Past marketing assignment papers for the Chartered Institute of Marketing - Chartered Postgraduate Diploma in Marketing
Task 2 - Emerging Themes Decemeber 2010
Executive Summary
The paint manufacturing industry has come under scrutiny to limit the use of harmful chemicals and toxins used in paints over recent years, from businesses and environmental organisations.
Research shows that paints can negatively affect human health and the environment - caused by fumes; most commonly Volatile Organic Compounds (VOCs), which are inhaled or released into the environment when in use.
Consequently, businesses are looking to paint manufacturers for safer paints. Large organisations in the paint industry such as ICI Dulux are already promoting low VOC paints and have the potential to influence other organisations within the industry to do the same.
Key players in other industries are following suit - shifting away from using paints that contain high levels of VOCs; evidence that the focus is moving towards ‘greener’ paints to help achieve and maintain a safer environment for workers and customers.
Paint manufacturers must recognise this and give customers what they want – it is the only way to remain sustainable and profitable.
In order to achieve a sustainability, manufacturers should look to develop Corporate Social Responsibility (CSR) policies; creating strategies around CSR behaviours to help organisations improve their practices – not only for profitability, but for its people and the planet.
Manufacturers should look at the triple bottom line framework and use this as a basis for CSR development.
Developing safer paints will limit organisations’ damage to the environment and will help to build and achieve a strong reputation as a business that realises the importance of its responsibilities to people and the planet. Once these are recognised, profitability should follow naturally.
Marketing professionals need to understand the importance of CSR and identify how best to adapt their skills and communicate this both internally and externally, understanding that internal belief must be achieved first and foremost, before the market sees any manufacturers’ CSR policies in place.
This comes from an ‘inside out approach’ where everything starts within the organisation – communicated and implemented by management, accepted by employees and rolled out company-wide. It is at this point that a business is ready to promote itself as an organisation committed to CSR.
In summary, paint manufacturers should start to focus more on CSR policies to provide safer paints. By doing this, they stand the best chance of achieving a sustainable future – reaping benefits such as strong brand reputation, increased market share and profitability.
Introduction
The paint and coatings industry is highly concentrated: the largest 50 companies, including Sherwin-Williams, Akzo Nobel and DuPont hold nearly 80% of the market and contribute to annual industry sales of around $20 billion (Hoovers.com, 2010).
The industry has seen a drop in trade recently, due to the economic downturn (see appendix fig. 5: Shipments, Exports, and Imports of Paint 2008 – 2010), with estimated trading figures for 2010 at approximately $17 million – $5 million less than trading figures of $22 million (U.S Census Bureau, 2010).
Already a heavily regulated industry, expected further regulations addressing environmental concerns will paint a very competitive market picture, with the production of environmentally friendly paints becoming an increasingly important means of differentiating products (IBISworld, 2010).
However the industry is expected to continue to evolve; US demand for paints is expected to rise 3.1% by 2012, aided by an improving outlook for construction, manufacturing and export opportunities (freedonia.com, 2010).
This paper identifies an emerging macro-environmental theme within the industry and looks at how it may bring about change to business buying behaviour.
It has been written to present at The National Paint & Coatings Association annual meeting: a forum for the exchange of ideas and information amongst some of the industry’s most influential businesses and individuals.
The paper recommends and justifies a strategic marketing response that manufacturers should make in response to these changes, identifying how marketing professionals need to adapt their skills, attitudes and behaviour.
Emphasis will be placed on environmental issues (see appendix fig.1, PESTEL analysis); how buyers are beginning to look for more environmentally friendly paints -containing fewer chemicals which harm both the environment and human’s health.
Choice of Macro-environmental theme – Environmental issues
Using primary and secondary research sources, it has been identified that environmental issues have been an issue within the paint manufacturing industry for many years.
However pressure is increasing; customers are looking for ‘safer’ paints, which reduce the affect on the environment and individuals who develop and use these products.
Painting operations are carried out by a broad spectrum of users; industrial, commercial, and consumer. The risks posed to these groups and the environments are highlighted in this paper.
The automotive painting process is considered one of the most resource and emissions intensive (S Papasavva et al, 2001). With the need for 3 coatings for one vehicle, the exposure to various chemicals is far higher than the fumes which someone in a domestic environment is exposed to – who would generally use only one type of paint. However this does not mean that these people are risk-free.
The US Environmental Protection Agency (2010) explains that Volatile Organic Compounds (VOCs), present in paints, can have short- and long-term adverse health effects.
Concentrations of many VOCs are up to ten times higher indoors, indicating that workers applying paint indoors are at greater risk than many others, such as shipyards, where paint is applied outdoors.
Businesses recognise this and are taking steps to reduce their environmental impact through the paints they use: In 2008, Honda Manufacturing introduced the use of waterborne primer and basecoat painting processes to reduce their environmental footprint and its Barcelona branch introduced a system of applying paints that dramatically reduces emissions of VOCs (world.honda.com, 2010).
Paint manufacturing – the environmental impact
The exposure of chemicals in the manufacturing processes impact global warming, ozone depletion, toxicological effects on humans and wildlife, and the ecosystem (R Seth & E.K.L Tam, 2006, p455).
The processes and raw materials have the potential to impact the quality of water, air, earth and a businesses bottom line (Pollution Prevention Resource Exchange, 2010). Key properties contributing towards environmental impact include:
Air Quality
Raw materials required to produce a finished product contain VOCs, listed as hazardous air pollutants (HAPs).
Additionally, pigment dust, generated during the manufacturing process can have an adverse effect on air quality and workplace health.
VOC’s and pigment dust are emitted into the environment during use, when exposed to air.
Water Quality
Most contamination of waterways occurs from wastewater discharge, often contaminated with solvents and heavy metals.
Solid Waste
Such as used containers, pallets, and packaging. The improper disposal of certain wastes can result in pollution of groundwater, surface water and air.
Paint manufacturing – The impact on human health
Indoor air is at least three times more polluted than outdoor air, and according to the US Environmental Protection Agency (EPA), is considered one of the top 5 hazards to human health with paints and finishes among the leading causes.
Paints release toxic emissions into the air for years after application. The source of these toxins is a variety of VOCs which have historically been essential to the performance of the paint (eartheasy.com, 2010).
However, with increased awareness of the potential hazards and a general shift towards healthier lifestyles and a greener environment, paints containing VOC’s are becoming decreasingly popular.
Meso-environmental theme – Business buyer behaviour
Given the growing concern about air quality, the depletion of the ozone layer, global warming and the rise of respiratory-related illnesses, the reduction of industrial pollutants (notably VOC emissions) has become a key focus for regulatory authorities and governments across Europe (Rohm & Hass Paint Quality Institute, 2010).
Paints contribute to many environmental issues, as research shows:
· In 1989 the World Health Organisation reported that painting as an occupation is carcinogenic
· In Denmark ‘Painters Dementia’ caused by excessive exposure to solvents and chemicals that constitute paint, is recognised as an industrial disease
· In Britain, allergies and chemical tolerance problems have doubled in the last ten years
· The indoor environment is up to ten times more polluted than the external environment and yet people spend up to 80% of their lives inside buildings; where up to 90% of the internal surface area can be painted
· Some paints produce up to ten times their own weight in waste, and can rise to as much as 30 litres for some specialist paints. (cornishlime.co.uk, 2010).
Additionally, new environmental regulations, such as the new European VOC directive have been introduced to bring down current emissions through encouraging the use of alternative low solvent paints (.3daycar.com, 2010).
It is facts such as these that have increased awareness amongst businesses, who are consequently striving to reduce the impact they have on health and the environment.
To achieve this they have started looking for safer coatings that limit the effect on the environment and pose less hazardous to individuals who both create and use the paints.
Such coatings include water based paints which contain almost no solvents therefore omit fewer toxins. Powder coat systems also remove the impact of VOC emissions completely and are 100 percent recyclable.
At Volvo and BMW, the painting process brings VOC levels down to below 2kg per car; the average is 5kg per car in Europe (3daycar.com, 2010).
In shipping, the top 5 Asian shipyards have committed to the VOC30 directive in an effort to reduce VOC emissions by 30% by 2012.
Another example is ICI Dulux, part of AkzoNobel. In Malaysia, Dulux was the first to introduce a range of low odour, low VOC green label-certified emulsion paints (icipaints.com.my, 2010).
As part of the worlds leading chemicals manufacturer, ICI is paving the way for the commercial paints market – whilst, as part of AkzoNobel, is widely recognised for its commitment to the environment.
In the marine paints industry, research conducted by company x identified that 45% of respondents believe environmentally friendly paints are becoming increasingly important (see appendix fig 4: Factors Growing In Importance for IP marine customers).
These are just some examples of industries where key, influential players are taking steps in the right direction; it is organisations like this that pave the way for other manufacturers, and there is no doubt many others will follow in the future.
Paint manufacturers need to develop safer paints and improve manufacturing processes to protect employees, whilst at the same time ensuring paints contain fewer VOCs and toxic chemicals to protect the individuals applying paint, and improve the end users environmental reputation.
Manufacturers could conduct an innovation audit here to identify ways of improving organisational innovation which may help gain or retain competitive advantage through new product development.
It will also help to identify any barriers such as resistance to change and costs associated with new and improved products.
Shift in social attitude
There has been a distinct change in the social attitude globally, towards issues of sustainability. People are less tolerant of activities detrimental to health or the environment (R Seth & E.K.L Tam, 2006 p453).
With issues surrounding lead poisoning from paints in the 1990’s, the banning of Tin (TBT) from marine paints in 2008, and increased awareness of the affects to human health from paints, the marketplace is looking at ways to limit use of toxic substances.
With more emphasis on organisations’ environmental impacts, businesses are also looking for paints that are better for the environment.
In time there is a strong possibility that the wider market will demand these paints.
Manufacturers should act now to identify what is happening in their market. One way of doing this is to use Market-oriented Ethnography to observe the markets natural consumption behaviour (Mir A J, 2010).
Undertaking such activities will enable manufacturers to see what their customers are doing now to determine how quickly their behaviours are changing. This will help identify what they need to do, and how quickly they need to make changes.
There are, however, still organisations that do not take their responsibilities seriously, or use paints containing VOCs for their performance properties.
Therefore there will still be a need for paints that contain harmful chemicals, but in time, regulations may be enforced and it may become compulsory to use low VOC paints – manufacturers need to be prepared for this.
Strategic response - Adopting CSR as a key strategy
Businesses are investing more resource into Corporate Social Responsibility (CSR) policies to achieve sustainability. For paint manufacturers to achieve this, they need to see the benefits and adopt CSR strategies (if they don't already do so), focusing on producing safer paint.
CSR is defined as the way companies integrate social, environmental and economic concerns into their values and operations in a transparent and accountable manner. It is integral to long-term growth and success and plays an important role in promoting values and contributing to the sustainable development of communities (Foreign Affairs and international Trade Canada, 2010).
The concept of CSR has been around for many years, evolving since the 1930s (Ziek, 2008); however it now seems more important than ever for companies to be perceived as socially responsible in modern society (Morsing et al, 2008).
In Asia, the top CSR issue for companies in the next ten years is expected to be climate change (Business and the Environment, 2009), with the greatest challenge facing businesses relating to the environment.
However, manufacturers cannot think solely about the environment. Paints with high levels of toxins are proven to affect health; steps should be taken to eradicate these chemicals.
Manufacturers with international business operations are increasingly held accountable for the working conditions of factories in which a product is made.
If a company or brand becomes associated with below standard working environments, it risks negatively impacting brand value, image, and market opportunities (Bureau Veritas UK & Ireland, 2010).
Manufacturers need to take any steps necessary to ensure this does not happen to them.
The triple bottom line
For a paint manufacturer to implement an effective CSR strategy, they should focus on the triple bottom line (TBL).
Developed in 1989 by John Elkington, it is a serious and increasingly recognized concept; becoming an accepted way for businesses to demonstrate that they have strategies for sustainable growth (greenlivingtips.com, 2010).
TBL takes into account the impact a business has in terms of social and environmental values along with financial returns.
Watching the TBL means ensuring a company’s actions meet the needs of all stakeholders, including the shareholders, community, environment, employees, customers and suppliers (Ivey, 2006).
One paint manufacturer doing this well is AkzoNobel. The business is committed to reducing its impact on the planet and delivering more sustainable products and solutions to customers, with sustainability at the heart of everything they do (AkzoNobel.com, 2010).
AkzoNobel has created a sustainability framework focusing on three key areas – environmental, economical and social. This sits very much in line with the TBL framework, proving that this strategy is effective.
Additionally, AkzoNobel are number one in the Dow Jones Sustainability Index (DJSI), showing that such a framework is recognised by the leading corporate sustainability body.
Paint manufacturers need to focus on the following areas to ensure a strong framework is in place:
People
Looking after the community where its business operates, and ensuring that the working environment and ethics are safe to ensure that people are happy and at low risk of job-related illness or injury.
Planet
Working to minimize the ecological impact in all areas – from "cradle to grave".
Profit
Making an honest profit, in harmony with the other two principles of People and Planet.
It is also important to build strong relationships with all parts of the supply chain as they are also accountable to the overall impact of a company.
By concentrating on the above, paint manufacturers have a greater chance of long-term success; creating a positive work force and environment, enhancing its profile as a responsible business.
How marketing professionals need to adapt
For paint manufacturers to evolve and shift their focus to CSR, marketing professionals must assess their current roles and responsibilities, and take necessary actions to develop and promote more responsible business practices.
Marketers need to gain a strong understanding of CSR and how it can benefit their organisation, then implement policies and communicate them internally and externally to emphasise how the business is changing and developing to contribute to a better future for people and the environment.
Promoting CSR externally
There should be a balance between promoting CSR and promoting the business and its products. Research shows that customers may leave if they perceive that CSR initiatives are achieved at the expense of product quality (Sen and Bhattacharaya, 2001).
Product development and innovation still need to be a key focus for paint manufacturers, which can link in to CSR policies relating to the environment and social aspects.
Innovation can help to bring ‘greener’ products to the market, and can generate a need for more resources, meaning recruitment and growth in the local economy.
If organisations do this correctly and the marketing teams focus on communicating to the right audiences, businesses shouldn't need to over emphasise CSR – they will in time, gain recognition for this.
Promoting CSR internally
Marketers need to understand how to communicate and implement CSR internally.
Gaining internal belief can often be the most challenging task, therefore it is vital that it is implemented effectively; promoting the benefits of working to become a more responsible organisation.
Using Morsing et al (2008) CSR management model ‘the inside out approach’ (see appendix fig.2: CSR management: the inside-out approach), businesses can identify key areas in which they should involve employees; giving them the opportunity to contribute to the local community through social schemes for example, where employees go out into the community and do something to help.
To achieve internal buy-in, employees need to feel a sense of ownership – otherwise manufacturers will not find that support comes internally (Morsing et al, 2008).
Using Mendelow’s stakeholder analysis, businesses can identify which stakeholders are the most influential, such as owners and senior management.
These stakeholders should be the people who communicate and promote CSR internally and externally.
Not only will CSR schemes give the business a better reputation, there are other benefits too:
· Employees will experience commitment and personal identification with the organisational CSR agenda – therefore supporting the CSR activities
· Employees will be surrounded by a safe and appealing working environment
· The organisation will be more attractive to the market therefore increase its market share and workload
· Revenue and profitability will increase (Morsing et al, 2008).
Businesses and individuals will benefit from all of the above. Marketers need to ensure that they communicate these benefits effectively so that the people involved recognise how they can help the business achieve its goals.
This will ultimately result in a successful and profitable business with the potential for long term sustainability and increased reputation.
Conclusion and recommendation
In order for paint manufacturers to succeed it is essential that they take note of the environmental issues surrounding the industry, identifying what they can do now and in the future to limit the impact on the environment and humans.
This means developing safer, cleaner paints that contain fewer toxic chemicals and VOCs.
By developing and promoting these paints, organizations will retain their position in the market and potentially increase market share and competitive advantage through offering the most innovative, groundbreaking products which meet the market wants and needs.
Organisations should focus on implementing CSR policies, with marketing professionals adapting their skills to fully understand CSR; communicating this effectively to key internal and external stakeholders to build belief in the business.
By working to become more responsible, taking care of its people and the environment, manufacturers can create a more sustainable and therefore profitable business.
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