Citizens All: The New Rules of Corporate Citizenship

By Tom Zara and Peter Cenedella

The markets in which brands operate are increasingly transparent and fast-moving, with greater public visibility into corporate practices and robust platforms for public reaction. The relationship between companies and their target audiences is less and less one of broadcast and image control, and increasingly about engagement and participation. “The wisdom of the crowd” is applied to everything from such brand staples as naming and logo design to business basics like product development. Clay Shirky aptly titled his influential 2008 tome on the digital revolution Here Comes Everybody. Just four years later, it’s safe to say that when it comes to the life of corporate brands, everybody is, by now, very much here.

And everybody isn’t just passively watching, of course. Consumers are expecting to see not just great products and services from the brands they choose; they also want to feel that the brands they love are, in fact, worthy of that love. Brands are strong presences in our lives, deeply ingrained and abiding parts of our emotional, mental, and physical experience and environment. So while the new interactive dynamic between brands and consumers is inherently filled with perils for brands, it is also replete with unprecedented opportunities to fulfill people’s desires — and even create some in the process.

This is why Corporate Citizenship is at the forefront of the life of brands as never before. How brands negotiate this razor’s edge of risk and reward in the new crowd-driven, digital, everything-at-once world will determine their strength, health, and wealth.

A tale of two brands

Case in point: British Petroleum (BP) is not among Interbrand’s Best Global Brands 2012. No surprise there; this marks BP’s third straight year in brand rehab following the 2010 Deepwater Horizon oil rig disaster in the Gulf of Mexico. The three prior years, from 2007 through 2009, however, BP held down respectable spots in the ranking as its brand strength grew in large part on the increasing credibility of the company’s “Beyond Petroleum” claims to green, which had helped them make deep and highly visible inroads into American markets. Its continuing, lengthy, and decisive fall from brand grace should not merely be seen as an inevitable by-product of the spill. It stems much more from the ethos and values of the BP culture, and its failure to perform under the disaster’s scrutiny. The bottom line for BP was that it was seen as dissembling, deflecting blame, and deceiving; it delayed and deferred taking responsibility, and it allowed others to drive the story. BP’s response in the media — including social media — stands as a case study in how a PR disaster can quickly turn into a lasting brand disaster.

So what’s a brand to do in the interest of building customer relationships and earning the respect, trust — and love — of its audiences?

Contrast BP with Nike (#26 in our report). Once a poster child for sweatshops and a target of international labor and human rights activists, Nike has completely averted brand disaster and is enjoying its sixth consecutive year on Corporate Responsibility magazine’s annual ranking of the best corporate citizens, receiving high marks for its transparency, its environmental policies, and — most importantly — its human rights performance. In the decade since Nike became, fairly or not, a symbol of all that is wrong with global outsourcing, one is more likely to see an activist wearing Nikes than bashing them. Why the turnaround?

Nike did two things: It simply owned its behavior, and then it got to work changing it for the better.

This tale of two brands — one an annual fixture in our survey, the other still reeling from its mishandling of a bad situation — is instructive of the new role of corporate citizenship. Today’s corporations face a stark choice in these increasingly transparent times: develop and implement strategies to carve out a meaningful presence as a corporate citizen in an engaged world, or run the risk of seeing your brand value erode and your business suffer. Billions of dollars of brand value are tied to various forms of corporate social responsibility — Coca-Cola, IBM and Microsoft alone routinely have close to USD $4 billion engaged in social programming among them.

Interbrand has focused on advising our clients how to ensure that their citizenship dollars are well spent. And the short answer is: It’s about more than the spend. It’s about the credibility of a company’s culture of citizenship.

The changing face of corporate citizenship

Corporate citizenship goes deeper and is fundamentally different than older notions of corporate social responsibility (CSR). CSR traditionally implied a separate body nominally within, but functioning apart from, the core organization, such as a foundation, that took action in the social arena and may have borne little discernible relation to the company’s larger sense of itself and its reasons for being in business. CSR too often smacked of doing the right thing out of duty, reducing risk of noncompliance, sundered from the bottom line, separate from the profit motive, unrelated to an organization’s fundamental raison d’etre. If doing good for the sake of a PR bump or to keep the regulator at bay was the hallmark of CSR in recent times, then the new opportunity for companies may be summed up in a simple equation: Doing good by doing what you do best yields greater value. Great corporate citizens leverage their expertise in the marketplace to solve the world’s challenges while gaining credibility and driving consumers to choose them over the competition.

Corporate citizenship, then, is the perception people have of a company’s positive contribution to society, which is a key component of that company’s standing in the market and its brand value. Such perception also has a tremendous impact on the HR function, hiring, and retention. Millennials, for example, have come of working age with a level of high tech that blurs the traditional work/life balance. They therefore feel entitled to demand that companies reflect their own values. To recruit the best of this generation, firms are finding they must be responsive to Millennials’ desire to work for those companies that not only produce a better widget, but also do something more positive for the world.

Metrically speaking, Corporate Citizenship, in our view, can be ranked as a measurement of how a company interacts strategically with six critical constituents that depend upon it, and upon which it is dependent: its employees, its customers, its suppliers, the government(s) responsible for both regulating and assisting it, the communities in which it does business, and the larger environment it shares with the whole planet.

In both our research and our client work, we have found that, first, consumer perception of a brand’s performance in any one of these six dimensions has a positive impact — a halo effect, if you will — on the other five dimensions. This is good news: it gives companies license to laser-focus on an aspect of social engagement that suits their brand identity, and they can expect to see returns in perception as a result. Second, we have seen that the ROI on this approach is real, and tends to trend higher long-term than the ROI on the more traditional CSR approach.

Closing the gap

There’s a potential sinkhole in the market, waiting to suck value away from brands. It’s the gap that can open up between a company’s actual corporate citizenship performance on the one hand, and the public perception of that citizenship, on the other.

This year Interbrand, in partnership with Deloitte, measured the Best Global Green Brands — in part by assessing the gap — positive or negative. To gauge performance we measured six elements of sustainability: governance, operations, transportation and logistics, stakeholder engagement, supply chain, and products and services. For perception, we examined differentiation, presence, relevance, consistency, understanding, and — crucial for countering the PR effect — the authenticity of corporate claims of environmentalism.

A negative gap occurs when a brand fails to get credit in perception for its performance. These brands are not seeing the full return on their Corporate Citizenship investment. That’s why it’s critical that companies find ways to tell the story of who they are, why they choose to engage as they do, and how they are having an impact in doing so.

A positive gap occurs when a brand receives too much credit for its performance. These brands run the risk of losing the valuable credibility they have gained with consumers. It’s critical that the story a brand tells across platforms about its social engagement is not a PR job or a brandwash. The story needs to show in every facet of its narrative that engagement is rooted in the brand’s business, its sense of purpose as an organization; rather than an add-on, corporate citizenship efforts need to check the box of authenticity.

This is a net positive, because it frees brands to pursue social engagement in ways that boost the bottom line by aligning so clearly with their business mission and values.

One of the best current exemplars of this approach is Western Union and its “Our World Our Family” program, which helps immigrants and their families worldwide. Much of the company’s profits come from its money transfer payments business, and much of that business consists of immigrants in the US, many of them from Latin America, wiring money home to assist family members in need. As Luella Chavez D’Angelo, Western Union’s Senior Vice President for Global Corporate Responsibility, puts it: “We take this audience and consumer base very seriously. We know we have a responsibility not only to watch after their cash as a leader in global payment services, but we’re moving that money for very important, impactful reasons: to get food on the table, to buy school supplies, to pay the bill that maybe is much harder for them than for you and I to pay.”

From the C-suite down, Western Union evolved its traditional philanthropic efforts to align its foundation’s focus with the company’s core business. Not without risk to the share price, the company’s CEO committed to the approach, culminating in an address on behalf of immigrant concerns to the United Nations General Assembly. No half measures there. With a footprint in 200 countries and what Chavez D’Angelo calls “some understanding of marketing and an understanding of working with various cultures,” Western Union has aligned its business-side policies and its foundation’s efforts.

The trends will only accelerate in the years ahead: to interactivity, to consumer participation, to instantaneous reaction, and real-time multi-platform dialogue between brands and their audiences. Companies seeking a market edge need to compete not only in the arena of products and services, but also in the wider world. Your social engagement could be a key determinant of where you rank in the coming editions of the Best Global Brands.