Corporate reputation on the couch: ESG, polycrisis and polarisation - Ipsos Flair Brazil
Corporate reputation on the couch: ESG, polycrisis and polarisation - Ipsos Flair Brazil

Corporate reputation: ESG, polycrisis and polarisation

Companies are expected to play a larger societal role, moving beyond traditional Corporate Social Responsibility and embracing ESG principles. However, the rise of societal polarisation, fuelled by social media algorithms and echo chambers, creates complexities for businesses.

Thinking about the challenges of corporate reputation has become a highly complex exercise with each passing year. The very particular characteristics of our decade require business leaders to cultivate a multidisciplinary perspective, capable of connecting the various crisis vectors that affect the image, reputation and performance of companies. The need to look ‘outside the box’ has always existed, but the idea of an interweaving of crises began to gain more traction after the Covid-19 pandemic. This interweaving of crises or, simply, our new reality, is being referred to by Ipsos and some experts as ‘polycrisis’, a context in which the product created by multiple crises is greater and more complex than simply the sum of these phenomena.

What does this mean for business? Thinking strategically about reputational challenges in today's world requires rethinking – or accepting – not only the world’s new environmental and geopolitical conditions, but also the new paradigms that are shaping the behaviour of global societies: climate change, which has a direct impact on supply chains, the availability of raw materials and the productivity of the workforce; wars and conflicts, which affect political and economic stability; migration crises, growing inequalities, demographic changes, advances in artificial intelligence, and polarisation.

On the social front, we must consider the new role that companies are being asked to play in society, since what we know as Corporate Social Responsibility has transformed drastically over time, in line with other changes in the relationship between companies and society. This particular topic has been on leaders' agendas for a long time, but it has gained new momentum since the concept of sustainability emerged as central to the idea of shared value.

Since 2020, board members have consistently advocated for a social role for companies. This year, seven in 10 Board members agree that corporate responsibility goes beyond the bottom line (Ipsos Reputation Council, 2024).

About 10 years ago, our conversations with sustainability and corporate affairs leaders focused on the need for companies to discover and put into practice their corporate purpose. This was an imperative for maintaining good performance and competitiveness, but not all companies had developed their own purpose from its ‘DNA’, as the business cliché goes. For many, this was a recent exercise, which required (re)compromising with new commitments with the entire chain of stakeholders – not always taken into account in most strategic decisions.

The current relevance of the search for corporate purpose has not been lost; in fact, it has become even stronger and more necessary. However, discussions around its legitimacy and practical action have overtaken the honeymoon period between companies and their stakeholders. The acronym ESG became synonymous with a range of concepts related to sustainability, and, above all, synonymous with responsible social action.

From that moment on, conversations with business leaders acquired new nuances. After all, where do we start to put corporate purpose into practice? Which actions have the greatest potential to generate value and positive impact? There were many questions and much confusion – which still exists – about the social role of the company and the role of brands. ESG was the panacea that would deal with the wreckage left by the pandemic period.

As if this were not enough of a challenge, and even without resolving all doubts about how to implement a new governance model, an additional layer of complexity appeared on the scene as a protagonist: the polarisation of society.

How can the polarisation of society impact the reputation of companies?

Growing political polarisation is a global trend. However, Latin America and the Caribbean is the region where polarisation has increased the most over the last 20 years (UNDP, 2023).

It is necessary to make a parenthesis before delving into the topic of polarisation. Just as ESG has automatically become synonymous with responsible action, the concept of polarisation has been used as a subterfuge for companies to avoid making commitments and as a justification for poor performance in environmental, social and governance practices. ESG, therefore, should be seen as a toolbox that helps companies guide their business models towards real sustainability.

Polarisation is not something new. Divergences of ideas between societal groups have always been a reality. What we have been experiencing more intensely in recent years is an exacerbated or excessive polarisation that prevents the identification of convergence zones between groups that are in opposing political and ideological camps. This phenomenon, which contributes to the radicalisation of politics and diverse relationships - including between people and companies - has been shaped, mainly, by the way we consume information.

As more people receive news and information from social networks and the web, algorithms use echo chambers or filter bubbles to decide what type of information is presented based on the user's search history and networks. In terms of political ideas, this algorithm promotes the creation of ideological bubbles that tend to confirm preconceived political beliefs. As a result, there is a weakening of political deliberation, since people are rarely exposed to opposing points of view (UNDP, 2023).

In this context, business practices in general, and not only those related to ESG, will increasingly be under the spotlight and greater scrutiny by society. Each ‘bubble’ will have its arguments to disqualify or delegitimise corporate actions. It is clear that building trust on the part of companies is no longer a nice-to-have, but rather an essential condition for getting through this context with a lower degree of risk.
A strategy considered by some leaders in this context of radicalisation may be non-action. However, this stance is also not a viable alternative. Ignoring increasingly pressing social demands also puts the company at risk.

At Ipsos, we monitor consumer interactions with brands on several fronts (marketing, public opinion, corporate reputation). In all of them, there is clear evidence that people expect companies to take a stand on relevant social issues. And while this demand is clear on the part of society, on the part of companies, the ‘how to respond’ has been keeping business leaders awake at night, especially those in corporate communications. 

On the other hand, even if there is a fear of getting involved in social actions, leaders themselves recognise that they must be part of the change. This awareness implies a change in relation to the personal image of the leader, which increasingly blends with the corporate image of the company. The recognition that there is a demand for corporate positioning and action requires corporations to mature their corporate social responsibility programs and cultivate a governance model guided by the notion of stakeholder capitalism.

Stakeholder capitalism is a type of capitalism in which organisations seek to create long-term value, considering the needs of all stakeholders and the promotion of social wellbeing. There is a concern with improving short-term profits for shareholders, but also the need to create long-term value, considering the needs not only of the company, but of the entire community (AMCHAM, 2023).

Brands will increasingly have to be activists, to have clear positions, so that the consumer really understands what that brand is about. On the other hand, you have to be careful between taking a position or taking a political stance. This makes a big difference. Some agendas are universal, such as human rights and climate issues. With this type of agenda, companies must increasingly take on the role of protagonists, helping to transform society (Advisor to the Ipsos Reputation Council, 2023).

Acting in line with stakeholders' expectations, however, is not enough to suppress possible reputational crises. It is possible to reduce the risk, but not eliminate it completely. Although the crisis mitigation strategy varies according to each company, building a strong reputation is a fundamental element for all.

A strong corporate reputation is more crucial than ever; it is a valuable intangible asset that directly impacts relationship indicators with all stakeholders that are essential for long-term success. Furthermore, reputation can directly impact financial performance. Our research shows that companies with a higher level of trust perform better in the market efficiency index.

The Ipsos Marketing Efficiency Index is composed of the following variables: a) considering the company's advertising memorable; b) considering the advertising trustworthy; c) feeling good about using products/services; and d) being willing to pay a premium price.

Confidence explains just over a quarter of the variation in the Marketing Efficiency Index globally. For every point of confidence, companies gain about 13 points in the Index. The biggest gains occur when companies move from a neutral confidence level to a positive confidence level.

In a context of polycrisis marked by polarisation and rapid advancement of information through digital platforms, maintaining a robust corporate reputation can differentiate a company from its competitors and serve as a shield against potential negative publicity. In this sense, keeping up with the evolution of social expectations, moods and consumer relations is as essential as defining the purpose of social action.

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The author(s)

  • Priscilla Branco
    Public Affairs and Corporate Reputation, Brazil