Sustainability: Stakeholder Perceptions vs. Reality: Recent Academic Research on People and Strategy

By Hanks, Steven H. | People & Strategy, December 2012 | Go to article overview

Sustainability: Stakeholder Perceptions vs. Reality: Recent Academic Research on People and Strategy


Hanks, Steven H., People & Strategy


Perceptions may not always mirror reality, particularly as it relates to corporate commitment to sustainability. This challenge was verified in a recent study by John Peloza, Moritz Loock, James Cerruti and Michael Muyot published in California Management Review. The study, conducted by Brandlogic and CRD Analytics, utilized a sample of 2,400 individuals, including 800 investment professionals, 800 purchasing/ supply chain managers and 800 potential employees (students graduating from a college or university in the next eight months) to examine differences between stakeholder perceptions and reliable sustainability metrics. The study was global in its reach, with respondents from six countries (400 from each country)--China, Germany, India, Japan, the United Kingdom and the United States--and looked specifically at perceptions versus reality in 100 well-known global firms. The findings of the study suggest that while stakeholders report that corporate citizenship is important in their decision making, with 45 percent reporting it was "extremely important" and 43 percent rating it as "somewhat important," they are often inaccurate in their assessment when compared with reliable sustainability data. The authors summarize two key findings of the study as follows:

   First, the perceptions of stakeholders
   can be highly divergent from reality of
   a firm's investments. For example,
   some firms that are objectively rated
   by third parties as leaders--not only
   within their field, but among all firms
   globally--are viewed by stakeholders
   as sustainability laggards.
   Conversely, firms that rating agencies
   consider as lagging in their sustainability
   investments and reporting,
   compared to other firms, are perceived
   by stakeholders as similar or
   even above other firms in sustainability
   activities. The second key finding
   from the data is that stakeholders, for
   the most part, are unable to distinguish
   meaningful differences on
   sustainability between the vast majority
   of firms.

What factors lead to this gap between perception and reality? The authors note several factors that impact the ability of stakeholders to accurately assess corporate citizenship. Among other things, the authors note difficulties in accessing and interpreting reliable sustainability information about corporations. They express this as follows:

   Regarding audiences' ability to process
   sustainability messages, the
   degree of knowledge and sophistication
   of sustainability among the
   average stakeholder is again low ...
   Typical stakeholders simply lack the
   ability, as well as the motivation to
   question and research sustainability
   claims. For example, consider the
   literally hundreds of certifications of
   organic products ... with literally
   hundreds of logos and certifications
   being used by manufacturers to promote
   their products. Typical
   stakeholders simply lack the ability,
   as well as the motivation, to question
   and research sustainability claims
   when they are encountered in communications.
   When individuals have
   limited ability to scrutinize information,
   they are less likely to analyze
   the information to draw conclusions
   and judgments.

Instead, note Peloza and colleagues, stakeholders rely on "heuristics" to form their judgments, often allowing the "halo effect" to come into play. Heuristics may be tied to product-performance cues, as illustrated by the authors as follows:

   Take the example of Honda and
   Toyota ... Both are rated as virtually
   identical to Volkswagen and BMW
   by stakeholders, despite significant
   differences in their actual sustainability
   as rated by agencies. Toyota
   and Honda are both well known for
   their support of fuel-efficient vehicles
   and hybrids, which shape the
   overall perceptions of stakeholders.
   Many stakeholders assume that a
   company that leads the industry in
   fuel efficiency (one form of sustainability)
   also leads in other forms of
   sustainability. … 

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