Case study Corporate Knights, a research organisation from Toronto, Canada, puts together the Glo...

case study

Corporate Knights, a research organisation from Toronto, Canada, puts together the Global 100, ranking of the world’s most sustainable companies, based on annual data analytics. Using data available publicly, Corporate Knights rates large companies on 17 key measures, evaluating their management of resources, finances and employees (eg. Energy, carbon footprint, water use, waste productivity, clean air). It considers about 4000 companies worldwide with market value of at least $2billion. For several years, Natura &Co SA from Brazil has been amoung the world’s leaders, ranking number 14 in the latest ranking. It is also the world’s largest cosmetic company. Natura (naturaco.com) with headquarters in San Paulo, Brazil, was founded in 1969. It has more than 18,000 employees and annual revenue of about $4.4billion. Natura has three prominent subsidiaries that strive to be as sustainable in their operation as possible: Natura Cosmetics, which has become synonymous with Natura & Co SA in general, and its more standalone brands The Body Shop. Natura Cosmetics develops, produces, distributes and sells cosmetics, fragrances and hygiene products. Natura’s products include creams, perfumes, shampoos, shaving creams, soaps and sunscreens. Its portfolio is made up of brand names such as Amo, Ekos, Tolodia, Aguas, Chronos, Erva Doce, Homen, Horus, Seve and Luna. It employs more than 7,000 people seven countries: Brazil, Argentina, Chile, Mexico Peru, Colombia and France. Sustainable development has been Natura’s guiding principle since it was founded. A passion for customer relationship management (CRM) led the company to adopt direct sales as its main commercial strategy. To support its direct sales model, more than 1,421,000 consultants around the world (most in Brazil) promote the company’s values and products to consumers. Innovation is at the heart of Natura’s sustainable development policy. For example, last year the company spent $75million on product development, launching 164 products and achieving an innovation index of 63.8% (percentage of revenue from products launched in the last two years). The Body Shop International Limited, trading as The Body Shop, is a well-known, formerly British cosmetics, skin-care and perfume company that was founded in 1976 by Anita and Gordon Roddick. It currently has more than 1,000 products, which it sells in 3,100 owned and franchised stores in 66 countries. The company is still based in East Croydon and Littlehampton in the United Kingdom, but was bought from the French cosmetics company L’Oreal (which owned The Body Shop from 2006 to 2017) in June 2017 for $1.2billion. Famously, The Body Shop has been a leader in banning animal testing of cosmetics products worldwide. The Body Shop has been against animal testing since the 1980s but is also tirelessly working to ban animal testing in general in the cosmetics industry. This position also feeds into its sustainability initiatives. Anita Roddick said: ‘My hope for the future of The Body Shop is primarily invested in those people who will be the custodians of our culture and values.’ This custodianship includes the pledge of being the world’s most ethical, sustainable company. For example, in 2016 to mark its 40th anniversary, The Body Shop unveiled a global CSR strategy – Enrich Not ExploitTM – that underpins all aspects of its operations. The pioneering commitment reaffirmed the global cosmetics brand’s positioning as a leader in ethical and sustainable business practice. Aesop was founded by hairdresser Dennis Paphitis in 1987 Melbourne, Australia. Suzanne Santos, Aesop’s first employee was also instrumental in the foundation and growth of the company. Aesop is viewed as an Australian skin-care brand, owned fully by Natura since 2016 (although Natura has had part ownership since 2012). The brand has been identified as a unique way of doing marketing in today’s social media world. In a somewhat unorthodox way, this includes not using traditional advertisements of discount sales to promote its products. Instead, Aesop’s promotional communication are mostly by word-of-mouth for the design of its products, stores, and events, which are a singular mix of indulgent product experiences, thoughtful language and modern minimalist design (compare with the Swedish furniture giant that often receives similar reviews of minimalist but superb design in the furniture business). With its core subsidiaries (Natura Cosmetics, The Body Shop and Aesop), Natura and Co SA has redefined success on business on a global scale. In 214, it became the first publicly traded company to become a Certified B Corporation. A Certified B Corporation is a company that focuses on two specific sustainability issues. First it has a threshold standard for its impact on society and the environment. Second, the company must have committed to consider the impact of its business decisions on its wider stakeholders, not just its shareholders. Currently, only 2,200 B Company Corporations exist worldwide, and their core sustainability focus is on the interdependence between society, environment, and economy. Importantly, Natura’s actions show that it is possible to make a positive difference to the environment while also ensuring that financial viability of the company. This mindset drove Natura’s purchase of The Body Shop in 2017, the first billion-dollar B Company Corporation acquisition by another B Company Corporation. Background Dossier generated as part of our company discussions with The Body Shop.

Please review the dossier and utilise the Body Shop website (https://www.thebodyshop.com/en-sg/#) and respond to the questions below:

RTC are in early discussion with Natura Cosmetics, parent company of The Body Shop (TBS) on how to improve TBS positioning in Asia to take advantage of their appeal to the market and expand to meet the demands of the forthcoming middle-class wealth boom. Managers of TBS and Natura are aware that TBS products and shopping experience is very popular in Asia, but they want to take it to expand the popularity and depth of penetration of TBS in Asia. The Boards of TBS and Natura have also become aware that, while TBS has excellent sustainability credentials (a B company rating) in the West, their corporate responsibility to community has focused on non-Asian recipients (see the About Us page on TBS web site). They wonder if the sustainability and corporate responsibility story is appealing in Asia or able to be maximized in some way to benefit the company. Natura and TBS have asked RTC to identify some strategies that would be successful in the Asian market (they have not yet specified which countries – you may wish to suggest which one country, or a grouping, based on market analysis). They are not looking for a marketing campaign – rather strategies based in sound knowledge of the country’s business culture that they can exploit to maximise potential success and profit while building on the sustainability credentials. Your strategies may take into account all aspects of business – from operations to marketing. Most importantly, your response should identify the ‘traps’ for a business such as TBS in Asia. One ‘trap’ identified by the client is counterfeiting (with non-sustainable product supply chains) undermining their reputation. Please offer advice.

In short – what is your advice for success for TBS and Natura in the Asian market?