June 2010

CSR/CONSUMER:RESPONSIBLE LUXURY

The movement towards 'responsible luxury' is gathering force, as companies come to recognise the advantage of talking publicly about their new-found ethical credentials.

Mother nature is the new fashion icon

➔The difficult economy and a fundamental shift in the market for luxury goods are forcing an industry that worships names like Chanel and Versace to embrace a different icon: Mother Nature.

➔ Over the past year, many of the world's best-known luxury labels have started to introduce eco-friendly products, snap up brands that tout their social responsibility and weave environmental themes into their advertising and marketing.

➔ Recently, French luxury conglomerate Moët Hennessy Louis Vuitton (LVMH) took a stake in Edun, an organic-clothing company founded by the singer Bono and his wife. In 2004, it conducted a "carbon inventory" to gauge its impact on greenhouse-gas emissions. Afterwards it cut back on corporate travel and air shipment of goods.

➔ Long time eco-friendly designer, Stella McCartney is finally being recognized for her steadfast commitment to cruelty-free, green luxury fashion.

➔ Other companies have begun to advertise initiatives they took years ago to promote resource conservation.

Going green is a luxury

➔ There has been talk lately about how going green is itself a luxury: what people want during a recession is cheap goods, whether or not they are the most environmentally friendly products available.

➔ There is a counter-trend too: the UK industry self-regulatory bodies the Committee of Advertising Practice (CAP) and Broadcast CAP (BCAP) have revised their codes to clamp down on “greenwashing”. They said absolute claims of environmental benefits “must be supported by a high level of substantiation” without omitting “significant information”. “Green” claims must also cover the full life cycle of a product and recognise areas where scientists’ opinions are divided. The Codes, due to come into effect in September 2010, will be administered by the Advertising Standards Authority (ASA).

➔ On the other hand, the market for luxury goods is a tiny market. So how much effect can greening it really have? In terms of promoting environmentalism as a trend, the greening of luxury brands has to be a good thing. After all, there are plenty of people out there who will follow faithfully whatever example their favourite celebrity sets.

➔ It's also worth considering that environmental promises made by high-end brands may be among the most reliable. They've presumably got the resources required to do very careful sourcing, in order to make sure that the organic, low-carbon, union-made, fair-trade cotton that goes into their $200 t-shirts really is what it claims to be. What’s more, it is clear that these brands would seriously damage their cachet if they didn't live up to their eco-rhetoric.

• In order to have credibility in the green arena, luxury brands need to be hyper transparent about their “back story.” Those brands that can show that the path from production to marketing and selling is a green one will gain a huge amount of traction.

• To do this brands should look at linking their purpose and performance, they should publish a clear CSR policy, and look to set up interaction with key stakeholders and consumers.

• Any eco labeling should be evidence-based and preferably have 3rd party endorsement. NGOs have called for sustainability certification schemes to incorporate rigorous, independent evaluation into their design.

• Co-branding or partnering with an appropriate NGO – after quantifying NGO vulnerability - is worth investigating.

READ: WWF DEEPER LUXURY REPORThttp://bit.ly/d5yQF

COMMUNICATIONS TAKEOUT

B2B/B2C/TECHNOLOGY:SPONSORSHIP TRENDS

The rise of social media will inevitably have a major impact and be a key driver in the globalisation of sponsorship. Whilst the economic downturn may not have an impact overall, there is a need for vigilance in the choice and management of brands. The industry is becoming increasingly evidence based.

The drive for data and accountability

➔ Twenty years ago only a handful of sponsorships were purchased based on sound marketing rationale with an expectation of fulfilling set objectives.

➔ Today, rising prices have driven most sponsorships to be purchased in conjunction with some form of independent research or goals.

➔ Research techniques have advanced to the point where sponsorship ROI can be measured with the same accuracy as advertising. It is likely that more sophisticated sponsors will demand performance clauses based on such research.

Impact of social media on activation & globalisation

➔ Sports fans are rapidly moving across to social media (Facebook/Twitter/blogs) and mobile media (iPhone apps) because these media offer even greater immediacy and ease of access than traditional websites.

➔ What is more, the growth in digital media - which is not subject to any national broadcasting rights -will only accelerate the globalisation of the sponsorship industry.

• Companies that can get ahead of the curve and build in social/mobile media activation to sponsorship deals will prosper.

• Similarly, no sponsorship deal should be negotiated without tight evidence-basedperformance measurements in place.

• Social media is in some ways a friend and a foe. As privacy boundaries blur, there is more risk of sensitive information being revealed. To counter this possibility, policies and guidelines on the use of social media need to be very clearly communicated and crisis plans should be in place.

VISIT: B-M’s TOTAL SPONSORSHIP WEBSITEhttp://www.totalsponsorship.co.uk/

COMMUNICATIONS TAKEOUT➔ In addition because of the increasing number

of sportsmen/women communicating directly via Social Media there needs to be very clear policies governing that interaction to prevent potential embarrassment to sponsors.

Relatively recession proof

➔ In spite of gloomy predictions about "the death of corporate entertainment" it is expected that the present global recession will have no long-term impact on the sponsorship market. The sponsorship industry in Europe has followed global trends in its growth rate this decade with expenditure on rights fees growing from an estimated €5.6 billion in 2000, to €7.7 billion in 2007.

➔ B2B corporate entertainment will return once the glare of the public spotlight has passed elsewhere, and the financial sector has recovered fully.

➔ With regard to pricing, history suggests that pent-up demand to spend as a downturn ends tends to actually increase sponsorship prices somewhat, through competition for the better deals.

When sponsorship turns sour

➔ The increasing incidence of issues surrounding celebrities and their sponsors [need we mention Tiger Woods?] highlights the need for companies to have robust crisis plans in place to deal with communications should the celebrity/brand suddenly develop issues that could impact the sponsor’s reputation.

ORGANISATION/TECHNOLOGY:THE AGE OF CYBER WARFARE

Threats of cyber warfare have been hyped for decades but a report by McAfee contains proof that cyber attack preparation is definitely happening.

Cyber Cold War

➔ Major countries and nation-states are engaged in a "Cyber Cold War," amassing cyber weapons, conducting espionage, and testing networks in preparation for using the Internet to conduct war.

➔ Key countries gearing up for cyber offensives are the U.S., Israel, Russia, China, and France.

➔ So far nations have been reluctant to use those capabilities because of the likelihood that a big cyber attack could do harm to their own country due to the way in which the world is so highly interconnected these days.

➔ Because pinpointing the source of cyber attacks is usually difficult, if not impossible, the motivations can only be speculated upon, making the whole cyber war debate something of an intellectual exercise at this point.

➔ The July 4 2009 attacks denial-of-service on Web sites in the U.S. and South Korea could have been a test by a foreign entity to see if flooding South Korean networks and communications between the U.S. and South Korea would disrupt the ability of the U.S. military in South Korea to communicate with military leaders in Washington, D.C., and the Pacific Command in Hawaii.

➔ There have been earlier attacks that smack of cyber warfare too. Estonian government and commercial sites suffered debilitating denial-of-service attacks in 2007 and in 2008 sites in Georgia were attacked during the South Ossetia war, orchestrated by civilian attackers.

Cyber warfare will soon be a reality

➔ Over the next 20 to 30 years, cyber attacks will increasingly become a component of war. If networks become ever more pervasive and unprotected cyber war operations could even stand alone.

Google Attack: “Digital Commercial Pearl Harbour”

➔ There are increasing concerns about financial losses and security breaches in the commercial world too, especially after Google was targeted by cyber attacks from China. This “digital commercial Pearl Harbour” has dramatically raised awareness of this threat to businesses.

Every computer user plays important role

➔ There are 32,000 suspected cyber-attacks every 24 hours.

➔ Reports are that almost 90% of all email today is SPAM. Every computer user plays an important role in using the Internet safely and securely by protecting themselves and the networks they are on.

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Tips for staying as safe as possible online:• Know who you’re dealing with • Keep web browsers and operating systems

up-to-date by setting them to automatically update

• Back up important files• Protect children online• Use a full suite of updated security tools as a

first line of defence• Use wireless devices and networks securely• Use hard-to-decipher passwords (long with

numbers and symbols)

We all need to employ the same judgment we use in the “off-line” world by remembering three letters: WWWWhenever you are asked for information online, make sure to ask yourself:

1.Who is asking or going to see this information?

2.What is the value of the information I am being asked to share?

3.Why do they need to see it?

READ: 7 PRACTICES FOR COMPUTER SECURITYhttp://bit.ly/bK6s1t

COMMUNICATIONS TAKEOUT

ORGANISATION/CRISIS:BEWARE THE BLACK SWAN

Black Swan is a highly topical term that is used in horizon scanning and future planning scenarios.

The origin of the term Black Swan

➔ The "Theory of Black Swan Events" was developed by Nassim Nicholas Taleb to explain the disproportionate role of high-impact, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, and technology.

➔ Taleb regards almost all major scientific discoveries, historical events, and artistic accomplishments as Black Swans — undirected and unpredicted. He cites the rise of the Internet, the personal computer, World War I, and the September 11 attacks as examples of Black Swan Events.

➔ Criteria for a Black Swan event :oThe event is a surprise (to the observer).oThe event has a major impact.oAfter the fact, the event is rationalized by hindsight, as if it had been expected.

When is a Black Swan a Black Turkey?

➔ There has been much debate as to whether the financial crisis 2007-2009 was a Black Swan or simply a Black Turkey : an event that is everywhere in the data—it happens again and again —but to which one is wilfully blind.

Recent and Future Black Swans

➔ The eruption of the Icelandic volcano Eyjafjallajökull was a surprise to most of us and had a major impact on air travel. After it occurred plenty of experts said they could have told us it was going to happen. Airlines are now all vying with each other to produce volcanic ash detectors to prevent the repeat of the havoc that caused wide scale grounding of flights .

➔ Since there has been oil-drilling in the Gulf for more than 40 years, with over 30,000 oil wells, BP's Deepwater Horizon oil spill certainly qualifies as a Black Swan event.

➔ As per the previous item on cyber warfare, data security products, such as antivirus software, can't protect you against Black Swan viruses, i.e., the ones that are out in the wild but haven't been identified or found yet.

Learn how to turn the Black Swans White

➔ Taleb’s advice is not to attempt to predict Black Swan Events, but to build robustness against negative ones that occur and work on exploiting positive ones. Taleb contends that banks and trading firms are very vulnerable to hazardous Black Swan Events and are exposed to losses beyond that predicted by their defective models.

➔ Taleb states that a Black Swan Event depends on the observer. What may be a Black Swan surprise for a turkey is not a Black Swan surprise for its butcher—hence the objective should be to "avoid being the turkey" by identifying areas of vulnerability in order to "turn the Black Swans white".

COMMUNICATIONS TAKEOUT

• Taleb believes that more disasters along the lines of the Gulf of Mexico are waiting down the line and that we are woefully unprepared to predict their occurrence in advance or to deal with them once they happen. He blames an overreliance on theory for some of the most seemingly insoluble problems troubling us today.

• It is essential that companies confront their doomsday scenarios and build crisis planning around them.

• What is Your Company’s Deepwater Horizon?

READ: TEN PRINCIPLES FOR A BLACK SWAN-PROOF WORLD http://bit.ly/9F2UG7

CONTACT

To request further information, give feedback or suggest a future topic for the newsletter, please contact:Elaine CameronStrategic Research & Trend Analysis, EMEA elaine.cameron@bm.com

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