Corporate Reputation, Purpose, & Public PolicyDecember 15, 2023

With leaders from governments, businesses, scientists, civil society, and other stakeholder groups congregating in Dubai for COP 28, climate change is in headlines world over. The conference will mark the end of the first global stock-take on the achievements and challenges of climate change goals and commitments and hopefully reach an agreement on the next steps. This will be an opportunity for countries and corporations to reaffirm their commitment to climate change goals, share their progress and strategies. While the commitment is commendable, the focus is shifting towards scrutinising and evaluating what governments and corporations are doing to cope and adjust. This is just the beginning.

The attention has been there for over the last couple of years, but the actions have only intensified with time. You may remember the May 2021 communique from the investment giant Blackstone Group to the companies it funds asking them to start reporting regularly on environmental, social and governance (ESG) to their boards. This was in response to the growing demands of investors from companies on their impact on the environment, community, and employees. The communique signaled a turning point for businesses in the post-truth, post-COVID era.

Much has happened since then—across the world—in terms of both, setting up mandates and frameworks, as well as calling out deviations and missteps. On one hand, leaders are coming together and discussing how to create positive impact, and on the other, the same leaders are being criticised for the use of excessive aviation fuel in the process of joining these discussions.

India’s securities market regulator, SEBI, recently announced an ESG framework for listed entities. An important consideration that drove this decision of the regulator was the need to have a set of metrics that is digestible for the retail investor and average citizen. Information asymmetries generate divergent results for individuals. While large investors will have the wherewithal to decode ESG reports, carefully evaluate performance of the company across the three areas of environment, social, and governance, the individual retail investor may find himself/herself lost in data.

Let us look at another area. The Ministry of Consumer Affairs had come out with a strong advisory against companies indulging in greenwashing and now has come out with draft guidelines. This is not limited to listed entities alone. Besides the areas of data reporting and claims, practices which may not be visible to the public, even though they may interact with the product or service, but hinder competition, are coming under scrutiny as evident from the reports and observations of the competition watchdog, CCI. The bigger the business, the greater and graver the risk to reputation.

There are lessons to be learnt from the government here. The purpose of the state in a rather simplistic term would be the welfare of its people. Governments are working with alacrity towards net-zero ambitions. There is a slew of regulations that are coming. The data is out. We analyse, critique, criticise, and hold them accountable. While businesses seek profit, their product and service must serve a purpose, at the core of everything that they do.

In such an environment, can the public policy that an organisation pursues be at odds with the very purpose that it seeks to achieve? Much of the change has come from the pressures, leading companies to define their purpose aligned to social role that they must pay. For instance, today it is unimaginable for a company that makes chemicals to dump the waste into the river flowing through the city.

Companies are today finding themselves to navigate choppy policy and regulatory realities across the world. Reorganisation of supply chains present opportunities for businesses, but it is equally important for the company to identify and align its role and purpose to the country’s context. Is your purpose clear to your stakeholders, backed by evidence and data, and consistent across operations, policy, and communications. Your reputation precedes you, your purpose lived across multi-stakeholders builds that reputation over time. If the purpose is lost in the pursuit of profit, the trade-offs diminish over time.

The article was first published in the reputationtoday