Protecting Your Reputation

How the Rules Have ChangedRe-defining Agriculture

to Build Consumer Trust

Charlie Arnot Charlie.Arnot@CMABuildsTrust.com

Earning and Maintaining the Social License (Sapp/CMA)

Freedom to Operate

Freedom to Operate

Social License

Social License

Definition: The privilege of operating with minimal formalized restrictions (legislation, regulation, or market requirements) based on maintaining public trust by doing what’s right.

Public Trust: A belief that activities are consistent with social expectations and the values of the community and other stakeholders.

The Social License To Operate

Tipping Point

Flexible Responsive Lower Cost

Rigid Bureaucratic Higher Cost

Social License

• Ethics

• Values

• Expectations

• Self regulation

Social Control

• Regulation

• Legislation

• Litigation

• ComplianceSingle triggering event

Cumulative impact

Earning and Maintaining the Social License (Sapp/CMA)

Social License

Freedom to Operate

Earning and Maintaining the Social License (Sapp/CMA)

Social License

Trust

Freedom to Operate

Trust

Earning and Maintaining the Social License (Sapp/CMA)

Confidence

Influential Others

Competence

Value Similarity

Social License

Trust

Freedom to Operate

Trust research was published in December, 2009 – Journal of Rural Sociology

What drives Consumer Trust?

Shared values are 3-5X more important in building trust than demonstrating competence

Shared

Values

Skill

s

Trust research was published in December, 2009 – Journal of Rural Sociology

What Does It Mean?

“They don’t care how much you know until they know how much

you care!”- Theodore Roosevelt

Questions of Values and Ethics Kohlberg’s Moral Hierarchy

Three Levels – Six Stages1. Pre- Conventional

• Direct impact on me

2. Conventional• Societal expectations

3. Post-Conventional• Principle driven

Lawrence Kohlberg, 1927 - 1987

Punishment-Obedience

The “law & order” orientation

Universal ethical principle orientation

The “good boy / nice girl” orientation

Personal rewards orientation

Social contract orientation

We have an ethical obligation to our employees, our animals, the environment, our customers and our communities

We comply with all environmental and employment laws and regulations

We take care of our land and animals because that’s when we get the best ROI

Pre-Conventional Direct impact on me

Conventional Societal expectations

Post Conventional Principle driven

Questions of Values and Ethics Kohlberg’s Moral Hierarchy

Punishment-Obedience

The “law & order” orientation

Universal ethical principle orientation

The “good boy / nice girl” orientation

Personal rewards orientation

Social contract orientation

Pre-Conventional Direct impact on me

Conventional Societal expectations

Post Conventional Principle driven

Questions of Values and Ethics Kohlberg’s Moral Hierarchy

NGO’s

Business

Sustainable Balance

Sustainable Systems

Ethically Grounded

Eco

nom

ically

Via

ble

Scie

ntifi

cally

Verifi

ed

Ethically Grounded• Compassion • Responsibility• Respect• Fairness• Truth

Value Similarity

Scientifically Verified

• Data Driven• Repeatable• Measurable• Specific

Objectivity

Economically Viable

• ROI• Demand• Cost Control• Productivity• Efficiency

Profitability

KnowledgeKnowledge

FeelingsBelief

Consumer Perception

• The public senses change in the way food is produced but does not understand

• Lack of understanding creates opportunity for activists and detractors

• The food system must engage in value based communication that is ethically grounded, scientifically verified and economically viable to build trust in today’s systems

Animal Welfare

• Values: The proper care of animals is very important to me. My family and I have an ethical obligation to make sure the animals on our farm are well cared for.

• Science: That’s why we use the latest technology on the farm to keep our animals comfortable, protected from disease, predators and the elements, and fed a well-balanced diet for optimal health.

• Economics: Treating my animals with the best care allows my family and me to help provide consumers with abundant, safe and affordable food, and allows me to make a living so I can provide for my family.

Environment

• Values: We drink the same water and breathe the same air as our neighbors. I want to protect and sustain the environment for my family, my community and for future generations so they have it as good, or better, than I do.

• Science: The environmental systems we use on our farm are based on research conducted at land grant universities across the country and I make sure I’m up to date by taking advantage of the latest training and certification programs.

• Economics: Because the market prices farmers receive have not kept up with inflation, farms are bigger than they were just a few decades ago. Like most farmers, I’ve changed my operation in order to keep my farm profitable and provide for my family.

2009 Consumer Trust Qualitative

ResearchSummary Slides

This information is wholly owned by CMA and licensed to CFI; Study was conducted by Gestalt Inc.

Thank You to the 2009 Consumer Trust Research Sponsors

CFI Annual Consumer Trust Survey• Qualitative research in 2009 study

– “What will cause consumers to grant more social license?”

– Eight consumer focus groups• April 2: Des Moines, IA• April 7: Syracuse, NY• April 8: Nashville, TN• April 13: Fresno, CA

Two Observations• Uninterested and uninformed.

– "Give me safe food, and I will trust you to give me safe food. I will trust you (farmers) until you do something to break that trust.“ – Connie, Nashville focus group

– “They could let us know more about what they do… I’ve never been on a farm, I don’t know what they do.” – Judy, Des Moines group

• Trust farmers but aren’t sure contemporary production is still farming.– "Large producers are about the money and rushing

production with antibiotics… Small farmers are concerned about their name…“ – Consuela, Nashville focus group

– "There is a difference: a farmer grows and sells locally with ethics, whereas commercial producers are all about the paycheck.“ – Maria, Nashville focus group

The Challenge

• Building trust and confidence in the contemporary food system among a public that is largely uninterested and uninformed.

• The contemporary food system is not perceived as being consistent with the understanding or values of consumers or with the positive attributes historically assigned to farmers.

• Voices questioning current food system practices are increasing in number, volume and impact.

Animal Rights GroupsLeveraging the gap between public perception and today’s

farms

Humane Society of United States – Channeling Passion

Well Funded – 2010 budget ~$130 million

Main stream messages – Not PETA

Confused with local animal shelters

New structure allows for more lobbying, more litigation

Pacelle’s goal – create a “National Rifle Association of the animal rights movement.”Wayne Pacelle, CEO HSUS

Animal Rights Groups Pick Up Momentum

Post-hurricane New Orleansforced to leave pets behind

Pet food recall after cats and dogs were poisoned

Michael Vick’s dog fighting conviction

Hallmark-Westland video and record breaking re-call

Mainstream Appeal

“Having witnessed the suffering of factory-farmed animals, first-hand, has increased my resolve to make my life a living struggle for animal liberation.”

“Do we want to support killing and misery by buying a meal that was produced from animal exploitation; or do we want to choose a vegan meal?”

Paul Shapiro, COK, 2002Paul Shapiro, HSUS, 2007

“We intend to build bridges. We need to reach out to try to gain support for animal protection wherever we can, no matter from which side of the political spectrum.”

Mainstream Appeal

“We're not telling people to become vegetarians – we're urging them to exhibit greater decency.”

Wayne Pacelle

11-28-08, Sacramento Bee

Driving a Wedge

Reasonablemajorityis here

Antagonistsare there

You arehere

Antagonists

Lawyers targeting pig, dairy farms Attorneys seek justice for neighbors allegedly injured by large operations

BY SETH SLABAUGH • MUNCIE STAR PRESS • DECEMBER 26, 2009

Blogger Cirera57“You do know what a CAFO is right? They are not

farmers.”

The Power of the Hidden Camera

• Raises Profile of Welfare Issues

• Treatment is Inconsistent with Values or Expectations of Consumers

• Undermines Trust in Contemporary Animal Agriculture

Undercover Video Investigations

Nov. 2006, Wiles Hog Farm, Ohio

Nov. 2007, Tyson Chicken Plant, Alabama

Feb. 2008, Hallmark/Westland Beef, Calif.Sept. 2008, MowMar Hog Farm, IowaNov. 2008, Aviagen Turkey Farm, West Va.Sept. 2009, Dietz Dairy Farm, PennsylvaniaSept. 2009, Hy-Line Hatchery, IowaNov. 2009, Hatfield Hog Farm, PennsylvaniaNov. 2009, Bushway Veal Packing, VermontJan. 2010, Willet Dairy, New YorkMay 2010, Conklin Dairy, Ohio

Undercover Video Investigations• Nov. 06 – Wiles Hog Farm, Ohio (HBO documentary)

• Nov. 07 – Tyson Chicken Plant, Alabama• Feb. 08 – Hallmark/Westland Beef Packing• Sept. 08 – MowMar Hog Farm, Iowa (Hormel

supplier)• Nov. 08 – Aviagen-owned turkey farm, West

Virginia• Sept. 09 – Dietz Dairy Farm, Pennsylvania

(Land O’ Lakes contractor)• Sept. 09 – Hy-Line International Hatchery in

Iowa• Nov. 09 – Hatfield hog farm, Pennsylvania• Nov. 09 – Bushway Veal Packing Plant, Vermont• Jan. 10 – Willet Dairy, New York (ABC’s

Nightline)• May. 10 – Conklin Dairy, Ohio

Brands as Agents of Social Change

NGO’s have discovered that global brands can do what

government cannot

Regulation vs. Market Pressure

“We attack the weakest link in the company’s value chain,” Kert Davies, Director of Research, Greenpeace

“We can dance with you or dance on you”

“Discovering brands was like discovering gunpowder.” -

NGO’s Can Accomplish What Government Cannot

NGO’s Can Accomplish What Government Cannot

NGO’s Can Accomplish What Government Cannot

NGO’s Can Accomplish What Government Cannot

NGO’s Can Accomplish What Government Cannot

Top Five US Retailers Now Sell More Than Half of All Food and the Top Ten Companies Sell More Than 75%

Ranking CompanyNumber Corporate/

Franchise StoresSales In $Billions

1 Wal-Mart 2,981 232.9

2 Kroger Company 4,276 66.6

3 Costco Wholesale Corporation 458 59.0

4 Safeway 1,767 40.5

5 Supervalu 2,567 37.0

6 Ahold USA 827 24.0

7 Publix Super Markets 885 21.7

8 C&S Wholesale Grocers 0 19.4

9 Delhaize America 1,544 17.3

10 7-Eleven 6,013 15.0

Source: Super Market News.com

Global Brands

Wal-Mart has 1.8 million associates in 6,500 stores in 15 countries serving 176 million customers each week.

McDonald’s has 30,000 local restaurants serving 50 million people each day in 119 countries.

Brands as Agents of Change

“We live in a time when people are losing confidence in the ability of government to solve problems,” said Lee Scott. “But at Wal-Mart, we don’t see the sidelines that politicians see, and we do not wait for someone else to solve problems that might hurt our business or affect our customers in a negative way.”

Lee Scott, January 23, 2008

Source: Kansas City Star, January 23, 2008

Brands as Agents of Change

Lee Scott, January 23, 2008

Source: Kansas City Star, January 23, 2008

“Our customers want products that make them feel good about their purchases,” he said. “They want to walk into our stores and be confident that the products on our shelves are safe and they are durable. They also want products that are made in a way that is consistent with their own personal values.”

2009 Goals

“We thought we could sit in Bentonville, take care of customers, take care of associates – and the world would leave us alone. It doesn’t work that way anymore.”

Business/NGO Partnerships

The Future of Food Issues Management

Ray Goldberg – Founded the agribusiness program at Harvard, authored, co-authored and or edited 23 books and over 110 articles on positioning firms and institutions in the global value added food system, has served on over 40 Boards of Directors of major agribusiness firms, farm cooperatives, and technology firms.

“There is a thin line between public, private and NGO management of the food system. Consolidation creates huge opportunity but also huge responsibility. We need to create managers where and how the public, private and NGO communities work together to manage the food system.”

- Goldberg at IAMA Conference June, 2010

Times Have Changed

“It is not the strongest species that survive, nor the most intelligent, but the ones who are most responsive to change.”

- Charles Darwin

Summary• We have to give customers, policy makers,

community leaders and consumers “permission to believe” that today’s agriculture is consistent with their values and expectations.

• Failure will result in revocation of our social license and freedom to operate.– Environment– Animal health– Production/processing practices

• We have to build and communicate an ethical foundation for our activity and engage in value based communication if we want to build the trust that protects our freedom to operate.

Protecting Your Reputation

How the Rules Have ChangedRe-defining Agriculture

to Build Consumer Trust

Charlie Arnot Charlie.Arnot@CMABuildsTrust.com