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Measuring and Managing Brand Reputation: How CSR and Other Factors
Influence Reputational Value
Sandra MacleodReputation Dividend
The economic case for ‘good citizenship’…CSR, ESG, and sustainability credentials
…more grist to the mill
Nov 15th, 2016
© Reputation Dividend
33 © Reputation Dividend
...is an independent consultancy
...focused on economic research of corporate reputation
...founded in 2010
...supporting business leaders in pursuit of more effective messaging and corporate communications
Some words of introduction - Reputation Dividend…
4 © Reputation Dividend
CR&S…the business case is building…surely and steadily
Identified wide ranging, and significant, benefits. Among other things…• Firm value … increased share price, lower
risk and cost of equity• Customer loyalty … greater revenues,
higher product prices• HR … lower staff turnover, improved
employee engagement
5 © Reputation Dividend
The investment community is there
High rating ESG companies outperforming low ones
SRI, Sustainable and Responsible Investment, the fastest growing investment category
SRI funds accounting for 18% of assets under management in the US by 2015, $6.6 trillion of investments
Investor interest is growing
6 © Reputation Dividend
Efficiency of operation• Enhanced management decision making
Improved access to capital• Fewer capital constraints
Meeting employee expectations• Increased employee loyalty
Better corporate reputations
Matters CR&S are understood, appreciated and valued
7
Leading
Profitable Trus
twor
thy
Innovative
Over bearing
Carin
g
Ethical
Mea
sure
d
CynicalNim
ble Aggressive
Faceless Nurturing
Fast
Ada
ptab
le
Une
xciti
ng
DomineeringConsiderate
Me-too
Led well
Clinical
Err??
© Reputation Dividend
Arrogant
“The sum of all the thoughts, feelings, associations and impressions that
come to mind when thinking of the corporation”
8
Profitability
Macro forces
Market perceptions
Product brand experience
News flow
Creating shareholder value
éUnderpinning
confidence in the ability to deliver economic return
Allocation of capital
Marketing and advertising
Industry dynamics, networking
Perceptions of management
‘Reputation’
Investor behavior provides the foundation for a better understanding the impact of reputation
© Reputation Dividend
9
What gets measured gets managed
© Reputation Dividend
10
Ø Sourced among ‘professional’ stakeholders Ø Collected
‘thoughts and feelings’
Ø Raw measures from survey
research
Reputation
Ø Commercial performance
(reported)Ø Analysts’consensus forecasts
Ø Company and third-party
sources
Financial
Media context…Ø What is being said about the company
Ø Mainstream business press
Modellinginputs
© Reputation Dividend
Reputation Value Analysis is informed by empirical evidence … ‘hard data’
11
ð c41 potential ‘explanatory’ variables
CompanyAveMcpAug10
AveMcpSep10
RepQman
RepFS RepQGSRep
AATalent
RepVLTIRep
CapInnRep
QmktgRepCER RepUCA
MeanRep
ICB1 ICB2 ICB3EBITDAAug10
EBITDAfcastAug10
EBITAug10EBITfcastAug10
DividendyldAug10
DividendyldSep10
DivyldfcastAug10
BarrattDevelopmentsPLC 945.96 989.98 5 3.8 6 5.4 5.1 5.8 7.1 5.1 4.9 5.36 ConsumerGoods Personal&HouseholdGoodsHouseholdGoods&HomeConstru39.3 90.46 34.2 85.1 0 0 0BBAAviationPLC 828.98 818.52 Industrials IndustrialGoods&ServicesIndustrialTransportation 142.55 149.59 100.5 107.53 4.29 4.03 4.46BeazleyPLC 603.41 591.48 Financials Insurance NonlifeInsurance 75.2 105 75.2 105 6.26 6.06 6.68BellwayPLC 681.26 691.98 7 7.2 6 5.2 6.3 4.8 5.5 5.1 6.2 5.92 ConsumerGoods Personal&HouseholdGoodsHouseholdGoods&HomeConstru47.8 53.79 45.59 51.3 1.72 1.56 1.89BerkeleyGroupHoldingsPLC 1073.98 1094.57 8.1 8.9 7.5 6.9 8.6 6.5 7 6 8 7.5 ConsumerGoods Personal&HouseholdGoodsHouseholdGoods&HomeConstru107.16 118.62 106.22 116.48 0 0 0BGGroupPLC 35212.92 37439.11 8 8.1 7.5 7.6 7.6 6.9 6.8 6.7 7.9 7.46 Oil&Gas Oil&Gas Oil&GasProducers 5225.5 5493.89 4019.56 4462.41 1.18 1.1 1.29BHGlobalLtd. 384.85 394.18 Financials FinancialServices EquityInvestmentInstruments BHMacro(USD) 380.88 370.19 Financials FinancialServices EquityInvestmentInstruments BHPBillitonPLC 106332.56 109094.18 6.8 8.7 7 6.8 7.5 5.7 6.2 6.8 7.3 6.98 BasicMaterials BasicResources Mining 15949.6 22881 12830.3 19736.6 3.09 2.73 3.25BigYellowGroupPLC 393.59 409.34 6.3 5.3 7.5 6.2 6.3 6.7 7.5 6.2 6 6.44 Financials RealEstate RealEstateInvestmentTrusts 28.39 32.69 31.14 35.28 1.37 1.23 3.09BlackRockWorldMiningTrustP 1011.61 1084.75 Financials FinancialServices EquityInvestmentInstruments BluebayAssetManagementPLC 547.79 645.87 Financials FinancialServices FinancialServices 23.59 51.32 21 49.9 2.26 4.35 4.9BluecrestAllblueFundLtd. 683.41 784.95 Financials FinancialServices EquityInvestmentInstruments BodycotePLC 439.21 465.37 Industrials IndustrialGoods&ServicesIndustrialEngineering 57.4 91.39 8 41.97 3.68 3.33 3.68BookerGroupPLC 659.25 707.74 ConsumerServices Retail Food&DrugRetailers 80.6 85.5 66.6 71.01 2.86 2.64 3.1BovisHomesGroupPLC 473.48 504.96 6.1 7.3 5.9 5.2 5.8 5.6 5.3 5.1 5 5.7 ConsumerGoods Personal&HouseholdGoodsHouseholdGoods&HomeConstru18.17 19.84 17.4 19.43 0 0 0.57BPPLC 75774.4 76726.13 6.5 5.5 6.8 6.2 6.2 6.7 7 3.3 6.3 6.06 Oil&Gas Oil&Gas Oil&GasProducers 21718 22620.3 14040.3 20266.7 9.11 8.11 2.39BRITInsuranceHoldingsN.V. 774.25 788.62 Financials Insurance NonlifeInsurance 130.2 90.14 127.9 97.2 6.25 5.85 6.25BritishAirwaysPLC 2556.99 2708.73 6.3 3.8 5.4 5.9 3.3 5 5.6 5.3 5.3 5.1 ConsumerServices Travel&Leisure Travel&Leisure 501 1070 -231 312.45 0 0 0BritishAmericanTobaccoPLC 44321.57 47108.32 ConsumerGoods Personal&HouseholdGoodsTobacco 5013.54 5502 4461 4961.24 4.49 4.19 5.13BritishAssetsTrustPLC 345.44 362.09 Financials FinancialServices EquityInvestmentInstruments BritishEmpireSecurities&Ge 692.39 726.7 Financials FinancialServices EquityInvestmentInstruments 1.62BritishLandCo.PLC 3984.13 4180.41 5.7 6.3 6.1 5.6 5.7 5.1 5.4 6 5.6 5.72 Financials RealEstate RealEstateInvestmentTrusts 357.5 450.6 488 420.05 5.7 5.59 5.7BritishSkyBroadcastingGroup 12425.1 12445.94 8 8.1 8 7.6 7.2 8.4 8.2 6.7 6.8 7.67 ConsumerServices Media Media 1192 1395.5 855 1055 2.65 2.75 2.91BritvicPLC 1147.91 1149.68 6.7 6.4 7.1 6.3 6.3 6.7 6.6 6.1 6.1 6.48 ConsumerGoods Food&Beverage Beverages 148.9 181.88 110 134.5 3.11 3.09 3.66BSSGroupPLC 545.94 551.06 Industrials IndustrialGoods&ServicesSupportServices 60.9 65 53.8 59.73 1.88 1.79 1.97BTGroupPLC 10750.47 10898.25 6.5 5.1 5.6 5.2 4.9 4.6 5 6.6 5.3 5.42 Telecommunications Telecommunications FixedLineTelecommunications5639 5666.79 2600 2679.25 5.18 4.93 5.63BTGPLC 545.15 561.07 HealthCare HealthCare Pharmaceuticals&Biotechnolog14.5 -0.54 2.1 -8.1 0 0 0BunzlPLC 2273.78 2486.61 6.6 6.7 6.4 6 5.8 6.1 5.8 6.2 6.3 6.21 Industrials IndustrialGoods&ServicesSupportServices 319.2 336.6 295.7 306.36 3.03 2.84 3.23BurberryGroupPLC 3679.84 4035.26 7.3 7.2 8.2 7.3 7.7 7.5 7.3 4 6.2 6.97 ConsumerGoods Personal&HouseholdGoodsPersonalGoods 272 304 219.9 245.29 1.65 1.35 1.88Cable&WirelessCommunication 1580.12 1585 6 5 5 5.2 4.7 3.8 4.2 4.9 4.7 4.83 Telecommunications Telecommunications FixedLineTelecommunications536.27 611.27 325.42 394.62 10.76 10.69 9.59Cable&WirelessWorldwidePLC 1690.69 1950.6 5.1 4.9 5.5 5.5 4.8 4.8 4.6 5 5.3 5.06 Telecommunications Telecommunications FixedLineTelecommunications431 450.33 149 177.76 4.49 4.08 6.74CairnEnergyPLC 6515.03 6263.91 7 6.8 6.6 6 7 6.8 5.8 6.5 7.5 6.67 Oil&Gas Oil&Gas Oil&GasProducers 2.79 548.68 -79.5 440.63 0 0 0CaledoniaInvestmentsPLC 918.61 941.25 Financials FinancialServices EquityInvestmentInstruments CapitaGroupPLC 4334.35 4638.58 7.9 8 6.7 7.3 7.1 6.8 6.7 6.3 7 7.09 Industrials IndustrialGoods&ServicesSupportServices 412.2 457.52 357.7 393 2.39 2.14 2.76Capital&CountiesProperties 713.09 807.25 Financials RealEstate RealEstateInvestment&Servi62.2 53.41 62.1 52.24 0 0 1.27CapitalShoppingCentresGroup 2061.91 2264.36 Financials RealEstate RealEstateInvestmentTrusts 300.5 261.19 298.55 258 4.98 4.49 4.53CarillionPLC 1213.36 1258.01 Industrials Construction&Materials Construction&Materials 207.35 226.5 130.9 159 4.81 4.66 5.01CarnivalCorp. 12918.13 14166.8 6.3 7 7.3 6.8 6 5.8 6.7 6.2 5.8 6.43 ConsumerServices Travel&Leisure Travel&Leisure 2144.47 2408.09 1333.87 1489.36 0 0 1.28CarpetrightPLC 488.97 506.78 7 6.6 6 5.4 6.8 4.8 5.2 4.6 5.6 5.78 ConsumerServices Retail GeneralRetailers 53.2 57.03 34.1 36.87 2.21 2.05 2.76CatlinGroupLtd. 1281.42 1225.4 Financials Insurance NonlifeInsurance 373.41 152.71 378.36 189.55 7.6 7.34 8.08CentaminEgyptLtd. 1710.92 1855.97 BasicMaterials BasicResources Mining 16.14 129.81 8.2 132.73 0 0 0CentricaPLC 16630.3 17255.34 7.6 8.2 6.4 7.4 7.8 7.2 7.8 7 6.8 7.36 Utilities Utilities Gas,Water&Multiutilities 2528 2995.15 1814 2198.54 3.93 3.96 4.21CharterInternationalPLC 1073.42 1114.44 Industrials IndustrialGoods&ServicesIndustrialEngineering 153.9 180.67 123 148.33 3.52 3.1 3.69ChemringGroupPLC 970.56 1025.5 6.5 6.7 6.5 5.8 5.8 5.8 5.2 5.2 6.5 6 Industrials IndustrialGoods&ServicesAerospace&Defense 131.65 162.5 114.75 141.49 1.92 1.66 2.17CityofLondonInvestmentTrus 541.73 571.64 Financials FinancialServices EquityInvestmentInstruments CloseBrothersGroupPLC 980.64 1016.62 Financials FinancialServices FinancialServices 133.05 134.35 113.1 118.5 5.86 5.29 5.86CobhamPLC 2525.72 2656.64 6.9 7.2 6.5 6.5 6.6 6.8 5.8 5.7 6.8 6.53 Industrials IndustrialGoods&ServicesAerospace&Defense 378.3 403.1 331 352.61 2.61 2.36 2.87ColtGroupS.A. 1063.44 1072.54 5.6 5.7 5.3 4.4 4.1 4.1 4.2 4.7 4.8 4.77 Telecommunications Telecommunications FixedLineTelecommunications300.93 269.03 76.68 63.26 0 0 0CompassGroupPLC 9834.87 10211.19 7.7 7.4 7.1 7.4 7 5.7 5.4 5.9 6.5 6.68 ConsumerServices Travel&Leisure Travel&Leisure 1102 1224.2 877 986.45 2.47 2.49 2.81
‘Targetvariables’
© Reputation Dividend
12 © Reputation Dividend
The results are clear, reputations are underpinning confidence in companies’ ability to deliver the economic returns investors are looking for
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
…creating $894bn of shareholder value
Prop
ortio
n of
mar
ket c
ap a
ttri
buta
ble
to
corp
orat
e re
puta
tion
…’destroying’ $19bn of shareholder value in the bottom five
As at May/Jun 2016
The S&P ‘Top Five’ 2016
13
…and, overall, confirming the role of reputation as a major corporate asset
© Reputation Dividend
S&P 500(Gross market cap. $19,874bn)
…as at May/June 2016
20.7% of the gross market capitalization
$4,104bn of shareholder value
14 © Reputation Dividend
All of which demonstrates valuable opportunities for CR and sustainability credentials
15
Financial soundness
Long term investment potential
Quality of products & services
Quality of management
People management
Use of corporate assets
Innovation
Social responsibility, sustainability, ESG
Global competitiveness
‘Corporate Reputation’(Aggregate rating of nine
individual factors)
© Reputation Dividend
Reputation value is delivered by a range of measurable attributes - anything and everything that comes to mind when thinking about the company
5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15%
Globalcompetitiveness
Socialresponsibility
Innovation
Useofcorporateassets
Peoplemanagement
Qualityofmanagement
Qualityofproducts/services
Long-terminvestment
Financialsoundness
16
Where value delivery depends on how well the company is regarded on each factor combined with how ‘interesting’ it is to investors
$4,104bn of shareholder value at May/Jun 2016(21% of the combined market capitalization of the S&P 500)
Proportion of value attributable to each reputation factor
$407bn of shareholder value in the S&P…and growing
è
12.9%
11.4%
11.3%
10.8%
10.6%
10.6%
10.0%
9.6%
12.9%
© Reputation Dividend
17
Strong CR&S credentials contributing $63bn of shareholder
value to ‘Top Ten’
Lack of compelling CR&S credentials costing $26bn of
shareholder value in ‘Bottom Ten’
Prop
ortio
n of
mar
ket c
ap a
ttri
buta
ble
to
CR
&S
cha
ract
eris
tics
-10%
-5%
0%
5%
10%
15%
Where tangible shareholder value is being produced by a wide range of winners and losers
S&P 500
© Reputation Dividend
18
-10%
-5%
0%
5%
10%
15%Contributing $63bn of shareholder value to
the ‘Top Ten’
‘Destroying’ $26bn of shareholder value in the
‘Bottom Ten’
Prop
ortio
n of
mar
ket c
ap a
ttri
buta
ble
to
CR
&S
cha
ract
eris
tics
…a wide range of winners and losers
© Reputation Dividend
Top TenCSR factor
contribution to market cap. Value
11.3% $24,659m10.1% $8,563m9.3% $7,614m8.3% $2,421m7.9% $4,575m7.4% $11,274m7.3% $1,755m7.1% $691m7.1% $547m7.1% $1,154m
19
Putting the insight to work
© Reputation Dividend
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
9% 10% 10% 11% 11% 12% 12% 13% 13% 14%
20
Factor Contribution
Reputation Value Analysis provides a powerful lens to examine the messaging opportunities
© Reputation Dividend
Valu
e G
row
th P
oten
tial
Value as a long term investment
Quality of management
Corporate & social
responsibilityGlobal
competitiveness
Quality of products &
services
People management
Innovation
Financial soundness
Use of corporate
assets
High
Low
Contribution vs leverage across the S&P
Corporate & social
responsibility
0
0
1
1
1
1
1
1% 2% 3% 4% 5% 6% 7% 8%
21
Value as a long term investment
Quality of management
Global competitiveness
Quality of products &
services
People management
Financial soundness
Use of corporate
assets
Innovation
… offering guidance as to messaging to support and secure strengths; for example…
Factor Contribution
Valu
e G
row
th P
oten
tial
High
Low
© Reputation Dividend
Reputation Contribution = 36%Market cap (Apr/May) = $153bn
CRS reputation value at risk = $11bn
0 .0 00
0 .2 00
0 .4 00
0 .6 00
0 .8 00
1 .0 00
1 .2 00
1 .4 00
1 .6 00
1 .8 00
-3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7%
22
Value as a long term investment
Quality of management
Corporate & social
responsibility Global competitiveness
Quality of products &
services
People management
Financial soundness
Use of corporate
assets
Innovation
…or, extend appreciation and ‘close the gap; for example…
Factor Contribution
Valu
e G
row
th P
oten
tial
High
Low
© Reputation Dividend
Reputation Contribution = 32%Market cap. (Apr/May) = $41bn
CSR reputation growth potential = $2.5bn
23
The investment community is increasingly favorable towards the companies they see as pursuing effective corporate responsibility and sustainability programs
The impact is marked and the benefits considerable – contributing nearly 3% of shareholder value across the S&P, up to 10% in those that take it and manage it strategically
The challenge is to take the case to the communications professionals and ensure a suitably integrated messaging strategy.
In sum...the business case for sustainability is now even stronger
© Reputation Dividend
24
Valuing Corporate Reputation To Secure Shareholder Value
Thank you
WWW.ReputationDividend.com© Reputation Dividend
