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Banking reputational capital with CSR

By 1st June 2017 Blog, CSR 2 Comments
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Bank reputational capital for a rainy day by running your business in an environmentally, socially and ethically responsible manner.

Businesses that do good also do well. Of this, there is no doubt.

The publicity benefits are no secret either, and, provided you’re not doing it just to create PR opportunities (see this on the perils of ‘greenwashing’) there’s no reason why you shouldn’t tell the world about all the good things you’re doing to really make a difference. It’s partly how you gain a competitive edge over your rivals that aren’t as enlightened.

But here’s something you may not know: you can also build-up what’s known as ‘reputational capital’.

What is reputational capital?

Think of it like an ISA. You make regular deposits up to the annual maximum every year and, provided you don’t make any withdrawals, you can earn a relatively decent return on your investment free of tax. Then, when the roof starts to leak, you’ve got the money to pay for any necessary repairs – in essence, it’s a financial cushion.

Reputational capital is much the same.

When you’re running your business in a way that makes a positive contribution, and when you’re seen to be genuinely making a difference and behaving responsibly, it creates a sort of ‘halo effect.’

Then, if something happens that suddenly attracts negative attention – a factory fire perhaps, or an accident in which a worker is badly injured – your good deeds of the past are remembered and reflected upon by those watching events unfold.

Rather than conclude that you’ve deliberately torched your own factory or paid scant attention to safety rules, the watching public and the media are more likely to be on your side because you have a proven track record of doing the right thing.

That’s reputational capital.

It really does work

We’ve experienced it directly ourselves here at Remsol. Several years ago, we donated around a thousand bin liners (that was the minimum order quantity) to BBC Radio Lancashire for use in a canal-side clean up project. The bin liners were co-branded with our logo and the BBC Radio Lancashire logo.

Then, last year, we were contacted by a stern-sounding official from the environmental health department of a local council who were investigating a fly-tipping incident in which hundreds of bin liners full of rubbish were dumped behind a row of houses. The bin liners had our logo on…and, because of our historic waste management work, we were initially considered to be the culprit!

We explained all about how we’d donated the branded bin liners to BBC Radio Lancashire and the environmental health officer agreed to go away and do some further investigative work. When she called back a week later, her tone was much different: she was apologetic for having initially thought we may have been behind the fly-tipping. She had been busy looking into us and discovered a wealth of news stories all about our past work in the community, including our Big Green Calendar project in 2011 and our work with the School’s Sustainability Conference among others.

Her conclusion: everything we did (and still do) screamed that we take environmental protection very seriously and that we’d be the last company to illegally dump waste in the community.

That’s reputational capital in action right there.

It’s a matter of trust

The 2017 Edelman Trust Barometer published earlier this year examined the factors people take into account when deciding whether or not to trust a company.

Environmental, social and ethical practices all featured, highlighting how people are generally more trusting of companies that do good.

It’s that trust that helps build reputational capital.

Moreover, it’s a notion backed-up by academic research from the University of California, Berkeley, which finds that CSR can essentially serve as reputation insurance, protecting firms against lost reputation even following adverse events.

When you think about it, it’s obvious: it’s human nature to want to believe the best of people.

Building-up reputational capital that you can carry forward into a crisis isn’t, in and of itself, a reason for embracing CSR – you should do it because it’s the right thing to do. But it definitely is one more in a long list of reasons why you should get serious about sustainability and CSR.

Start making deposits at the reputation bank now – you never know when you might need to make a hasty withdrawal for that rainy day.

Not sure where to start? Don’t worry, [email protected] 

2 Comments

  • Ella Minty says:

    You are right – reputational capital can and should be built: if it’s not done with the main focus of doing good, then even if it’s done as a blanket for rainy days, it should still be done. There is one thing though that we must be aware of and advise others accordingly: the public only forgives once. Should a mistake be repeated, should the corporate action that has led to that particular issue/incident/scandal be allowed to continue, no reputational capital will help.

    Warren Buffett’s argument that “it takes 20 years to build a reputation and five minutes to ruin it” is very true – no amount of reputational capital will save your future: only what you do about the present will.

    • Remsol says:

      Thanks Ella, that’s really insightful!

      Warren Buffett also wrote in a 2014 memo to Berkshire Hathaway colleagues: “We can afford to lose money — even a lot of money. But we can’t afford to lose reputation — even a shred of reputation.”

      He’s a wise old owl, isn’t he?

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