“It takes 20 years to build a reputation and five minutes to ruin it,” said Warren Buffet, the third-richest man in the world.
A company’s reputation is one of the most important aspects for any organisation. If it is damaged, it stands to lose in many ways; it should thus be guarded. Toyota had its reputation almost destroyed when it recalled thousands of vehicles with faulty brake and accelerator pedals. It took Toyota many years to build a reliable brand. Tiger Woods recently took a fall through a sex scandal and lost contracts with Gillette, PepsiCo and Accenture. These companies no longer want to be associated with Tiger Woods as they also have a reputation to uphold.
The best thing that a company can do is to build on the good reputation that it has. Maintaining a good reputation is hard work and is a function that should sit in the strategic approach of an organisation. Some aspects of reputation include how the public view a company, and whether they trust the company or not. A company may produce products or offer a service to the public, but if trust is breached when delivering a product or service, there is damage to its reputation. Another aspect of reputation includes a company’s values and ethics and whether these are aligned to people’s beliefs. A company which supports child labour, will not have a favourable reputation. Parents and activists will surely not take issues like this very lightly. One of the most important aspects of a good reputation is whether a company is socially responsible or not.
Previously, many companies operated solely as financially sustainable organisations. Over recent years, more focus has been directed towards the contributions that companies make towards communities within which they operate. Companies are now realising the value of corporate social investment (CSI) and community relations as part of their overall strategy. Investing in CSI and community relations not only benefits people in communities, but also has a positive impact on the company’s reputation.
Companies need to be aware of the impact that they have on the environment. Companies are becoming more aware of their carbon footprint and many initiatives are being introduced encouraging employees to support these causes. Vehicles are now being manufactured that are more environmentally friendly. Many companies are moving to new environment-friendly buildings. There is also more involvement in water conservation, energy conservation, campaigns such as recycling and world environment days.
Some companies have extremely green buildings. One is Nestlé South Africa’s newest premises in Bryanston. There are indigenous landscaped gardens, atriums and indoor gardens, and natural light from central atriums. The building is energy efficient and some of the features include: an intelligent lighting system with motion sensors; atriums allowing lights to dim when outside light is bright; the air-conditioning plant utilises ammonia chillers to reduce electricity consumption. Companies like these are seen as responsible in that they care about the environment.
Looking at CSI and community relations over the last decade, initiatives have been introduced that challenge organisations to be more responsible. Accountability is a key factor as companies are being urged to report on how they are being socially responsible. These guidelines are available in the public domain and therefore put added pressure on organisations to follow suit.
United Nations Millennium Development Goals
In September 2000, leaders of 189 countries made a declaration of eight goals. These goals are commitments that have been made by all countries to work together to fight issues that are prevalent in all countries today. The aim is for these goals to be achieved by 2015.
The Eight UN Millennium Development Goals
- Eradicate Extreme Poverty and Hunger.
- Achieve Universal Primary Education.
- Promote Gender Equality and Empower Women.
- Reduce Child Mortality.
- Improve Maternal Health.
- Combat HIV/Aids, Malaria and Other Diseases.
- Ensure Environmental Sustainability.
- Global Partnership for Development.
Many companies are now choosing at least one of these goals and including this as part of the overall strategy. Companies such as SAB Miller, Nestlé South Africa, Unilever, Levi Strauss & Co, and KPMG are already aligning themselves to working towards achieving these goals.
More recently, the release of the King III report has given companies guidelines and frameworks within which to operate. These guidelines relate to corporate governance and King Ill encourages all organisations to embrace the report and integrate it with their company’s overall strategy. This report holds management more accountable in terms of reporting. With the ever-changing trends and the new Companies Act in terms of governance, there is a need for this report.
King III emphasises sustainability
King II highlighted corporate citizenship and integrated sustainability, the so-called triple bottom line, in terms of which companies needed to account not only for economic and financial issues, but also for social and environmental issues.
King III builds on this principle by emphasising sustainability. Directors have accountability to shareholders and an obligation to all stakeholders (including shareholders) to ensure that the company’s resources are used to ensure the continuing viability of the company.
This involves not only environmental sustainability (resource management with an eye on future needs), but also issues such as social responsibility, respect for human rights, and the effective management of stakeholder relationships.
A focus on sustainability will not only positively impact a company’s risk management, but also its strategic planning processes. Governance, strategy, risk, performance and sustainability have become intrinsically linked, and directors should ensure that the company’s strategy accounts for sustainability issues. Directors also need to ensure adequate sustainability reporting to all stakeholders.
King III also points out that the economic value of a company can no longer be based on the balance sheet alone. Rather, the economic value will be impacted by a range of non-financial issues such as brand and reputation, stakeholder relations and goodwill, an evolving and forward-looking strategy, environmental sustainability, social responsibility, quality of governance, etc.
When companies become involved in CSI and community relations, the rewards are greater than imagined.