SOCIAL RESPONSIBILITY BEYOND ORGANIZATIONAL REPUTATION (SUSTAINABLE REPUTATION)

In today’s business environment, intangible assets, such as reputation, are increasingly important in determining the value of a company. Stakeholders increasingly expect companies to behave in an ethically, socially and environmentally responsible manner and to communicate transparently about their actions. Satisfying these expectations is one way to earn a favorable reputation as a sustainable company. The challenge then becomes how to signal that the company is meeting stakeholder demands for sustainable practices. In discussing Sustainable Reputation and the linkage between an organization’s reputation and its social responsibility, it is important to understand the two keys issues.

Social responsibility is the obligation of an organization’s management to make decisions and take actions that will enhance the welfare and interests of society as well as that of the organization.

Reputation, on the other hand, is a stakeholder’s expectation of value vis-a-vis an organization’s peers and competitors. Each stakeholder has different expectations of value. For example, employee expect, among other things, a good workplace and fair compensation; a customer expects a product or service that is considered “worth what’s paid for;” and an investor expects a good return on their money.

Reputation as it were, is an ‘intangible’ asset which can be said to account for ±10% of the market value of an organization. The social responsibility of an organization however, is a major influencer of its reputation. A positive CSR perception of an organization will lead to trust and better engagement with its stakeholders. It will also enhance the public perception of the organization. 

The prevalence of CSR practices has, in part, increased with the rise of corporate reputation rankings as quantified measures of corporate quality and prestige (Fombrun 2007) and the simultaneous spread of CSR frameworks that attempt to hold multinational corporations accountable to emerging standards of conduct. As reputational dynamics have seemingly become more integral to corporate strategy, organizations have sought progressively sophisticated ways to differentiate themselves from their peers. Building a reputation is about being able to distinguish one’s position in the global corporate field by excelling according to ever-higher social and economic performance standards.

As various groups and requirements bring up frameworks of CSR standards and norms that prescribe certain practices and policies, thereby defining what it means to be “good”, organizations increasingly seek to build their reputations not only through product quality but also by affiliating themselves with these prestige-enhancing CSR practices. In this light, CSR practices are a tool of impression management that organizations use to build positive reputations and gain the support of stakeholders.

The question now is: How can organizations’ ensure a sustainable reputation in all facets beyond just being known for their social responsibility initiatives? It is imperative to note that reputations emerge from an accumulation of signals. Positive signals enhances an organization’s reputation and negative ones distract. Consistent signals helps to stabilize an organization’s reputation (Cornellisen et all, 2007) and makes it easier for it to resonate with its stakeholders.

A strong reputation is a valuable asset to every business, but it is especially important in driving consumer awareness and business sustainability.  Companies need to be able to demonstrate beliefs with action. ‘Walking the talk’ is no longer just a catchy phrase, it is a critical component to driving sales and capturing additional market share.

Interestingly, evaluations of the quality of a company’s products and services (37 percent) and how well the company manages its business operations (35 percent) play the largest role in shaping overall perceptions of the company. However, the role of social responsibility is also a key component. A company’s ability to meet people’s expectations on the social responsibility front makes up more than a quarter (28 percent) of the company’s overall reputation.o doubt, the importance of social responsibility efforts in shaping overall corporate reputation plays into a larger trend for what the public expects from companies. To be judged as a responsible and respected company, it is no longer enough for a company to deliver quality products and services to its customers. Audiences worldwide increasingly judge companies by their business operations – in particular, their labor practices (domestic and abroad), the safety of their plants and operations, and whether they are holding their international chain of vendors and suppliers to these same strict labor and operational safety standards.

Additionally, companies are increasingly being scrutinized on the basis of their social responsibility efforts or their efforts to “give back.” There has also been a general shift in the tenor of expectations from “don’t” to “do.” That is, the public’s expectations for corporate behavior have moved from “don’t mistreat your workers” or “don’t pollute the environment” to “invest in the education and training of your employees so they have avenues for job growth and advancement.”

On the environmental front, in addition to limiting their environmental footprint in their operations, leading companies are expected to do things like “proactively educate small businesses on how they can green their business practices,” or, depending upon the company’s business expertise “support research and development of alternative fuels.” This shift from “don’t” to “do” also carries with it an expectation that responsible major companies have an obligation to somehow “give back” to larger society through social responsibility initiatives.

References

Cornelissen, J.P., Haslam, S.A and Blamer, J.M.T. (2007). ‘Social Identity, organizational identity and corporate identity: towards an integrated understanding of processes, patternings and products’. British Journal of Management, 18,  S1-S16.

Fombrun, Charles J. and Mark Shanley. 1990. "What's in a name? Reputation building and corporate strategy." Academy of Management Journal 33:233-258.

APCO Insight, 2010

McGuire, Jean B., Alison Sundgren, and Thomas Schneeweis. 1988. "Corporate social responsibility and firm financial performance." Academy of Management Journal 31:854-872.

Klein, Michael and Tim Harford. 2004. "Corporate responsibility: When will voluntary reputation building improve standards?" in Public Policy Journal. Washington DC: World Bank.

Williams, R. J. and J. D. Barett: 2000, 'Corporate Philanthropy, Criminal Activity, and Firm Reputation: Is There a Link?' Journal of Business Ethics, 26(4), 341-350.