A Society Brand. That's an interesting way of phrasing the importance of corporate responsibility for companies and its impact on stakeholders. An article in PRWeek described a study by StockWell where they interviewed 26 financial leaders in the UK -- financial analysts, investment bankers, investors, brokers, risk officers and IR directors -- about corporate reputation today. Interestingly, they learned that financial performance is not the end-all be-all of what drives a company's reputation. Although financial value is fundamental to a company's reputation, the relationship with the wider community is now recognized as having the potential to put that reputation and financial value at risk, especially if tampered with. The moneyed group now strongly believes that reputation is more important than ever and that a strong "society brand" is critical to a company’s long-term commercial future. As the report says, "...non-financial performance factors now have a significant bearing on corporate valuations and investment decisions."
However, this group is very sceptical of CSR initiatives and CSR reports and do not see them as solving reputational challenges. Yet, that does not surprise me when it comes to financial perspectives on CSR. Although they may be perceived as window dressing, CSR is not. It focuses leadership and as government directs fewer resources towards citizen well-being such as health and education, companies have a critical role in safeguarding families and communities in these areas. What surprised me was that nearly half of these financial leaders could not name three companies that had reputable Society Brand reputations and 12% could not even name one company that fit this bill. Paltry to say the least.
- Almost all (96%) saw reputation as having increased in importance over the past few years.
- Over two-thirds (69%) considered reputation a critical area for corporate risk management.
- Four-fifths (80%) agree that a strong Society Brand is critical to a company’s long term commercial future.
- More than half felt there was too much emphasis on the Financial Brand.
- 81% saw Society Brand as relevant to all investors, not just SRI funds.
- 46% felt that a Society Brand was reasonably or very relevant to investment decisions.
- 46% couldn’t list three companies with a good Society Brand.
- 61% agreed that companies with a poor Society Brand trade at a discount as markets and analysts build in reputational risk.