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Paul Carothers, vice president of global public affairs at Kraft Foods, offers his view on why socially responsible business practices create strategic value for companies. Carothers spoke Oct. 18 as part of the Kellogg Social Impact Club's lecture series.

Building a better cookie — and customer trust

Healthier menu options part of Kraft effort to integrate social responsibility into enterprise-wide strategy, says company’s vice president

By Matt Golosinski

10/20/2006 - A cookie is still a cookie, and Paul Carothers was not trying to convince anyone otherwise during his Oct. 18 presentation at the Kellogg School.

“An Oreo is not health food,” said the Kraft Foods vice president for global public affairs, addressing several dozen Kellogg students as part of the Social Impact Club’s ongoing lecture series. “But you can make it a better cookie,” something Carothers said the food giant has done by removing the product’s harmful trans fats.

“Trying to reengineer an iconic product like this isn’t easy,” he said, since the company wanted to preserve the cookie’s classic taste to avoid eroding a flagship brand whose loyal customers might resent any alterations. Still, Carothers said it was a “good thing and a responsible thing” to do, one that fits Kraft’s focus on health and wellness, an area Carothers called one of the company’s “most important priorities.”

In fact, he said that Kraft, a century-old company with sales in more than 150 countries and 2005 net revenues of $34 billion, is well aware of the public’s increasing concern with health, one of the reasons it has introduced its “Sensible Solutions” line, products that offer better nutrition and less of the things, such as saturated fats, implicated as health risks. The company also understands the importance of earning customer trust — something Carothers called bridging “the trust gap.”

Producing data that illustrated consumer sentiment about corporate social responsibility, Carothers noted that most people regard global companies with suspicion: 52 percent of U.S. respondents report not trusting the firms, while only 38 percent believe that these companies “do a good job” in advancing social good. Nearly 80 percent of those polled claim they are either “very likely” or “somewhat likely” to avoid a company’s products or services if they believe the firm acts unethically. A full third of those surveyed said that socially responsible business practices are “very influential” in determining whether they would invest in the company.

Carothers said that Kraft is working to make its investments in socially responsible business “durable” by integrating the ideas into its core business strategy, rather than having these goals be “an add-on … by a bunch of spinmeisters.” He also said the company believes in focusing on priorities and increasing transparency as ways to create customer trust.

“You have to align doing the right thing with the reality of growing your business,” said Carothers, who came to Kraft in 1993 after working in policy and advocacy roles in Washington, D.C., where he turned a doctorate in fisheries science from Texas A&M into a political career that included a role as a legislative director for a U.S. senator.

He told the audience of MBA students that today’s progressive professionals need to regard social responsibility not just as a way to avoid legal liability, but as a vehicle for creating real business opportunities. At Kraft, he said, “act responsibly” is among the firm’s core strategies, alongside perennial wisdom such as expanding global scale and creating superior customer brand value.

Carothers admitted that “transparency is a challenge for most companies, including mine,” but he said Kraft has been “remarkably good at giving people a place to go to find out about [corporate policies] they are interested in,” such as Kraft’s policy on genetically engineered food. The information appears on the company Web site under a section titled “Responsibility,” he said. The company also maintains a Health and Wellness Steering Team, whose members include Carothers.

But, asked one student, aren’t all these considerations a burden for Kraft executives, particularly marketers, who might have to compete with companies not worried about social responsibility?

Carothers replied that good marketers always rise to the challenge of product innovation.

“When challenged to find more imaginative ways to market, our guys find more imaginative ways,” he said.