Sustainability and corporate social responsibility in companies

For the first time, environmental risks are in the top 5 worries of the world’s population (World Economic Forum, 2020). In recent years, sustainability and corporate social responsibility became essential in the entrepreneurial world. Ideas such as responsible capitalism or sustainable investment, which were born in the private sector, are changing what is acceptable and beneficial at the time of investing and consuming. Increasingly, business management is oriented towards stakeholders and having a positive impact in society and the world. This vision has created great acceptance amongst consumers, investors and other interest groups. Companies should not look away from this trend. This is especially important because of the negative social and economic impact brought by the pandemic.

ESG criteria

In this new reality, it is more and more important to improve environmental, social and governance performance. These are the ESG criteria (Environment, Social and Governance), which help measure the impact that companies have in society and the world. These concepts are becoming popular because they determine the appeal of a company and help decide if investment on that company is a good idea. The reason for this is that they provide a significant intangible value and they reduce risk. Enterprises like the Davos Economic Forum or important companies such as Black Rock, choose the ESG criteria to create value. An ESG strategy will not only lead to better talent acquisition and long-term investment, but it will also reduce costs and bring more beneficial regulatory frameworks.

The path to reputation

The ESG criteria need to be implemented correctly and should be paired with an assertive and transparent communication, in order to achieve a positive impact on reputation. Reputational risks related to green washing are very real. For example, a recent study from the University of Twente, revealed that communicating fake information about your performance in legal obligations related to the environment can have a negative impact on reputation. These kinds of actions make the public more skeptical, which is the opposite of what companies want. It is better to walk the talk, to be a role model.

The value of intangibles

No one can ignore the real value that intangibles have on a company’s reputation. It is estimated that the value of the intangibles has increased during the pandemic, reaching 55.5 trillion of euros in September 2020 in the enterprises that are listed in the stock exchange market (Brand Finance, 2020).

Among the intangibles we can find the mission. Introducing a mission strategy in a company can improve its reputation; when you add the mission to the impact on reputation, it can improve up to 30%, as is demonstrated in our Leaders with Purpose Positioning Model.

Some numbers to understand how intangibles can impact a business:

In the last two years, the number of institutional investors that have acquired responsible investment assets has increased 10% (Morgan Stanley, 2020) and 57% of them believe that this will be the only way to invest in the future. On the other hand, investors look for tools and data to measure criteria like sustainability. They rely on them to know about the impact on their budget, but 31% lack the adequate tools to evaluate their investment based on these goals.

Through intangible measurement models like real-time reputation, we can see the impact of actions, launchings and key moments in the public perception of our company. Taking into account these assets in the intangible era, knowing how to control and monitor them will be key not only to maintain a competitive advantage in consumer’s minds, but also to bring the attention of potential investors.