The R-factor when it comes to sustainability
In a recent report from McKinsey on the business value of sustainability, the management consultancy asked nearly 2,000 global business executives several questions related to reputation management. And year after year, global executives report back that enhancing reputation is a top factor as to why companies spend time and resources devoted to sustainable initiatives. Executives also say that reputation has the “highest value-creation potential for their industries over the next five years.” That’s quite an endorsement of the ROI of reputation management. And when asked what are the activities they do the most to arrive at these reputation-inducing sustainability perceptions, executives mention communicating their sustainability to customers and continuing to build and safeguard relations with stakeholders. This makes sense because if customers and other stakeholders do not know what a company’s sustainable practices are, they can only guess or most probably assume they don’t exist. On the other hand, I would also assume that sustainability is table stakes for most companies and most consumers expect companies to care about sustainability. Unless they are told otherwise, they would be surprised if a company was not pursuing sustainable activities aggressively. I recall my shock several years ago when Apple received the lowest scores from Climate Counts for its environmental actions and position. That has been reversed in recent years. Bottom line — it pays to communicate.
Lower on the reputation-building front for having a sustainable image are having company leaders join the external dialogue on environmental, social and economic issues. Understandably, having your CEO take a public stance carries all sorts of risks when it comes to environmental practices, particularly if it is not aligned with your business strategy. Even when it is aligned, CEOs remain cautious because of the scrutiny and spotlight they place themselves under when they are out in front. As they say, risky business. I presume that longer-tenured CEOs have less to risk for taking environmental stands externally because they already have a decent track record for leading a well-managed company and have a bank of credibility built up.
Despite their reluctance to go hyper-public with their views on sustainability, McKinsey found that more CEOs today versus two years ago consider sustainability a top strategic priority and it is among their top three priorities overall. It is definitely at the top of CEOs’ agendas and a solid reputation-builder that drives value. (Chart from McKinsey report)