisation have changed the name of the game,” Cescau, speaking on the sidelines of the Temasek European Advisory Panel (TEAP) meeting held in London in May, explains.
Empowered by low entry and operational costs, deep-rooted networks, a familiarity with local preferences and the agility to respond to changing domestic conditions, local and regional players such as ride-hailing operator Grab have expanded their market share despite having to fend off MNC rivals at every stage of their growth.
The Nielsen report also revealed that 52 percent of consumers are choosing local brands over global brands when it comes to new product purchases, citing better value for money and national pride as major reasons.
The conscious consumer — one who cares about transparency and ethics in business — is here to stay, says Cescau, a former chief executive at transnational consumer goods giant Unilever.
“If you look at the millennials’ point of view, they want to know the company behind a brand, its values, and what it does for society and the community. What’s important is that big business realises that what were in the past seen as big obstacles to growth are now opportunities, he says”
“It’s about meeting the needs of consumers as citizens.”
First put forward by the World Economic Forum, Cescau recommends that globally-oriented businesses embrace corporate social innovation to achieve sustained growth and long-term returns.
Companies that practice social innovation actively pursue community-oriented agendas in areas such as capacity building, infrastructure and public health.
The goal is to improve the quality of life for underserved or vulnerable communities. “It’s about meeting the needs of consumers as citizens,” Cescau says.
Cescau cites Lifebuoy, a Unilever brand of antibacterial soap, as an example.
In 2013, Lifebuoy rolled out handwashing programmes in villages across 14 developing countries as part of a broader social innovation initiative to save lives of children in vulnerable communities who were at risk due to a lack of sanitation.
The scale of the MNC puts it in a strong position to carry out social innovation.
Not only do these companies possess the resources needed to address daunting societal needs, many large corporations also have the talent to come up with creative solutions.
Implementing Social Innovation
What’s stopping these companies from pursuing social innovation then? The relentless focus on short-term profit, says Cescau.
He argues that companies with shareholders should create an investment proposition that incorporates social innovation as a primary focus. Doing so would attract shareholders with eyes on the long term. “We are seeing more and more shareholders who want sustainable returns.”
“There is no longer a dichotomy between businesses doing well and doing good,” he adds.
The Temasek European Advisory Panel (TEAP) brings together eminent business leaders and experts to share insights and perspectives on major political, economic, social and industry trends, with a focus on Europe.