Measuring Perceptions vs. Reality

Thinking Strategically About Corporate Sustainability

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Environmental sustainability, corporate citizenship and responsibility have been intriguing business topics lately. Make no mistake: The implications greatly affect you as a marketer.

Companies are shifting their view of "sustainability" from a secondary practice centered on reporting to a foundational business discipline that goes to the heart of strategic operations and brand reputation. A key driver of this transformation has been recognition that a positive position on sustainability gives a competitive edge in attracting investors, employment talent and supply chain partners—as well as customers. That means those responsible for creating and maintaining brand relevance must pay close attention to their companies' sustainability practices.

The first thing to keep in mind is that sustainability now means more than merely using natural resources in environmentally responsible ways and effectively managing waste. Increasingly, it encompasses social practices and corporate governance -- a more complete view of sustainability termed environmental, social and governance or ESG.

The rise of ESG as a decision-support tool is significant because all three factors affect not only a company's immediate success but its enduring survival. By measuring ESG performance and how it impacts business economics, organizations can better assess actions that make long-term differences.

So what's the link between sustainability practices and, specifically, branding and reputation management? What profile should brand marketers and corporate communicators give to stated ESG commitments and actual performance?

Getting a handle on the opportunities for communications and brand strategy requires clear understanding of the gap between what's actually happening and what the public believes is happening. On one side is perception and brand image; on the other, operational reality.

Bridging the gap between reality and perception

Earlier this year, Brandlogic set out to help corporations build the information base and tools required to bridge this gap. We conducted a worldwide study called "Sustainability Leadership: Measuring Perception vs. Reality" that covered 100 global corporations and contrasted their real and perceived performance in 2011 across all three ESG factors. On the perceptual side, we considered several audiences crucial to corporations' success: the investment community, purchasing and supply managers, and graduating students about to enter the workforce.

The study gathered and compared real and perceived ratings on each company at multiple levels across several performance factors. CRD Analytics, which supplies data for the NASDAQ Sustainability Index, provided ratings of the companies' actual sustainability practices. These were paired with ratings of perceived performance developed by Brandlogic through its global perception survey.

As shown in the Sustainability IQ Matrix, mapping real and perceived sustainability performance allowed us to organize companies into four quadrants: Leaders, Laggards, Promoters and Challengers, with significant differences between scores shown as large dots. For more about the quadrants and how different companies and sectors fared, download the Sustainability Leadership Report.

Drilling into study findings specific to "E," "S" and "G," we uncovered an important underlying viewpoint. Respondents across all three surveyed segments considered corporate performance on social factors to be much more important in 2011 than performance on either environmental or governance factors in determining good corporate citizenship.

What it means

The matrix points to opportunities and risks surrounding sustainability. The Leaders in the matrix stand out not only for actual operational superiority and detailed reporting but for the ways they have begun mastering the integration of sustainability into their vision, mission, values and brand communications.

Companies in the Challengers quadrant may be able to improve return on investment in sustainability through better communications. Key audiences may be making decisions based on inaccurate assumptions of actual performance.

On the other hand, companies considered Promoters could have considerable value at risk. They may enjoy brief advantages -- lower capital costs or better supply chain access, perhaps -- but once their real performance is understood, trouble can ensue.

Facts matter

As borne out by our study and others, empirical facts are starting to transcend mere anecdotes as measures of sustainability performance, perceptions and their connectedness. We're at an exciting juncture where, for the first time, objective and usable data are available to support decisions. This is an important advancement for brand builders.

To make good use of this new resource in the development and management of corporate brands, it's crucial to consider the larger view of sustainability and blend social and governance with environmental factors. By understanding the nuanced perceptions and realities associated with all of ESG, marketing and communications executives will be able to manage their corporations' reputations more effectively, drive performance and fuel more meaningful and lasting levels of value.

James Cerruti is senior partner of strategy and research at Brandlogic with more than 20 years of experience leading strategy, marketing and brand consulting engagements in corporate, consumer and b-to-b settings. He can be reached at [email protected].
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