Why do some companies win public favor and others lose it? That’s a hot topic now that more people distrust corporations than ever before.
The trust deficit is clearly a trend on the rise. Back in 2005, a Roper poll showed that 72 percent of respondents felt that corporate wrongdoing was “widespread,” up from 66 percent the year before. A subsequent survey issued by the Customer Care Alliance reported that 90 percent of people were dissatisfied with the way companies treated them, while 64 percent felt “rage” toward corporations. In 2008, a Reputation Institute study revealed that 13 of 24 industries had “weak” reputations based on the perspective of the general public. And in 2009, things have grown worse.
According to pubic relations and research group Edelman, global faith in business has hit a 10-year low, with 62 percent of people worldwide trusting companies less today than they did a year ago, and 77 percent refusing to buy from companies they distrust.
“It has been a catastrophic year for business, well beyond the evident destruction in shareholder value and need for emergency government funding,” says Edelman’s president and CEO Richard Edelman in a recent press release. “Our [2009 Trust Barometer] survey confirms that it’s going to be harder to rebuild our economies because no institution has captured the trust that business has lost.”
Dismal as the current state may seem, it is a crucial one for companies to strategically face. They can start by asking smarter questions. For instance, it’s not so much about which companies and industries are among the world’s most and least respected, but why. What attributes and values do the winners and losers share?
The Reputation Institute says that outstanding leadership, financial performance, innovation, products and governance are the qualities that lead to a strong reputation. Boston College indicates that corporate citizenship plays an important role. Having spent five years researching this issue myself, I’ve found a common thread that might trump them all: purpose.
True High-Purpose Companies – those companies driven by a social or environmental cause to the extent where their financial performance depends on it –are among the most respected companies in the world. Conversely, Low-Purpose Companies – those companies whose social and environmental postures run contrary to shareholder interests – tend to be the some of world’s least respected. In true High-Purpose Companies, purpose directly influences everything from the product line to the innovation cycle, growth strategy, leadership, governance, citizenship efforts and ultimately, the financial performance of the business. Take Toyota Motor Company, for instance.
Toyota, which was just ranked “The World’s Most Respected Company” by The Reputation Institute, stands for the purpose of “making sustainable mobility a reality.” This purpose is clearly reflected throughout Toyota. Hybrid Synergy Drive, the Prius, zero waste manufacturing facilities and multi-dimensional quality models are just a few examples of how tangible the manifestation of purpose is at Toyota – and how crucial it is to shareholders.
There are dozens of similar examples. GE, Fortune magazine’s “Most Admired” company of 2008, serves the purpose of “providing imaginative solutions to the mounting challenges to our ecosystem.” JetBlue, which JD Power & Associates ranked “The Highest in Customer Satisfaction” three years in a row, aims to: “bring humanity back to air travel.” Patagonia, which Fortune magazine dubbs “The Coolest Company on the Planet,”exists in order to “inspire solutions to the environmental crisis.”
High-Purpose Companies are widely known and revered for their purpose, which is why so many people love them. Such companies might not be perfect, but they are authentic in the sense that their actions and investments match their words. That’s not case in Low-Purpose Companies, which tend to say one thing and do another.
For example, Halliburton says: “[our] every action is guided by our vision to be welcomed as a good corporate neighbor,” but The Wall Street Journal reports that it is “the company with the worst corporate reputation.” Monsanto promises: “integrity is the foundation for everything we do,” yet Amnesty International and theOrganic Consumers Association consider it a “global corporate terrorist.” Allstate Insurance claims that its customers are “in good hands,” while the FBIC counts it as one of the Nation’s “top three worst insurers.” ExxonMobil insists that it is effectively “taking on the world’s toughest energy challenges,” but Harris Interactive rates it as one of the world’s “least trusted.”
The fact is that no ad campaign, no slogan, no celebrity and no promise can compensate for a lack of trust and the feeling that one is being manipulated, fooled or lied to. That’s why authenticity and purpose play such a vital role in establishing corporate reputation.
While not every respected company in the world is a High-Purpose Company, every High-Purpose Company is a respected company. The strategic pursuit of purpose is therefore an effective tool that companies can use to improve their impact on stakeholders, their perceived character and ultimately, their worth.
Christine Arena is the author of The High-Purpose Company – The Truly Responsible (and Highly Profitable) Firms that are Changing Business Now