Transparency and trust are what drive reputation and results, says C B Bhattacharya
Transparency and trust are what drive reputation and results, says C B Bhattacharya
Global companies face huge challenges today that will only become harder in the years to come. Climate change, demographic shifts, urbanisation, an increasingly networked society and technological innovation are but some of the issues that will dog us through the next decade.
Suffice it to say that these mega-trends concern a broad range of societal actors: among them are businesses, governments, customers and employees.
One palpable implication for companies is that business as usual is not an option. Business cannot restrict itself to maximising financial performance (ie profit) anymore. Performance on the people and planet dimensions will be ever more important for companies to succeed.
As a case in point, trust and transparency far outranked financial performance as drivers of corporate reputation in the Edelman Trust Barometer 2010. “Trust in now an essential line of business to be developed and delivered,” Edelman says.
Talent rethink
Increasingly, business must cater to savvy stakeholders (people), especially employees and customers. The market for talent has been taken for granted for a long time – now, the rise of labour shortages is forcing companies to rethink ways to acquire and retain talent.
Corporate trust plays a decisive role in this regard, as employees look for more than a paycheck while choosing for whom to work.
In turn, trust motivates employees to spread the word to their families and friends, potential future employees and customers and thus be valuable ambassadors for corporate reputation. On the customer front, as many products provide comparable features, trust will be another powerful tool to differentiate products and the companies producing them.
Creating real value
Responsible innovation, specifically closed-loop systems – cradle-to-cradle design – and resource efficiency, will play a key role in safeguarding the planet. There is no substitute for investing heavily in innovation. And the finiteness of our planet and its resources behoves companies and even countries and society at large to question if eternal growth is possible or whether it is time to rethink the growth paradigm.
Nobel laureate Joseph Stiglitz sums it up in three words: “Avoid GDP fetishism.” Similarly, pioneering companies (ie those who can rise above the herd mentality currently permeating business) need to be stakeholder-centric and view profits as a consequence of value creation.
After all, the doctrines of profit and shareholder value maximisation are also man-made, so why can’t we think in terms of the triple bottom line – people, planet and profit – going forward?
It is important for us to recognise that the legitimacy of many businesses per se is not in doubt: most industries such as clothing, energy, and transportation are fundamental human needs. The sticking point is how businesses conduct operations and whether they are perceived to be a part of the solution, and not of the problem.
BASF is a good example of the former: it claims to impede climate change, as their products help customers curb greenhouse gas emissions. And they communicate their actions credibly to their stakeholders.
Look for solutions
As I recently discussed at a senior management workshop at E.ON, moving in this direction requires a cultural overhaul and for a company’s stakeholders to bond around the common goal of being solution oriented.
A necessary change for companies to be part of the solution is that corporate responsibility/sustainability cannot be pushed off to a single department, disconnected from key decision makers.
To demonstrate one’s ability to make a real difference to people and planet – a key prerequisite for building trust – corporate responsibility must be incorporated into overall business strategy. Otherwise, companies will lose credibility and consequentially also trust among stakeholders.
Embedding sustainability
Going forward, there are three questions executives must ask.
First, who are we as a company? Assessing detailed stakeholder perceptions and identifying potential sources of mistrust is a necessary first step. Next, who do we want to be? Communicating across all levels of staff and soliciting stakeholder input can help a company solidify its identity. And, finally, how do we get there?
Co-creating and communicating a signature cause in cooperation with stakeholders can help companies unearth the hitherto untapped symbiosis between business and society.
Prof C B Bhattacharya is E.ON chair in corporate responsibility at the European School of Management and Technology
Ethical Corporation has published a detailed report on how leading companies embedd sustainability. The report includes case studies from leading companies including: Alliance Boots, PepsiCo, Innocent Drinks, Tata, Vodafone, Man Group, Starbucks, Novo Nordisk, BP, Sedex, Campbell’s Soup and moreFor more details click here
business success reputation trust