Reputation Risks
Guiding Defintion
The risk that adverse publicity regarding business practices and associations, whether accurate or not, will cause a loss of confidence in the integrity of the institution.
EXAMPLES
- Brand equity impacts from negative publicity, consumer concerns or advocacy campaigns
- Damage to brand equity due to conflicts over scarce resources or environmental or social issues highlighted in advocacy campaigns
Business Risks - Reputational Examples
Deforestation and Land Use Change
Many leading brands have been the focus of campaigns by NGOs such as Greenpeace, Rainforest Action Network, SumOfUs, and Union of Concerned Scientists. In 2012, Greenpeace’s mock advertisement linking Nestlé’s palm oil sourcing to orangutan deaths was viewed by over 300,000 during its first day on the Internet. Cadbury New Zealand went from number one in brand trust to number 36 after public criticism over irresponsible palm sourcing in 2009. Kellogg Co. was accused of rainforest destruction in over 30 prominent media outlets.
IMPACT
- Brand equity damaged due to consumer concerns and advocacy campaigns
Water Use and Pollution
The Coca-Cola Company decided not to move forward on the development of an $81 million bottling plant in southern India in April 2015 due to resistance from local farmers who cited concerns about strains on local groundwater supplies.
IMPACT
- Damages to brand equity from public criticism by advocacy groups and failure to meet local needs
- Monetary costs of abandoning part of a strategic plan
Livelihoods and Working Conditions
A May 2016 Oxfam report on the appalling working conditions of poultry plant workers in the United States generated intense media scrutiny and pressure on the companies named to respond to the allegations, including Tyson Foods Inc., Pilgrim’s Pride Corp., Perdue Farms Inc. and Sanderson Farms Inc.
IMPACT
- Brand equity damaged due to consumer concerns and advocacy campaigns
- Costs of complying with human rights and labor certifications
Land Rights
Nestlé report highlights that legal and other, often violent, disputes on rights to land and natural resources are increasing in some countries. The report confirms that companies must recognize and clarify rights to land and natural resources, through an inclusive and equitable process, to further sustainable agricultural development.”
IMPACT
- Brand equity damaged due to consumer concerns and advocacy campaigns
- Costs of complying with human rights and labor certifications