Reputation Index research indicated a strong connection between the overall company’s reputation and its evaluation of the ESG dimension. So our team raised the question of whether the ESG reputation reflects the reality of the company’s efforts in being sustainable.
The mentioned Reputation Index study was conducted in May 2022, together with partners: communication agency ”Fabula Rud Pedersen Group”, the Lithuanian marketing association “LiMA” and the Investors’ Forum. The study evaluated and ranked the reputation of 50 companies operating in Lithuania.
The first insight we uncovered, which led us to deeper research on ESG, was that from ESG attributes, for most industries it was not E (Environment) but G (governance) and S (Social) dimensions that drive a company’s reputation, whereas businesses mostly emphasize their Environmental efforts.
So, we looked into communication by the analyzed companies to find what really drives the reputation of sustainable business. The investigation into sustainability actions was conducted in the summer of 2022.
The single most important sustainability reputation driver turns out to be the sector the company operates in. For example, there is a worldwide trend to rank IT and tech companies higher on ESG just due to the nature of their business: they are believed not to impact the environment as much as manufacturing companies or FMCG brands which have multiple touchpoints to consumers and their impact is more visible.
On the other hand, start-ups, such as Vinted or CityBee, enable their users to be more sustainable themselves, i.e. by re-using clothes or car sharing. Such companies don’t even need to communicate much about their contribution to making the world more sustainable, as long as they remind the difference their users are making.
We also noticed that international companies tend to enjoy a better reputation than the local ones. One of the reasons is that due to their size and geographic reach, they tend to measure their environmental impact and calculate sufficient but ambitious company-specific greenhouse gas emission reduction goals.
Meanwhile local or regional companies usually are not obliged to such measurements and therefore tend to lack concrete goals, instead adhering to international generic guidelines and so falling behind on the sustainability reputation.
For non-tech companies, packaging is the widest-reaching touchpoint that shapes the perceptions of the company’s commitment to the preservation of the environment. Those retail chains which visibly commit to reusable/ recycled packaging and the reduction of plastic bags, tend to have higher ESG reputation scores. However, the packaging is only a small part of the total impact company has on the environment.
Social dimension requires ensuring a level playing field for the company’s employees and society – carrying out consistent social activities. However, the public wants to know what it feels like to work for the company. Therefore, generic employee programs are not enough, leaders do:
Those leading companies that can’t offer salary advantage, instead of generic benefits (trainings, summer events) provide something that is of tangible value to their employees.
Governance dimension is the trickiest to measure based on publicly available communication, however, the Reputation Index research indicated that fair company governance practices are more important than the other two ESG dimensions. So, we looked into the number of policies, salary levels per gender (these are obligatory public information in Lithuania) and gender ratio on the boards of the companies.
Surprisingly, the ratio of women in the leadership team is a predictor of not only the company’s reputation but also the number of sustainability goals. And the optimal ratio tends to be 30-50% of women in leadership roles.
The main learning we take from the comparison between people’s perceptions and what companies actually communicate is that sustainability efforts shouldn’t be modestly kept in secret.
In fact, the companies that enjoy good or great reputations tend to have a strategic approach to the ESG initiatives – they pull the levers that are important for the public:
If your company wants to undertake a strategic approach to sustainability – learn how we can help.
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