Machiavelli wrote that it is better to appear virtuous than to be virtuous, that leaders benefit from looking like good guys while actually doing whatever they see as best for themselves. A recent study, by Brandlogic and CRD Analytics entitled “Sustainability Leadership Report, Measuring Perception vs. Reality” seems to echo history’s most famous expert on amoral leadership -companies that are seen as leaders in the area of sustainability are not always the greenest companies. While it may seem opportune to benefit from this inflated reputation, in fact it represents a growing risk. In many cases, it has been known to backfire – sometimes spectacularly.
The Brand Logic / CRD study looked at 100 leading companies across 9 major industries and compared perceived performance on environmental, social, and governance (ESG) parameters versus actual reported performance. It found that, in many cases, there is a stark disconnect between how companies perform and how they are perceived.
The perceptions were measured in six countries (China, Germany, India, Japan, United Kingdom, and United States) from three “highly attentive” audiences: investment professionals, purchasing professionals, and graduating university students who are entering the workforce. The reality score was determined from a review of the companies’ Global Reporting Initiative (GRI) G3 sustainability reports, the most universal reporting protocol for sustainability.
Perhaps surprisingly, a number of well-known brands such as Apple, Google, and Honda were categorized as ‘Promoters’, meaning that “they are credited with ESG [environmental, social, and governance] performance ahead of their actual achievements”. While these companies enjoy a halo-effect from the prominence of their brand and from some specific sustainability activities, they are, as a whole, sitting on reputational air.
Recent events surrounding Apple and BP demonstrate that reputational bubbles can deflate rapidly and embarrassingly. Apple was exposed to the critical spotlight when the alarming treatment of workers by their supplier, Foxconn, was exposed. BP, who dramatically rebranded themselves from ‘British Petroleum’ to ‘Beyond Petroleum,’ saw their market capitalization halved in the wake of the Deepwater Horizon disaster last year. In these cases, as in others, ‘Promoters’ suffered tangible consequences for having sustainability performances that did not live up to their marketing.
It has become increasingly difficult for companies to mask their environmental deficiencies because the stakes for sustainability performance have been raissed dramatically in recent years. Most Fortune 500 companies have taken actions which they can point to as sustainability achievements. While it is a positive sign that so many companies are seeing value in investing in these activities, many of these programs are still formed from the bottom up as opportunistic collections of uncoordinated quick hit actions. This is no longer enough to demonstrate leadership or even differentiation. What’s needed is a strategic platform to: review needs, benchmark successes and failures, adapt and improve. Beyond reputational credibility, such programs often uncover cost savings and even profitable new market opportunities.
To develop a program that can vault your company into the ‘Leaders’ category, your company needs to be deliberate about reviewing all areas of operations. We find that it is best to begin the process with an assessment to see where you are performing well and where there is room to improve. At Malk Sustainability Partners, many of our engagements begin with this type of sustainability review, followed by benchmarking your performance to your peers. We commonly find that even in the best-managed companies there are opportunities to realize more value from environmental initiatives, or for risks (reputational or otherwise) to be mitigated through more comprehensive action.
Machiavelli might have thought that looking green is better than being green, but many companies have already found that greenwashing is a liability. Simply put, sustainability should not be faked. Sustainability benefits will accrue over the long-haul when they are developed under an umbrella strategy that has high level commitment, clear targets, and authentic program branding so stakeholders can recognize that sustainability is part of corporate DNA.
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