The challenges facing companies in the era of global warming
OPINION: The consequences of climate change can be seen in crises around the world. From fires in Australia and California to floods in New York City and Auckland, there seems to be a daily crisis linked to climate change. As a result of these crises, governments are under pressure to combat global warming. In this age of global warming, companies should be looking very carefully at their carbon footprint. Are their operations perceived to be playing a role in global warming by stakeholders? If the companies operations are perceived to be harmful to the environment, there could be negative consequences. These could include consumers boycotting a companys products, investors purchasing shares in more socially responsible companies, and employees working for competitors that are perceived to be better corporate citizens. The government may also pass legislation to restrict a companys operations. One way that companies have been trying to reduce their carbon footprint is through the reduction of new plastic in their products. Plastic releases powerful greenhouse gases as a result of exposure to sunlight and heat. These greenhouse gases increase the rate of climate change. READ MORE: * The Detail: New Zealand goes to important climate change meeting with an embarrassing record * Banking on nature to fight climate change * Climate explained: What is an ice age and how often do they happen? Several large companies have recently announced plans to reduce the amount of new plastic in their products and packaging. PepsiCo plans to significantly reduce the amount of new plastic in its products by using 50 per cent recycled content by 2030 . McDonalds also announced that it will reduce the amount of plastic in its Happy Meal Toys by 2025. This is very significant because McDonalds makes more than one billion toys a year . Finally, our national carrier Air New Zealand has been trialling reusable plastic for meal packaging. The new packaging is made from bagasse, a by product derived from plant fibre that is renewable and has a lower carbon footprint. It is worth noting that in the case of PepsiCo, this is not the first time the company has changed its product to become more environmentally friendly. However, the companys previous experience with a change in packaging did not turn out as expected. Back in 2010 Frito Lay, a subsidiary of PepsiCo, was relatively early among large corporations in its attempts to reduce the amount of harmful plastic in its packaging. This American conglomerate of snack foods changed the packaging on its Sun Chips brand to a biodegradable bag made from plants instead of plastics. This change may have been beneficial for the environment, however consumers of Sun Chips were in an uproar. The new packaging caused a loud grumbling noise, which was very distracting to people who wanted to eat their chips while watching TV, or talk with their friends or family while eating the chips. Frito Lay received a considerable amount of negative publicity in the media as a result of the noisy new packaging, and customers also turned to social media to voice their outrage. As a result of this debacle, the company stopped using the new packaging, and re-introduced quieter sustainable packaging in 2011 . Hopefully PepsiCo has learned from its experience with Frito Lay, and the company will conduct sufficient market research for its new recycled packaging before it is introduced to the public. Similarly, McDonalds also needs to think carefully about the changes it plans to make to its toys. How will children react to the new toys? What will be the response of parents? Many people express public support for combatting global warming, however drastic changes to packaging and the design of products by companies are not always positively received by consumers. Air New Zealand is using the right approach by trialling its new packaging before making widespread changes. In addition to the importance of conducting market research before making changes to products, companies need to consider the timing of the change to more environmentally friendly material in its products. Ideally this should take place before the government mandates a change. An early move by the company signals to the public that a companys actions are driven by sincere concern over the environment as opposed to pressure from the government. A good example of this is the banning of single-use plastic bags in supermarkets in 2019 . Supermarkets were required by the government to stop supplying single-use bags from July 1, 2019. Countdown was the first New Zealand supermarket to commit to phasing out single-use plastic bags by the end of 2018, and it benefited from positive media coverage as a result of its actions which took place before its competitors. Companies need to be proactive in their approach to global warming. By making their products more environmentally friendly before government mandates and competitors, companies increase the likelihood that they will be perceived by the public as playing a positive role in combating climate change. However, rushing to make changes can also be risky. Market research needs to be conducted before implementing changes. Companies do not want to introduce changes to their products that alienate customers. Effectively managing both the timing and adaptation of products in an era of climate change can be challenging. However, it is essential in order to be successful in todays volatile business environment. Daniel Laufer, PhD, MBA is an associate professor of marketing at Victoria University of Wellington, and an expert in crisis management.