The seemingly inexhaustible list of ratings, rankings, and indices can puzzle even the most seasoned corporate citizenship professionals. They are as varied as the industry itself—from the Best Corporate Citizens and the Best Places to Work lists to the Environmental Performance Index. Through them, a company’s environmental, social, and governance (ESG) impacts and efforts are ranked and reported to large audiences—affecting both internal and external audience perceptions. As a company’s brand and reputation continues to be one of its most important intangible assets, contributing to up to 80 percent of a firm’s market value[i], understanding what CSR and sustainability rankings genuinely report about a company is vital.
“Reputation is what people expect us to do next. It is their expectation of the quality and character of the next thing we produce or say or do. We control our actions (even when it feels like we don't) and our actions over time (especially when we think no one is looking) earn our reputation.” – Seth Godin
Predictability is comforting. We like our daily routines, we wear the same jersey or sit in the same seat when our team plays, and we tend to remain loyal to the brands we like and trust. Unforseen events can shake our confidence in corporations, so companies spend a great deal of time preparing for the unexpected to ensure they consistently deliver on their brand promises. However, businesses today face a unique challenge in that most of their value is intangible, which must be protected and advanced in different ways.
In the 1970s, a company’s market value was comprised of 83 percent tangible assets, things like the physical property, products, and machinery that the company owned. Only 17 percent of the market value of a company was made up of intangible assets, like intellectual property, human capital or reputation.[i]
Fast forward to the present day and the proportion has completely inverted. Only 16 percent of a company’s value is comprised of tangible assets, while 84 percent is made up of intangible assets (see Figure A).
Sustainability reporting—also known as corporate citizenship, CSR, ESG, or non-financial reporting—is widely considered a best practice of companies worldwide. The reporting process—and the resulting report—has become essential for strategic decision-making, enabling stronger long-term planning, stakeholder relations, and data-driven insights. With the growing popularity of disclosure, reports are becoming more sophisticated and useful for decision makers and leaders in the company, as well as for external audiences such as investors—who are using the information to make more accurate market evaluations.
All corporate citizenship work is change management; citizenship programs are designed with the express intent of creating meaningful, positive change in our companies and communities. Citizenship professionals are adept at building the case, marshalling (sometimes scarce) resources, and imagining that there could be better education, safer neighborhoods, and a healthier environment than there is now.
The world has never been so small, nor the issues facing it so far-reaching. Last month, the United Nations convened a general assembly to discuss the broad range of issues facing the world, including climate change, health, and security. In his closing speech, Sam Kutesa, President of the UNGA 69 stressed the need for “financial resources, capacity building, and technology development and transfer” from all global leaders and partners.
The notion of “partnership” is central to the corporate citizenship agenda. Partnerships can serve as strong, unifying forces, gathering the complementary skills and inputs of the public sector, the private sector, and civil society in order to tackle complex social and environmental problems. Partnerships draw diverse resources together and, therefore, are a means to get things done that individual organizations cannot achieve alone.
Two key takeaways emerged from a Lead and Learn session with FedEx and their partner the Salvation Army at the 2012 International Corporate Citizenship Conference.
1. Build relationships: Always steward the relationships you have with NGO partners. By listening to their needs first, the company will be better positioned to provide the most useful services and information.
2: Build resilience: Promote resilience and pre-disaster preparedness through programs that build community capacity. By focusing on long-term relief, companies can reduce drop-off and cultivate better, more sustainable customers.
MasterCard is a successful technology company. Grameen is a microfinance and technology provider to the poorest of the poor in hard-to-reach rural areas. What do they have to offer one another? Apparently, quite a lot.
Partnerships are successful when each partner can both provide and derive value in a way that each could not do alone. As Patricia Devereux, group head of MasterCard International's Corporate Philanthropy and Citizenship division, pointed out, there's never enough money to solve the world's problems. What businesses can offer to NGO's are the time and talent of their employees, the technology or products they produce, and the business expertise they possess. The key to maintaining a partnership is directly related to the ability of both partners to extract value from the partnership, and then the ability to connect that value back for the benefit to the business or NGO.