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After the world entered lockdown in an attempt to stem the spread of coronavirus, there was a sense of being in limbo, of watching and waiting to see what would happen next. But, in the sphere of corporate reputation at least, Covid-19 didn’t establish a holding pattern, but a catalyst for change, accelerating and emphasising reputational trends which had started to emerge with the new decade.
In the wake of the outbreak, companies’ reputations have been made or broken by their response to it. And with locked-down populations glued to news sources, those responses have been broadcast to an expanded audience.
The future of corporate reputation has been forged in the pressures of the pandemic.
In mid-2019, Weber Shandwick interviewed more than 2,000 mid- and high-level executives from companies in 22 markets, with revenue of at least £500m in developed regions and £250m in developing regions. The resulting report outlined the state of corporate reputation in 2020.
It showed that corporate reputation is recognised as a vital asset with tangible impacts on a company’s success, including its bottom line. On average, the executives surveyed credited the reputation of the business with 63% of its market value. A third rated it at 76% or more of that value.
The other major finding of the report was that a company’s reputation isn’t based on a handful of factors which can be internally managed. Instead, it is ‘omni-driven’, with two-dozen factors seen as having a similarly weighted influence on corporate image. Quality of products and services, employees, and customer service; innovation, technological advancement, and industry leadership; financial performance, and value for money; ethics and values, corporate culture, and purpose; community relationships, governance, philanthropy, and environmental responsibility; and quality of leadership, and staff training and support were all factors rated highly by at least half of the executives surveyed.
The overall lack of distinction in importance between all these factors underlines the shift towards a multi-stakeholder view of reputation, an acknowledgement that the long-held shareholder-centric view is no longer appropriate. Add into this the growing demand among those same investors for environmental, social, and governance (ESG)-focused portfolios through 2019. Plus scores of the world’s largest companies signing up to the environmental disclosure scheme at Davos in January 2020. Even before coronavirus hit, the scene was set for a new take on the importance and role of corporate reputation, against the backdrop of pressing societal issues.
When the pandemic took hold, these changing dynamics were caught up and absorbed into a broader view of the responsibilities and purpose of business. The belief that they shouldn’t be devoted solely to making money for their shareholders, but should be concerned with the greater good, took hold. In effect, Covid-19 accelerated the pre-existing trend towards greater stakeholder-centricity.
By putting the spotlight back onto the social contract, the coronavirus outbreak has made businesses more aware of their corporate social responsibility; and consumers, employees, regulators, suppliers, NGOs and governments more alert to corporate behaviours. Accountability, transparency and authenticity have become mainstays of corporate reputation.
During the early days of the pandemic and national lockdown, many companies were praised for their apparently altruistic efforts to keep the country fed, supplied, and healthy. Initiatives put in place to support both the most vulnerable in society and the creaking care system were lauded in the media and applauded by the public.
Whether it was donating products and services to those in need, such as laptops to care homes or education services to home-schooled kids; converting manufacturing processes to make PPE, hand santiser or ventilators; raising money for charities supporting those hit hardest by lockdown; or using their skillsets to help people find new ways of working, the Covid-19 business heroes stepped up to the mark.
But as well as providing companies with the opportunity for a boost to their corporate reputation, the fallout of coronavirus has spawned a new breed of reputational risk.
The pendulum has swung back, creating a backlash against those abandoning the ‘we’re all in it together’ spirit. Companies who took public money as part of the UK’s Job Retention Scheme to pay furloughed staff, and subsequently announced large-scale redundancies, are obvious targets for criticism.
In the UK, 70% of businesses furloughed staff. But as the scheme is wound up, many have been faced with tough decisions over staffing. In June, manufacturers, retailers and travel operators, among others, warned that as many as nine million jobs could be at risk. The impact of these decisions on corporate reputation is profound. The Weber Shandwick research listed employees as the third most important group in terms of stakeholder perception at 83%, just behind consumers at 87% and investors at 86%.
Consumers have been similarly alienated by the behaviour of some companies during the crisis, vowing to boycott their services. As early as March, businesses including pub chains, hotels and bookshops were being named and shamed by the press and vilified on social media, due to laying off staff, failure to put in place safety measures, or leaving customers in the lurch. Refusal to compensate due to coronavirus opens up reputational damage potential.
The boycott movement has gathered pace in subsequent months. Big businesses who received bailouts from the government have been perceived as not playing by the rules in relation to customers and staff. In response, consumer-citizens are using their power to boycott brands linked to unethical behaviours and ‘buycott’ those seen to be more aligned to their values.
Customers have threatened to stop shopping in supermarkets which fail to enforce the wearing of face masks. Unfair labour practices, environmental concerns and treatment of animals are among the top motivations, with 50% of UK citizens willing to engage in boycotts due to unethical business practices, and 74% of under-25-year-olds having participated.
Bailed-out businesses are also being held to account by government and NGOs, airlines being a case in point. Around the world, governments are being petitioned to save the industry. Some have effectively nationalised airlines, taking a stake in return for financial support. In the UK, airlines have been told they must exhaust other methods of raising funds before the government will step in. For an industry shedding staff, with tens of thousands of redundancies announced, reputation risk is already high.
One way to mitigate that risk would be to link bailouts to environmental commitments. A poll by climate action group Possible found that only 10% of UK consumers support airline bailouts without plans to tackle climate change, and 35% oppose airlines receiving public bailouts without attaching conditions on climate change. Despite this popular consensus, to date, airline bailouts have not been directly linked to emissions commitments, environmental taxes or use of greener fuels – a missed reputational opportunity for both airlines and government.
A further outcome of the coronavirus outbreak is the resurgence of popular movements. There is a greater expectation for businesses to be accountable to the wider community. The social contract is being renewed. Black Lives Matter, for example, has demanded a corporate response in the wake of a pandemic which has disproportionately affected the health and livelihoods of black people. Businesses are expected to publicise their anti-discrimination policies, and have been scrambling to comply as the reputational consequences of not doing so become clear.
Other social causes are also using the opportunity for upheaval of the old world order presented by the pandemic to protest a return to ‘business as usual’. Extinction Rebellion intends to blockade the return of the UK Parliament in September. Their hope is to convince the government to sign an ecological emergency bill, outlining radical changes to combat the climate crisis. One of the outcomes of these movements has been companies reasserting their commitment to the UN’s Sustainable Development Goals. By flexing their SDG credentials, they hope to tap into raised awareness of societal issues, and reassure stakeholders that their business practices are aligned with the priorities of the communities they do business in.
These reputational trends are not new. The shift in influence from investors to multiple stakeholders was already underway. The rise of consumer-citizens, employee empowerment, and influence of campaign groups in the wake of the pandemic is set against the already evolving backdrop of hyper-transparency, interconnectedness and media anarchy which defines the new normal.
What Covid-19 has done is accelerated and emphasised these trends. Businesses are fearful of being called out and tarred with the brush of coronavirus righteousness, and have become hyper-reactive to stakeholder opinion.
They are repositioning to reflect the demands of their stakeholders in a post-pandemic society, and the strength of their future corporate reputation will rest on their success in doing so.
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