Reputation, Reporting and Communications

February 19th 2015

Lecturer: Tobias Webb

Tobiaswebb.blogspot.com

Corporate Reputation: What and Why

• Driver of value?

• Perceptions of product quality and likely behaviour?

• ‘Your most important asset’?

• Vague notion that’s hard to quantify?

• All of the above…

Why does Reputation matter?

• 301 business leaders from 29 countries across 28 industries participated in the 2014 Reputation Leaders study

• Only 16% feel their organization has the full capabilities to manage reputation.

• 65% of business leaders saying that reputation management is a top priority for executives and the Board of Directors.

Theorists? MIT Sloan/Imperial

The results of the survey showed that the company’s reputation for corporate social responsibility had a greater effect on consumers’ willingness to overlook negative information about the company than the company’s reputation for being customer-oriented (defined as the extent to which a business is viewed as being caring and attentive to customer needs) or for being oriented toward service quality.

These results suggest that a dollar invested in corporate social responsibility initiatives would buy greater insurance against negative information than a dollar invested in either service-quality orientation or customer orientation.

However. Surveys are one thing.

The reality of boosting sales by ethical reputation is more complicated.

Consumers will pay for sustainability/CSR/Reputation

• A tempting myth which CEOs still often believe• Reality says they want to trust the brand, despite

surveys saying they will buy more socially responsible products.

• Reality is that nearly 500 ecolabels confuse consumers and beyond ‘deep green’ niches they just want companies to take care of the issues –and they won’t pay any more for the privilege

• Professor Craig Smith on Consumers and Sweatshops

The vague and the vacuous?

• Lots of expert advice is all rather PR/jargon oriented and communications orientated.

• For example.

• Look on Google Scholar since 2011. There’s very few studies looking at reputation and sustainability in a rigourous way

• Lots of organisations out there adding ‘snake oil’ science and measurement of reputation

What can companies do? Cliches..

• Transparency

• Honesty

• Authenticity

• Humility

• Open ness

• Listening

• Responsiveness

• Why don’t these happen?

Challenges to reputation improvement

• “No need to say more than we need to”

• Legal risk

• Perceptions of open ness vs. expectations of stakeholders

• Career limiting fears of radical transparency given social media risk

Can you do the right thing and still have a bad reputation? Yes

• Look at Nike, Gap, Adidas, Primark etc

• Look at the Chemical industry, Mining companies…

• Companies behaving best in class often do not get credit outside the sustainability / CSR world

• Understanding their work is hard. Valuing it for shareholders and society even harder

So why bother? Back to the business case for CR/Sustainable Business

• License to Operate

• Employee motivation

• Bank Account of Goodwill

• Partner of choice

• Trusted brand

• Academic and business case study

• Be popular on the internet

• Make CEOs feel good when they go to Davos

Who has the best reputation?

• Apparently, according to the “Reputation Institute” consultancy the: “Top three CSR reputation winners in 2014 are Google, Microsoft and The Walt Disney Company”

• But according to GlobeScan it’s Unilever, Patagonia, Interface and M&S on sustainability.

So, good we’ve sorted that out then…

Corporate Sustainability and CSR Reporting: What’s it all about?

• On the surface, massively dull PR, as if someone was trying to sell you on the idea of spending time in a library full of propaganda

• But also significantly important because of the process sustainability and CSR reporting takes a company through

Really?

• Yes because to produce an acceptable report or website on sustainability of any note the company has to collect lots of data

• Data collection can improve performance

• Imagine if facilities managers are asked for data – and what they are doing to improve performance

So where did CSR/ Sustainability reporting come from?

• Some companies produced reports in the 1970s

• Accelerated 2000’s onwards

• 4000/5000+ produced each year world-wide

• Regulatory disclosure drivers increasing slowly (EU, China, Singapore, South Africa, Brazil, often Stock Exchange related)

So who reads them?

• Boards and senior managers read them as they sign them off.

• That’s what does most of the good in reporting.

• Assurance providers are paid to read them!

• ESG analysts might read them.• Some employees, potential and

existing, but few compared to overall numbers.

• Journalists / NGOs when things go wrong!

• Trade press, some mainstream media, occasionally.

• Most met with deafening silence

Does reporting do any good?

Under-studied area. One working paper from Harvard and London Business School says yes:

• ...find increased propensity to receive assurance to increase disclosure credibility in the case of South Africa, and increased propensity to adopt reporting guidelines to increase disclosure comparability in both China and South Africa.

• In contrast, treated firms in Denmark and Malaysia did not increase disclosure.

• Danish firms responded by embedding environmental and social factors in their supply chain management, and by signing on the United Nations Global Compact while Malaysian firms adopted reporting guidelines.

• (No) evidence that the disclosure regulations adversely affected shareholders.

Future of reporting?

• More of it as Stock Exchanges, some investors, institutions/NGOs and Governments demand more information on material issues (GRI / CDP)

• Integrated reports: “...a concise communication about how an organization's strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value in the short, medium and long term.”

Areas for further research

“…increasing number of countries are adopting disclosure regulations similar to the ones considered….

…firms respond differently across countries, it is important to evaluate how companies respond differently across distinct contexts.

…more research is needed in order to understand how companies change resource allocations and investment decisions as a response to changes in disclosure regulations.

Finally, a fruitful avenue for future research is investigating changes in the demand for non-financial information.

While the disclosure regulations in some cases increase the supply of such information, we still know little about how they affect the demand across different stakeholders.”

Case Study: Interface

Corporate Responsibility Communications

I Conclusions: Interface

• A story based on purpose matters most

• Demonstrating top level buy in over a long time vital

• “Change the world by changing our industry” message strong

• Social media not just for B2C companies

• Campaigning for level playing fields helps the business AND drives credibility if sharing attitude is genuine

I Final conclusions: Interface

• Shows that a medium sized company ($1 billion turnover) can make a big impact

• International community work (NetWorks) linked to closed loop ethos. Helps demonstrate world-wide company focus and potential for sustainability to help communities and the business in a commercial proposition

Case study: Primark

Corporate Responsibility Communications

The background

• Popular UK fast fashion retailer

• Owned by FTSE 100 listed group ABF

• From 2005: NGO accusations of sweatshop conditions

2008 onwards: Pressure mounts

• BBC allegations of sweatshop conditions both in India and the UK aired

• NGOs and media delighted to report in detail

• Boycotts, bad PR

The response

• Boycotts don’t usually affect sales much, BUT:

• Reputational damage in media was undoubted

• Primark disputed journalist claims and launched mini-counter offensive

Renewed vision statement:

“As an international brand with a global supply chain we have a responsibility to act ethically. We embrace this responsibility as an opportunity to be a great force for good.

Primark is committed to providing the best possible value for our customers, but not at the expense of the people who make our products”

Other substantive changes

• Integrated systemic operational changes by March 2009/March 2010

• Hired Senior Head of Ethical Trade

• Doubled Ethical Trade team 2009/10

• Buyers need sign-off from Ethical Trade head for new suppliers

• 100 buyers given intensive Ethical Trade training

• Engaged with NGOs in meetings via Ethical Trading Initiative

Primark: Conclusions

• Business “head in the sand” until 2008

• Reacted unusually in pursuing journalist(s)

• Made substantive internal changes (Ethical Trade Director, support staff, senior level buy-in and stakeholder engagement)

Primark: Conclusions

• Used partnerships, pilots to drive change

• Uses multi-media on the website. Humble tone: Not active on youtube/twitter/FB yet

• Confident enough to pay for “Times 100 Case Study”

• Now welcomes challenges from NGOs/others

Primark: Final Conclusions

• Financial impact of scandal and boycotts was not key driver (little impact)

• Moral/Reputational impact on management

• Reputation ‘recovered’ with NGOs and media

• Now much better attuned to supply chain risk

15 Things Good Corporate CR Communicators Get Right

1. They have clear websites navigating readers to clear targets

2. They demonstrate both an understanding of the global challenges, and their role in the world.

3. They use their reporting as the basis for communications campaigns, not as the campaign itself

4. They are not afraid of honest debate about challenges and progress

5. They use social media to communicate on sustainability, either via a corporate account or by specific accounts

6. They publish regular performance data and updates

7. They offer news feeds on progress

8. They showcase critical stakeholder voices and suggestions for improvement

9. They partner with credible academic institutions and NGOs –because science matters!

10. They talk about how sustainability fits with business strategy – and how that will improve

11. They don’t forget to link sustainability with both social issues and governance, global and local

12. They host public debates which are streamed online and do not always have themselves at the centre

13. They seek crowd-sourced solutions and encourage and fund innovation

14. They are clear about sustainability as a business opportunity

15. They are clear about their corporate power and influence and have a public debate about how that power and influence are used, and report on progress, positive and negative

Further CR Communications Reading:

http://www.slideshare.net/Tobiaswebb/how-to-shout-about-sustainability-effectively

http://www.slideshare.net/Tobiaswebb/csr-ethics-and-sustainability-communications-then-and-now