The big UK energy companies are in a reputation crisis. Nor are they alone.
On average it takes four years to mend a broken reputation. Some companies never recover. From banks to health care, from security to food, many firms and even industries have lost public trust. Most are trying to pick up the pieces. Ethical leaders care deeply about their company’s reputation. This means giving attention to: maintain; grow; or repair reputation. Of these, the most challenging is repair. It’s always more costly than protecting it the first place.
For a start, few companies see reputation damage as a separate form of risk. They seldom have someone special managing it. Even large firms usually rely on small corporate affairs departments to anticipate issues and respond. These are severely limited in their ability to defend and repair reputations. 1
Consequently, there’s now a whole industry ready to help tackle the repair job. But many such efforts start entirely on the wrong foot. Many leaders for example, just want to bury bad news, not correct obvious wrongs.
Action on reputation
How best can you cherish your company’s reputation? Here are seven essential ways :
1) Care: Be genuinely concerned with your company’s reputation—this must convert into action, not just sound bites, or burying bad news.
AstraZeneca put all its raw clinical trial data on its web site. Result: Independent researchers could draw their own conclusions from the evidence and the company appeared more open and transparent about its research.
Coca-Cola mishandled a product contamination crisis in Europe during 1999 when it dismissed the issue as overblown and “hardly a health hazard.” Result: As a senior company put it: “Things were said that took on extraordinary proportions, and then the scare became international and more difficult to manage.”
2) Engage: Enrol all stakeholders to help guard and repair reputation
The Eneabba to Moonyoonooka transmission line in Western Australia was Western Power’s largest transmission line project in 20 years. Its new sustainability framework focused on true stakeholder engagement.
Result: Engagement was so credible the authorities concluded no further environmental impact assessments were needed and no appeals were lodged against the project. Economic benefits included shorter delivery by two years, reduced costs, and greater community support for the ongoing aspects of the project.
Chevron’s attempt through an advertising campaign to address many of the oil industry’s most difficult issues around energy needs has not fooled anyone. Result: Even more adverse coverage; critics accuse the company of “trying to fool people in thinking it is environmentally conscious when the company is responsible for the extensive contamination found in Ecuador’s rain forest and in other places as well”. The company then had to fight back with yet more
3) Build Relationships: create community and society trust through transparency, dialogue and responsible behaviour
Forward Publishing a London-based SME, became concerned about the young homeless people outside its offices. To raise funds they persuaded local restaurants to add a voluntary charge of £1 to bills during the run up to Christmas. Result: In the first year 100 restaurants participated. In 2013 the now national scheme donated half a million pounds to charity.
The GS4 security company over-promised on its Olympics contract then hid its inability to deliver until the last moment. Result: a serious loss of community and society trust and possible exclusion from future government contracts.
4) Track reputation—make monitoring a way of life, discover how your company is perceived
The BT Corporate Social Responsibility (CSR) risk register quantifies the company’s most significant social, ethical and environmental risks. Result: the Risk Management Team can report in detail to the BT Group’s on its strategic risk profile.
Japanese customers forced Australian wood product company Gunns into making mill closures in 2010 over environmental certifications of wood chips. Customers demanded wood products certified under the Forest Stewardship Council. Result: Gunns could not obtain certification due to lack of community support for their operations. Three years later the company went bankrupt.
5) Demonstrate—plan and implement community actions that positively build and defend reputation
Marks and Spencer launched its Plan A in January 2007 to change 100 things over five years and make a real difference to the environment and its business.
Result: The company is widely admired for its actions, seen as an environmental leader and moving towards its aim of becoming the “the world’s most sustainable major retailer by 2015.”
Apple has a limited and reactive CSR strategy and does not believe it needs to engage stakeholders, let alone an engagement strategy. Result: severe external pressure to distribute retained profits to shareholders.
6) Recovery—accept recovery is a long-term strategy, not a short-term fix.
Mattel faced a series of toy recalls in 2007 with lead in children’s toys sourced from china. It immediately ceased production , promised full cooperation with the national regulatory authorities, and initiated a thorough investigation. All deliveries from the Far East, ceased and major retailers were alerted. They then began inspecting every toy themselves. Result: The response drew widespread praise, and over time minimised reputation damage.
A 2002 fatal rail crash in the UK pushed rail safety into the headlines and led to questions about the capability of Jarvis to deliver rail maintenance. The company finally admitted liability two years later. Result: By then the damage was done; share price fell from £5 to just 30p and investor confidence was shattered; by late 2004 the company was only saved by banks extending further credit.
7) Protect—cherishing reputation demands close attention to what is happening to it, which means acting when its comes under threat.
Faced with criticism of its packaging, Ed Rensi, president of McDonald’s USA, said “We’re going back to paper. I can’t live with the impression that we’re harmful to the earth, even if it isn’t true.” Result: The world’s largest restaurant chain began serving its trademark food in light cardboard containers and paper wrappings within days of that decision
Tyco International seemed unaware or unconcerned its CEO was taking millions in unauthorized bonuses, purchasing art for $14.725 million and so on. Result: He is currently serving time in jail; the company still exists but much smaller and with its tarnished name ever-linked to this reputation disaster.
Too few ethical leaders fully grasp the elements that create reputation; or how the different strands relate and how quickly they can unravel in a crisis. These seven areas for attention show why cherishing the company’s reputation is no easy ride. Reputation generally goes unreported, despite being a highly influential value driver. Ethical leaders should be leading the way.
1. Corporate reputation: perspectives of measuring and managing a principal risk, CIMA 2007