Even before the collapse of Enron and WorldCom, public perception of large companies was at an all-time low. Today, 51 of the world's largest economic entities are corporations (49 are countries), but consumer awareness and activism, coupled with the greater transparency afforded by the internet, have resulted in escalating interest in what stands behind corporate brands.
Frightened by the consequences suffered by corporations such as Nike and Shell that ignored such pressure, many companies, including some surprising candidates, are nailing their colours to the mast of corporate social responsibility (CSR).
Two weeks ago British American Tobacco became the first tobacco company to publish a corporate social responsibility report. Its chairman Martin Broughton believes the day will come when tobacco and CSR are not seen as contradictory.
But detractors say BAT's moral position is tenuous, given the role of an industry that kills its customers. If BAT can claim to be socially responsible, what value does the tag have?
A report released today (Wednesday) by brand consultancy Springpoint, in conjunction with Marketing, carries the results of a survey of marketing directors responsible for CSR. It found that, while 80% of respondents see CSR becoming more important for corporate brands in the future, only 40% plan to commit more resources to CSR programmes over the coming year, and just 30% will commit more budget to communicating them.
The difficulty lies in how and to what extent companies communicate their CSR agendas to avoid allegations of whitewash. According to Springpoint's research, the most popular tool for communicating CSR programmes is direct communication with employees, and they are seen as the stakeholder group most influenced by CSR activities. But respondents feel their companies do not communicate as well as they should to their audiences, and 10% believe they do it badly.
This is borne out by research from the Future Foundation, which shows that consumers believe companies take their responsibility to society and the community less seriously than they did four years ago.
Consumers rated most of the 22 companies lower than they did in an earlier study conducted in 1998, with Sky, McDonald's, Dixons and British Airways seeing the largest declines. Only the BBC saw its corporate citizenship rating increase significantly, though Heinz, Tesco, Boots and the Co-op Bank also saw small rises.
Investors are also demanding social responsibility. Last year, the Association of British Insurers (ABI) published guidelines for socially responsible investment and the FTSE launched the FTSE4Good index to track the performance of socially responsible firms.
But though most CSR strategies are essentially defensive, they can reap substantial benefits. BT attributes a third of its image, reputation and trust to its CSR activities, which include education and IT awards, in conjunction with local government and charities such as Childline. Adrian Hosford, director of group social policy, says CSR is 'a major contributor to customer satisfaction'.
Ed Williams, head of CSR at Marks & Spencer, believes the retailer's bank of goodwill, won through its community activities, helped it emerge from its recent troubles more strongly than it would otherwise. And in May the Co-op Bank reported that its ethical and ecological positioning contributed more than pounds 20m (20%) to its pre-tax profit in 2001.
'There is compelling evidence that companies that practise CSR are more successful,' says Michael Willmott, Future Foundation chairman and author of Citizen Brands.
But, as Willmott points out, CSR is about enlightened self-interest rather than altruism, yet companies that appear to be using it solely to benefit the brand are in danger of undermining consumer trust and the perception of being a good corporate citizen. …