Reputation and Responsibility: The Corporate Connection

July 2005 Volume III Number 3

Net Contents
I. Network Presentation
Key Learnings
Perspectives

II. What’s New

III. The Women’s Network for a Sustainable Future
The Concept of the Network

I. Network Presentation
A big thank you to those who took the time to attend WNSF’s luncheon panel on June 21, 2005: “Reputation and Responsibility: The Corporate Connection.” The event was hosted by Dow Jones at the offices of Hunton & Williams in New York City. The session featured three corporate efforts to integrate corporate social responsibility with brand and reputation in the marketplace, as well as commentary from Wall Street Journal editor Ron Alsop based on his book “The 18 Immutable Laws of Corporate Reputation.” The cases demonstrated how corporate social responsibility (CSR) efforts can boost public trust and help protect a company’s reputation in trying circumstances.

Key Findings

  • Companies can exert influence over their reputations.
  • Social responsibility initiatives can build public trust and bolster corporate reputation.
  • Corporate reputations can be rebuilt after tumbling if the company is willing to listen and apologize to consumers and other stakeholders.
  • Staying in touch with customers, stakeholders and changing public values is essential to preserving reputation.
  • Openness and communication trump silence and defensiveness in building trust and bolstering reputation.
  • Increasingly reputation depends on the blend of a company’s impact on consumers and its footprint on society and the environment.

Perspectives

Introduction: Ann Goodman, Executive Director, WNSF.

Moderator: Sarah Howell, Director, Corporate Communications, BP.

Speakers:

  • Ron Alsop, Wall Street Journal editor and writer.
  • Bill Nielsen, special counsel to the CEO of Johnson & Johnson and retired Vice President, Public Affairs.
  • Karen Daragan, Vice President of Corporate Affairs, Strategy and Social Responsibility, Altria Corporate Services.
  • Margaret Laney, BP General Manager , Public Affairs for the Midwest and East US

At a time when corporate scandals account for an unusual number of headlines and the environmental and social impact of business draws increasing scrutiny in a fast-paced global economy, earning and maintaining a good reputation is harder for companies than ever before. Increasingly, corporate reputation depends on social responsibility, which in turn depends on the complex interaction between a company, its impact on stakeholders, and how it is perceived by consumers.

The WNSF panel speakers, a Wall Street Journal editor and reporter, and representatives from Altria, BP and Johnson & Johnson, explored an array of questions that bear on this theme, candidly sharing their inside views of image-altering change in their respective organizations. While each spoke from different experiences, the short presentations made it clear that companies can have control over their reputations. Ultimately, taking responsibility for wrongs done, contributing to the well-being of stakeholder communities, and setting ambitious social and environmental sustainability goals, are bold steps that can rebuild trust in companies whenever they stumble and wherever they operate.

Ron Alsop of the Wall Street Journal and author of The18 Immutable Laws of Corporate Reputation ties the issue of reputation to corporate citizenship. He began his presentation with two provocative questions: “Can companies publicize their corporate citizenship in a credible manner without appearing self-serving? Can companies take up a cause and become associated with it?” Much of his work on corporate reputation aims to answer these questions. “Companies rarely realizereputation’s full value—how a sterling reputation can enhance business in good times, protect it in turbulent times, and be destroyed in an instant by people at the lowest or highest levels of the corporate ladder,” Alsop writes. His book is a practical guide to corporate reputation and firmly asserts that bolstering it is the way companies can win over the public. Among the topics addressed in the book are:

  • How to protect your reputation when the inevitable crisis hits
  • How to cope with cyberspace’s many hazards
  • How to become the model corporate citizen
  • How to create a reputation for vision and industry leadership
  • How to establish a culture of ethical behavior
  • How to measure and monitor your ever-changing public image
  • How to achieve consistency in your identity
  • How to decide when it’s time to change your name

The centrality of these issues was brought to life in the panel’s remaining presentations. Bill Nielsen, retired Vice President of Public Affairs at Johnson & Johnson, frequently cited as a company with the top reputation, said “reputations are terribly important to successful business organizations today…probably more important when you’re in trouble.” Nielsen acknowledged the fragility of trust between Johnson & Johnson and its consumers. Knowing that customer satisfaction meant that women in particular would make recommendations to their own daughters and “take up the ‘cause’ of the company,” Johnson & Johnson worked hard to build a level of what Nielsen called “sustainable trust” with its customers. That’s mainly because consumer trust, when violated, could only be built or rebuilt when the company was willing to apologize. In Nielsen’s experience, customers would again be receptive to the company only after they felt heard.

Highlighting the process of corporate reflection, Nielsen added: “Rebuilding public trust is based on examining attitudes of shareholders, consumers, employees–spearheading ‘public interest’ issues.” He outlined a three-pronged approach to this reflection, guided by the questions: What do we know? What do we think about what we know? How should what we believe about what we know guide our actions?

Ultimately, Nielsen concluded, “Companies ought to act toward principles before they are made to do so. They should be the first to speak about what they believe and what they are doing.” And Nielsen’s former role was just that–he worked to ensure that the company’s values were upheld throughout its vast operations as growth and the influx of newcomers puts new people in key decision-making posts in the company. For Johnson & Johnson, principles are derived from the company credo, which enumerates its commitments and responsibilities to its customers, employees, community stakeholders, and shareholders.

The full credo can be viewed at: http://www.jnj.com/our_company/our_credo/.

Karen Daragan, Vice President of Corporate Affairs, Strategy and Social Responsibility, Altria Corporate Services, spoke on behalf of Altria Group, parent company of Kraft Foods, Philip Morris USA and Philip Morris International (the firm changed its name in 2003 from Philip Morris Companies to Altria Group to more clearly communicate that it was the parent of both food and tobacco companies). Daragan described the decline of then Philip Morris Companies’ reputation during a particularly stormy period when the firm’s tobacco companies “fell out of step with societal values.” According to Daragan, this precipitated the conglomerate’s fall from second place on Fortune’s 1990 list of most admired companies to number 202 only five years later. She said Altria’s tobacco companies displayed defensiveness toward stakeholders as concern about tobacco-related illnesses and other issues rose. The ensuing barrage of litigation brought by states, individuals, and class action lawsuits only deepened public mistrust of the domestic tobacco company Philip Morris USA and its parent Philip Morris Companies. By the late 1990s Philip Morris USA was “on the verge of losing its license to operate,” said Daragan.

For Altria Group/Philip Morris Companies, recovering from this steep decline meant realigning itself and its companies with society, by meeting or exceeding stakeholder expectations. This reckoning has meant pivotal changes in the family of companies’ internal culture. Openness to outside critique has replaced defensiveness, and the tobacco companies have acknowledged the serious health effects of smoking. In addition, the firm’s tobacco companies are seeking to reduce the harm caused by cigarettes by developing new processes and technologies and by encouraging comprehensive regulation of tobacco products. Kraft Foods is working to bolster its reputation in the food industry by partnering with experts and stakeholders in the areas of food quality and safety, health and wellness, responsible marketing practices and the sustainability of its agricultural supply base. Daragan summarized the key lessons of this turbulent period in Altria companies’ past:

  • You can’t succeed in business without the public’s trust.
  • Responsibility goes well beyond shareholders.
  • Listening is important–maybe more than talking.
  • Words with no actions fall on deaf ears.
  • Actions won’t speak louder than words if you aren’t trusted.
  • Dialogue and engagement with critics will help shape reputation.
  • Respect must be earned and takes time to rebuild.

Finally, Margaret Laney, BP General Manager, Public Affairs for the Midwest and East US described the importance of responsibility and reputation at a time when corporate scandals have provided skeptics with ready opportunities to question the propriety and ethics of the energy industry. Citing the challenge to address environmental and societal impacts in the industry, Laney said: “While we strive to be a force for good, we also understand why we continue to face skeptics.”

Through stakeholder research, BP learned that being in the energy business alone is sufficient to weigh down the company’s reputation. Distinguishing BP from the industry pack, CEO Lord John Browne made a public commitment in 1997 to reduce the company’s greenhouse gas emissions in 2010 by 10% from 1990 rates. Utilizing an internal Emissions Trading Scheme at its plants across the globe between 1999 and 2001, BP was able to reach this goal at a reasonable cost by making reductions at plants and operating sites where the changes were most cost-effective. Since then, the firm has committed to maintaining its net emissions at or below its 2001 levels over the next decade (source:http://www.pewclimate.org/companies_leading_the_way_belc/company_profiles/bp_amoco/).

According to Laney, BP’s reputation-building process is guided by four core values: performance, green, innovation, and progressive. BP focuses on objectives within—providing profits, products, jobs, capabilities, taxes and responsible operations that meet or exceed government regulation. In addition, the company is committed, within its sphere of influence, to being a leader in climate change—cutting carbon dioxide emissions and investing significant resources in renewable energy sources and cleaner-burning fuels. The company is also taking a leadership position in inclusive development—ensuring its global operations benefit the greatest number of people. Such endeavors have included investing in enterprise development, enhancing education opportunities, and enabling communities to gain access to energy resources.

Reputation, the panelists’ experiences seemed to demonstrate, is the outcome of a company’s impact on consumers and its footprint on society and the environment. Companies can recover from missteps if they are honest with themselves and those they have affected. By choosing to value the short and long-term health of its consumers and stakeholder communities, listening, and thoughtfully reformulating operation policies, firms can earn the public’s trust even as shareholders continue to benefit. As Alsop puts it “reputation is your most valuable asset” and strategic investment in it can only have a positive impact on the bottom line.

II. What’s New
In mid-July WNSF presented a session entitled “Building a Sustainable Future: The Role of Women in Business” at the Forte Foundation’s conference for women MBA students. Presenters included Dianne Dillon-Ridgely, a Director at Interface Inc. and a member of WNSF’s Advisory Council, Ann Goodman, WNSF’s Executive Director, and Michele Kahane, Director of Special Projects at the Center for Corporate Citizenship at Boston College and a member of WNSF’s Board of Directors. The conference session was adapted from WNSF’s Businesswomen’s Sustainability Leadership Workshop designed for internal corporate women’s networks. To learn how WNSF can tailor the workshop for your company’s women’s network, contact WNSF Executive Director Ann Goodman (please direct inquiries to info@wnsf.org).

WNSF’s second annual Businesswomen’s Sustainability Leadership Summit will take place on September 29 in New York City. Building on the insights captured at last year’s Summit, this unique, daylong event for executive women will suggest new avenues of thought and action on social responsibility and sustainability and provide opportunities to exchange experiences and best practices in a high level, candid setting. $100 per person. Space is limited. For more information and to register see WNSF’s website (www.wnsf.org). Sponsors include: Alcoa Inc., BP, Coca-Cola, Con Edison, Eileen Fisher Inc., McGraw-Hill Cos., Merrill Lynch, Pfizer, Starbucks. For sponsorship opportunities, contact Executive Director Ann Goodman (please direct inquiries to info@wnsf.org).

The next luncheon panel, “Preserving Natural Capital, Building Financial Capital,” with speakers from the Investor Center for Corporate Responsibility, Praxair and Smith Barney, will be hosted by Smith Barney on October 18. Look for details in an upcoming email invitation and on the WNSF website (www.wnsf.org). Registration will begin later this summer.

III. The Women’s Network for a Sustainable Future
The Concept of the Network
The Network provides a forum for business and professional women to congregate, reflect, and act on the converging issues of corporate social responsibility and sustainable development. Through meetings and simple electronic support tools, the Network aims to facilitate the exchange of experiences and best practices on these vital workplace issues. By creating a new network of executive women, the Network seeks to improve responsible practices in workplaces; sensitize corporate culture more generally to issues of sustainability and social responsibility; and encourage a public commitment locally, nationally, and internationally to sustainability principles.

The Women’s Network for a Sustainable Future is a 501c3 organization. Gifts are tax deductible.

For more information, please contact:
Ann Goodman, Executive Director
Women’s Network for a Sustainable Future
Please direct inquiries to: info@wnsf.org

Board of Directors:
CHAIR: Joyce LaValle, Senior Vice President, Interface Inc.; Muni Figueres, formerly of the Costa Rican Foundation for Sustainable Development; Joanne Fox-Przeworski, Director, Bard Center for Environmental Policy, Bard College; Ann Goodman, Executive Director, WNSF; Sarah Howell, Director, Corporate Communications, BP; Michele Kahane, Special Projects Director, Corporate Citizenship Program, Boston College; Clair Krizov, Executive Director of Environmental and Social Responsibility, AT&T; Kathy Robb, Esq., Partner and Head of Environmental Practice, Hunton & Williams; Deborah Sliter, Vice President of Programs, National Environmental Education & Training Foundation.

This issue of Net Notes was written by Jen Petersen and edited by Ann Goodman. WNSF thanks founding sponsors AT&T and the Ford Foundation for their generous support.

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