Wednesday, 9 December 2009

The New Consumer

December 09, 2009

Karim Raslan: The New Consumer The Jakarta Globe

Copenhagen will be a turning point. Most people — especially those of us in Southeast Asia — have not realized the gathering’s significance, but it will have a major impact on our lives and our economies.

Sadly, there will not be substantive progress at the multilateral level. However, the UN Climate Change Conference will accelerate developed world consumer activism, especially in the moral and ethical spheres.

Most nations (even Barack Obama’s United States) will end up disappointing during Copenhagen’s deliberations. They will not be able to muster the political will necessary for a successful resolution. A hoped-for settlement between the developed and the developing worlds will end up being watered down. Indeed the UN’s lead negotiator, Yvo de Boer, has already been lowering expectations heroically.

Millions of ordinary onlookers — especially those in Europe and America — will be infuriated and frustrated by this compromise. They will respond by seeking to shape public policy through their own personal consumption. As a result, environmentally compliant and sustainable products and services will experience a spike in popularity. Businesses that ignore these changes will suffer.

Southeast Asians need to be prepared for this eventuality. Many will find these changes baffling, contradictory and at times deeply unfair as our prosperity is undermined. Indeed, much of our resources sector — palm oil and coal — will be challenged by these shifts in consumer preference.

Global public opinion will be shaped by highly emotional and deeply moralistic campaigns. Companies and industries that are persistent environmental offenders will be vilified, shamed and actively penalized by consumers. Even the perception of failing to act can and will damage companies.

The divide between winners and losers will be centered on issues of professionalism, sustainability and integrity. Unfortunately, Southeast Asian corporations are not known for their transparency and accountability. This must change.

As it is, some savvy multinationals have already recognized the trend and are taking advantage of the momentum to differentiate themselves in the marketplace. Using issues such as fair trade, companies are establishing a moral cachet for their products, including Nestle and its Kit Kat chocolate bar.

This sort of branding, with an emphasis on the moral high ground, will sweep markets in the developed world. Indonesian and other Southeast Asian companies will lose out if they cannot respond accordingly.

In the case of Kit Kat, having come under criticism for its dealings with cocoa farmers in the Ivory Coast, Nestle altered its terms of production dramatically. On the opening day of the Copenhagen summit, the confectioner announced a slew of fair trade measures and community initiatives.

Interestingly, Nestle chose to focus on Ivory Coast cocoa farmers, ignoring Southeast Asian producers. Of course, Africa has become an increasingly trendy cause for philanthropists and do-gooders from Angelina Jolie to Bono.

But what’s more serious is that “our” Southeast Asian cocoa producers will not enjoy the same positive buzz and commercial benefit. It’s worthwhile remembering that West African farmers will gain an advantage in terms of pricing now that they can proudly claim to be both “ethical” and “environmentally friendly.”

Southeast Asian corporate leaders may well argue that we needn’t worry given our proximity to the booming Chinese and Indian markets. However, we do not want to concede lucrative markets elsewhere. This loss of pricing and branding power will eventually make our products less valuable.

We must also bear in mind that the desire for sustainable lifestyles and products will quickly spread to the Asia Pacific. Our vast palm oil industry is extremely vulnerable to sustained attack and a consumer-led backlash could easily materialize. Are we ready to face this challenge — a challenge that could destroy a vital regionwide industry?

It would be extremely myopic to dismiss such attacks as a mere “Western conspiracy.” Instead, we need to formulate strategies to tell our story and explain our circumstances.

We need to engage, and Indonesia as the world’s largest palm oil producer, must lead the charge. We must enter the battle for the hearts and minds of today’s environmentally-conscious consumers. Like it or not, we must undergo a near total overhaul of industry standards and practices.

Sustainability, environmental compliance and corporate social responsibility are no longer fringe issues. Instead they have become central. We must be ready to engage, and engage globally. Copenhagen is a wake-up call.

Karim Raslan is a columnist who divides his time between Malaysia and Indonesia.