Value Washing

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By Gautam Mahajan and Philip Sugai

Try googling Value Washing. You get washing machines. Which is not what we mean by Value washing a term first used by co-author Prof. Philip Sugai of Doshisha University in Japan in his 2019 article for Campaign magazine.

The unfortunate reality is that we have gotten used to value washing. Many companies make statements they do not follow such as we are customer friendly, we are customer centric, the customer comes first, and we are environmentally friendly. These words are meant to give a warm fuzzy feeling, but fail to actually improve the situation for their customers.

Value washing is a form of fluffy (and often meaningless) statements companies make when describing their work in value creation. This is more common for societal and environmental value creation. However, as one digs deeper, washing is present in all forms of stakeholder value creation whether for customers, for employees or partners. Value washing can happen by using jargon, vague terms, outright lying, irrelevant claims, and often with no proof something is really happening or there is a change in thinking or action actually being set in place.

Often this is just plain white washing and often brain washing.

This happens because:

Many companies have mastered the art of washing by giving meaningless statements and platitudes to customers for years. They keep saying we are customer centric etc. but they are not. They in turn may actually believe what they are saying, but never put in place actual metrics to measure their results, nor transparently disclose these so that an outside authority can judge whether or not they are indeed doing what they say.

This also happens when companies begin to write about issues that are currently trending, in order to improve traffic to their websites or social media accounts without actually offering anything concrete. Value creation for stakeholders has become fashionable, and companies feel they have to show they are doing something. Therefore, the fluff and meaninglessness of the words that they use relative to their actions.

To do so, let us explore what value is and how it is washed for each of the following stakeholders, whether customer, employee, partner, society or Nature. We start with a well-known term, green washing.

Greenwashing is the process of conveying a false impression or providing misleading information about how a company is environmentally friendly or the company’s products are more environmentally sound. Greenwashing is considered an unsubstantiated claim to deceive consumers into believing that a company’s products are environmentally friendly. (Taken from Investopedia)

An example of greenwashing is the multinational oil and gas corporation ExxonMobil indicating they were reducing greenhouse gas emissions while they were actually increasing. (January 20, 2021 article)

“Greenwashing” refers to fashion companies claiming that their products are environmentally friendly, when often they are not. Examples of greenwashing from companies today include the fast-fashion brands Uniqlo, H&M, and Lululemon — which are popular with college students.03-Mar-2020

Let’s contrast this definition with the meaning of value creation:

Creating Value is executing normal, conscious, inspired, and even imaginative actions that increase the overall good and well-being, and the worth of and for ideas, goods, services, people or institutions including society, and all stakeholders (like employees, customers, partners, shareholders and society), and value waiting to happen.

Based on this definition, we want to improve the overall good for or improve the well-being or worth of people, companies, goods and services, and stakeholders including the society and the environment.

Thus, companies have to do good for or improve the worth or well-being of these various stakeholders. Taken by itself, it may appear to be one sided. After all there is no question that companies exist to create value for themselves and to make a profit. They are not meant to be purely charitable organisations. This was the point that Milton Friedman clearly made in his infamous 1970 New York Times Magazine editorial, “In the present climate of opinion, with its widespread aversion to “capitalism,” “profits,” the “soulless corporation” and so on, this is one way for a corporation to generate goodwill as a by‐product of expenditures that are entirely justified in its own self‐interest. ”Thus, companies have to extract value from stakeholders to be profitable, and if in the process they need to say something to generate goodwill, so be it. This, crudely, was the profit motive. However, if the purpose is also to create value for stakeholders, who in turn create value for the company then this becomes meaningful. Such value created by stakeholders for the company can be extracted. Of course, it is important the stakeholder feels value is being created for them. This becomes a win-win situation.

What is important is that the company must realise they are the first movers within the value creation process. They have to create value for the customer, who in turn decides to buy from the company based on the value the company has created for him or her and other stakeholders. In making this decision to buy, the customer most likely is looking at the whether the company is adding or destroying value for society and the environment and other stakeholders.

When the customer buys, they hopefully give the company value which is partially profit, partially long-term loyalty etc.

Creating value for the society can mean good governance; can mean helping employeesto benefit and directly serving society through social responsibility actions, through adding to the tax base, through consuming from other companies in the society mix, by hiring people, by adding infrastructure, etc. Companies can add value by using their expertise to help solve societal problems, taking up humanitarian causes or having products or services that can do that.

Society creates value for companies by good governance, by being a source for people, services such as sewers and power, by being a marketplace for the company by providing roads and infrastructure, a justice system and so on.

Creating value for the environment means being environmentally friendly, not destroying the environment, by replenishing the environment, by using recyclable materials and products, create environmental awareness within employees and to society at large and manage such efforts, by not wasting power and other resources, and even trying to reduce their usage. Protecting the environment creates important value for the company as does the prevention of natural calamities caused by human error and design like pipe bursts, oil spills, forest fires, etc. Deforestation, over-mining, over-fishing or dumping wastes into nature are examples of destroying the environment which companies should not do, and efforts are underway globally, through the Capitals Coalition and other organizations to make companies accountable for such value destroying activities.

Value created by nature for the company could be realized as a good environment to work in (assuming they have not polluted the environment), natural parks and wilderness to enjoy, giving renewable resources to the company such as rainwater harvesting (which is an example of co-creating); nature is a primary source for raw materials and energy, a source for food and good air, diversity of flora and fauna, A good environment reduces stress and increases pleasant feelings. The destruction of nature will eventually lead to a future where our planet itself can no longer sustain us.

We can think of value created for employees to include such things as: a good place to work, giving meaning and sustenance (financial and non-financial) to people. Employees in turn create value for companies through making the company more human, by earning profits through their good work, by working on and helping society and the environment.

For partners, it is to be fair and honest and help them make a good profit and in turn partners create a supply and delivery chain that makes a profit for the company.

The shareholder profits from the company by sharing in the profits, while in turn supplying capital and other support to the company. It is well known that the cost of this money has to be less than the profits generated or extracted from this investment

To do this, a company must have a purpose, and not a wishy-washy value creation statement but a true value creation objective.

They then have to have a vision and mission that includes value creation. This then becomes a culture to perform. Lastly the company has to believe that they are human and not an inanimate entity, and that profit is a result of creating profit, which can be intangible and tangible.

You can see a good purpose in life, in a business, in a family, gives you a direction and a long-term goal, keeping you always focused. All this creates value for you and for your business. Businesses that have a commitment to purpose tend to get more loyal customers, better employees, have competitive advantage and increase their chances of success, while focusing on the environment and society. Purpose guides life as it did for Gandhi and Eichi Shibusawah and sports people like Tiger Woods. Purpose has an impact on behaviour, gives a focus on direction and goals and makes life meaningful and full of value.

The purpose has to be good for the company and the stakeholders, and must therefore be good for people, and society. These concepts are called Blended Value by Jed Emerson.

Sadly, there has been destruction of the environment, of people, of society under the guise that the company is good for the people. Carelessness, and bad management has led to damage of the environment and forest fires, or oil spills, whose impact is disguised through the use of value washing. Getting companies to think they are human and not inanimate is a good starting point. Getting them to commit to a clear set of objective goals with clear and transparent reporting on their efforts to achieve them is the next step and one that many organizations globally are working to help us achieve.

We would like to have your views.

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