Many will see their reputation as being impacted by negative comments in the press. They may even assess this impact in terms of whether the criticism is local or national, and how long it lasts. But do they fully understand the complex dependencies within their business processes that could cause the actions or inactions that receive criticism?

Yes, there are differences between brand and reputation. And there is a lot that people do to project positive images of what they do. But is all the effort clearly focused, and are there plans in place to address actual concerns of stakeholders with deeds? Does effort get wasted window dressing the perceived or typical concerns of stakeholders?

Do you really understand how your reputation is impacted?

This could seem to drive organisations down a rather narrowly focused approach to managing a sub-set of risks, but two things should stop this:

1. The most successful companies plan and act consistently on a much wider range of risks than this. It may be getting a tired cliché, but enterprise wide risk management helps to put the right effort into the right places.
2. Sustainability is a long term game. The immediate impacts of something going wrong may not be on your reputation, your wider stakeholders, or your longer term strategic objectives. If something really goes wrong the impact could be long and far reaching.

Imagine doing a post mortem on your organisation, looking back and seeing what you could have prevented going wrong. How could you have done things differently? It really helps if you can see what the important things really are, and make sure that the right things get done at the right time!

SK

1. Reputation and brand strength – Sustainable performance fosters a strong corporate reputation, which has a significant effect on a company’s financial valuation. According to the UN Global Compact, reputation accounts for 10% of the marketing value of a company, and 45% of a company’s reputation is based on social performance.  Nike is a classic example of a company which, faced with reputational damage in 1996 due labour and environmental practices, pioneered product-stewardship strategies and sustainability innovation to recover its reputation.

2. Competitive advantage and productivity – A survey of over 1,600 of the world’s largest companies in 16 industrialized countries revealed that as many as 53% of the companies surveyed indicated that much of their sustainability behaviour is motivated by innovation.

3. Improved shareholder value – SRM can contribute to increased profits in the long term and reduce weighted average cost of capital. Shareholders are increasingly demanding future-proofed financial investment strategies, and the inclusion of an early warning risk management process for risk factors such as climate change.

4. Operational efficiency – Not addressing sustainability concerns (including environmental legislative requirements, employee engagement, supply chain issues and customer demands) raises the risk of operational disruption through strikes, boycotts, and greater regulatory scrutiny, with often major financial implications.

5. Financial efficiency – Appropriately managing sustainability risks can result in cost reduction achieved through improved environmental and health and safety performance (resulting in fewer fatalities, accidents, non-compliance fines, and lost workdays). PUMA has recently announced that the economic value of its impacts due to water consumption and greenhouse gas emissions is Euro 94.4 million.

6. Improved human and intellectual capital – There is increasing evidence that a company’s environmental and social performance affects employee turnover rates. For example, Patagonia, whose motto is to “build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis”, has a turnover rate of 4.5%, compared to an industry-wide employee turnover of 20%.