August 14, 2019
/ by Guest Contributor
Mary Pollard, partner and head of purpose at Portland, explains why the agency has created a Total Value Index which measures a business’s profit and purpose.
Pride month saw banks jostle with supermarkets to push a pro-equality message on the streets and on social media. However, despite rainbows emblazoned on everything from limited-edition sandwiches to corporate Twitter handles, research has shown that one in three of Britain’s 100 biggest companies do not refer to LGBT+ policies in their annual reports.
This prompted some LGBT+ campaigners to brand it as ‘rainbow washing’ – creating a façade of solidarity without engaging with the issues that cause discrimination.
From a reputation perspective, the clamour around Pride proved once again that business is struggling to articulate its contributions to society and prove that it means it.
A decade ago, a supermarket would be praised for offering school vouchers and selling Fairtrade bananas. Now, audiences have questions on everything from employee contracts, the treatment of suppliers, CO2 footprint, gender-neutral advertising, single-use plastics and how much the top team get paid. Let alone how profitable a company is, and if it’s losing ground to competitors.
Social media has played its role in placing business under the spotlight. Customers and stakeholders now have faster access to information and the means of voicing their opinion and sharing it widely – leaving companies vulnerable to scrutiny.
Business must of course continue to make a profit, not just for investors but for the benefits that growth brings to society. It enables a company to innovate, to push new boundaries, to invest in people and make choices that reflect its purpose, and to contribute to wider economic growth and employment across the country.
But the days of companies reaping in revenue with little care for its contribution to society are gone. To calculate the Total Value business adds to society, it needs to act with purpose as well as creating profits.
The Total Value Index looks at which sectors are managing to achieve this. Using a wide range of measures from profits, dividends and investments in R&D through to employee diversity, staff satisfaction and records on corporate tax and the environment, we have assessed the Actual Value business and sectors produce and compared their scores against perception amongst influential audiences.
The research found that many sectors are simply not doing enough on the issues that matter to their stakeholders. And when they do respond to these issues, they are generally not getting the credit they deserve for doing so.
In fact, seven out of nine sectors surveyed in the Index showed a large gap between the Actual Value for society created by companies and the perception of that value among their audiences. This is most obvious in both the pharmaceutical and automotive industries, which ranked among the least successful sectors in demonstrating their social and economic impact.
Where this gap between contribution to society and perceptions persists, sectors have the most reputational risk.
However, in some other cases, perception appears to be higher than the reality. This is the case for the food industry which has gained a good level of recognition, thanks to favourability towards their products and the work of a few pioneers who have raised the bar for their sector.
The real challenge for the industry now is to keep up with the high performance and expectations and respond to potential pressures facing them – such as obesity or plastics.
Purpose is here to stay, but profit remains an essential part of a business’s value. Those who can back up profit with an authentic purpose that goes far beyond ‘rainbow-washing’ can enhance and safeguard reputation, attract customers and talent, and drive further profitability and growth. As expectations continue to rise, businesses should recognise that combining purpose and profit is now a reputational imperative.
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