8 November 2014

Reputation: Fundamental to Survival

Companies in the most regulated industries across the globe see their reputations as crucial to their survival. This is something all of our clients – regardless of industry – should learn from.
Reputation: Fundamental to Survival
On a fundamental level, an organization’s reputation is related to its very existence – and the threats to it.

We call this ‘Licence to Operate’

Or rather, in some specific industries, most notably the energy, mining and pharmaceutical industries, they call this their License to Operate. In other industries: not so much, or as often. In these former industries’ world views, the license to operate is granted by authorities, by customers and by the public through them accepting their business, despite this business having some negative impact – usually because the pros are seen as bigger or more important than the cons.

From energy to banking…

When an energy, mining or pharmaceutical company reviews its digital and media relations strategies, its stakeholder outreach programmes, and its brand building tactics, the key concern is: Are these directly and unequivocally tied to, and supportive of, the corporate strategy, and securing our License to Operate? If not, or not entirely, they should be rendered redundant- and removed from the communications palette.

Consider this: In the 1970s and ‘80s, public concern about the safety and sustainability of nuclear power threatened this industry’s very survival. This resurfaced post-Fukushima. The current energy policy of Germany - a direct consequence of Fukushima - has as a core tenet the shutting down of the remaining nuclear power plants by the early 2020s.

Or, to take another example, the banking industry: following the fall of Lehman Brothers and the ensuing financial crisis, it really has faced significant criticism, has it not? Politicians have responded with demands for tighter regulations, interfering in what a few of years ago would be seen as internal matters. Add to that the decade-old calls for global taxes on transnational financial transactions, and the result is an industry with an immense challenge to its reputation – and where that challenge already has influenced the industry’s freedom.

… and from banking to everything.

Many people may feel that we communications people ‘bang on’ about transparency, about engaging with employees, about creativity and compelling corporate messaging. But we do this for more than mere window dressing: It’s about protecting not only our clients’ reputations, but their very existence—their Licence to Operate.

There is an economic licence to operate, an environmental one, and a societal one. The economic is most easily understood, as it is about sales, profit and loss. The environmental is not difficult, either, as it concerns globally recognised issues such as climate change. The societal licence to operate, however, is more difficult – how does your company benefit me, my friends and society at large? In the ‘Court of Public Opinion’, any and all organisations may be the defendant.  

Some industries are heavily ‘reputation threatened’, and the financial services industry is among these. And as the challenges to their reputations escalate, it all of a sudden starts to become fundamental. Reputation-threatened industries, and organisations, therefore, are rightly concerned about their Licence to Operate.

My point is that if we are to take our roles as PR professionals seriously, we should consider all industries as ‘reputation threatened’. Stakeholder activism, watchdog bloggers, a general focus on more regulation from authorities – all these trends combined means that companies that could take their licenses to operate for granted in the past, suddenly might see their fates turning.

In the technology industry, the reputations of companies such as Apple, Microsoft, IBM, Amazon, SAP, Oracle and so on, have primarily been affected by their financial or product performances – and their charismatic founders and CEOs. In recent years, however, the reputation of this industry has also been challenged by questions around sustainability and sourcing of raw materials, working conditions at factories, and the perception of “locked down” data universes. All of these issues challenge the License to Operate of this industry.

This is where reputation management, and communications, come into play. A creative campaign, a sustainability report, a message platform – these and many other tools available in communications are employed as evidence in the Court of Public Opinion.

Yes, we ‘bang on’ about employee engagement and CEO positioning and all the rest. But we do this for a reason: Looming behind the odd criticism of a company or an industry is a more fundamental threat than damaged reputations. The very existence of the industry or the company is at stake.

And only at their peril will those who do not care too much about the fundamentals of reputation management discover the importance of their own Licences to Operate.

Lars Erik Grønntun
Chairman & CEO, Hill+Knowlton Strategies Europe, Middle East and Africa