A2.5.5.4 Build reputation by increasing environmental efficiency


Brand value & reputation can be significantly enhanced by action which improves a company’s environmental and social performance. A company’s reputation is intangible but it helps to build sales, attract capital and business partners, and recruit and retain workers. It can be separate from, but related to, brand image.

There are many components of reputation but sustainability is an increasingly significant factor for governments, NGOs, customers and investors. Measurement of reputation is not as precise as for many components of business success, but it can be assessed through customer satisfaction surveys, public opinion polls and rankings in lists such as ‘most admired companies’. Brand valuation methodologies are also becoming increasingly sophisticated and include tracking of a company’s overall reputation. Another rough but easy proxy for brand value for quoted companies is the difference between the company’s book value and its worth on the stock market. Reputation is not an end in itself. It matters because it enhances the ability to attract capital (both human and financial) to mitigate risk and to build a company’s license to operate.


Develop human capital through better human resource management

Human capital means the knowledge, skills, motivation, health and empowerment of workers. A quality workforce is critical for key aspects of competitiveness such as productivity, product quality and innovation. The key is finding the right people and motivating them, and there are often shortages of the right people for the job. Mistakes cost money to rectify, while committed workers can be invaluable in achieving required quality levels and boosting innovation. An unhealthy workforce can lead to increased absenteeism, loss of trained employees and high costs for replacement and training.

Improve access to capital through better governance

Demonstrating that governance structures and management systems are designed to encourage attention to sustainability issues can help companies raise capital at attractive rates. Access to capital is critical for any company wanting to invest and grow.

High standards of corporate governance reassure lenders and investors that the board is properly constituted, that shareholder and stakeholder rights are respected and that the highest standards of transparency and disclosure are maintained.

Financial institutions are increasingly likely to require evidence of sound management of environmental and social issues as a condition of any deal. Since the cost of capital is driven by perceived risk, companies which can demonstrate good relations with stakeholders will reassure investors about potential volatility and should benefit through lower rates.