The $5 trillion reputation dividend

Next time someone asks me about the value of PR and communications, I will tell them this: corporate reputation is worth trillions of dollars. The latest Reputation Dividend report found that reputation accounts for more than one-fifth of shareholder value across the S&P 500 index, which equates to US$4 trillion (NZ$5.6 trillion).

This means corporate reputation is worth more than the entire GDP of Germany, the world's fourth-largest economy. As the report only looked at one major stock index, the true global value of reputation for businesses could be much larger. While the numbers won't be as big in New Zealand, the lesson still applies: a good corporate reputation creates value for shareholders.

In fact, the importance of corporate reputation may be increasing. The report, in its ninth year, found the value of reputation had increased from 18.2% across the index last year to 20.7% in 2016. In the age of automation, artificial intelligence and apps for everything, investors and consumers need to trust the humans behind it all.

The importance of reputation also depends partly on what industry you operate in. The Reputation Dividend report found reputation was most prominent in telecommunications (34% of total value) and had the least impact in utilities (13%). Apple was the top-ranked company by value of reputation, followed by Walt Disney and Google.

For local context, New Zealand businesses should take a look at the Colmar Brunton Corporate Reputation Index. This year's edition saw Air New Zealand come out on top, followed by Toyota in second place and Z Energy in third. Air New Zealand also topped the 2017 survey.

The Colmar Brunton Corporate Reputation Index is based on four pillars - leadership and success, fairness, responsibility, and trust. When it comes to the bottom line, the most important of these is trust - at least in the New Zealand context where softer measures seem to carry more weight than in overseas markets.

Trust measures not only whether a company can be trusted, but whether it has a positive influence on society and is honest and ethical in the way it conducts business. Kiwis are more likely to do business with or buy from organisations they trust. This is the impact of reputation on bottom line, in a nutshell.

Couple this with other leading research such as Colmar Brunton's Better Futures Report and the message is clear: if companies have corporate social responsibility at the heart of their communications programmes, they will be focusing on the stuff that actually matters to consumers.

Genuine two-way engagement is the key. We talk about earning a good reputation by doing the right thing. It's a simplistic view but it is an essential truth. Two-way communications builds trust as does a willingness to address the issues - all part of doing the right thing.

We assist our clients to measure their material issues so they can engage with their stakeholders on the issues that matter to them and focus on sustained communications addressing these impacts.

To be clear, doing the right thing is no longer just about fluffy community or conservation projects. If you are a bank, focusing on ethical global lending or financial literacy of borrowers is far more meaningful and likely to build trust and reputation than fundraising for a popular cause (worthy as it may be) unconnected to your business.

If Kiwi companies want to improve their reputation, they need to understand the values of their consumers and incorporate that into their business strategy and communications. Do the right thing, engage in two-way communications with consumers and other stakeholders and your reputation will grow and help to boost the bottom line.

Reputation is something all businesses try to improve, but simply hoping for the best is no longer enough. You have to take a strategic approach, make reputation a KPI and invest in improving it, both through your actions and your communications. It may not turn your company into Apple, but it will put you top of mind when your target consumers are making their choice.