Guest blog by Alex Russell, Associate Director, Ipsos Corporate Reputation. First published in Society Matters magazine.

The idea of businesses as corporate citizens has seen much evolution since Howard Bowen first published ‘Social Responsibilities of the Businessman’ seven decades ago. This nascent concept evolved in 1971 when the Committee for Economic Development described the social contract between business and society, and since then we have seen the topic encapsulated through various monikers and acronyms. From Corporate Social Responsibility (CSR) to Environmental, Social, Governance (ESG), an increasingly important branch of business has grown. What may have originally been seen as ‘extra-curricular’ to the running of a business is now considered imperative, and how businesses fulfil this role is fundamental to success.

The importance of ESG is highlighted through Ipsos research, where there is a clear positive correlation between ESG performance and corporate reputation. Findings among business journalists ¹ and MPs shows that the higher a company’s perceived ESG performance, the higher regard the company is held in. And of course, what journalists write and MPs enact into policy can influence a company’s success, share price and licence to operate, so being seen favourably by these groups is key.

Despite widespread agreement about ESG’s growing importance, there remains uncertainty about what ‘good’ looks like in this area. With three distinct letters under one umbrella initiative, it’s hard for businesses to know where focus should lie, but the current economic state of Britain may provide a roadmap. ‘Environmental’ may claim to be the most widely championed, but the response of business to COVID-19 signals the growing importance of ‘Social’ – especially for banks and building societies. Indeed, signs are encouraging here with Ipsos research showing that trustworthiness in banking in the UK grew eleven percentage points from 2019 to 2021 ², and the pandemic response no doubt played a part in that. There was a wide array of actions taken that showed genuine support for people, and by extension a refined focus on the S of ESG. The forbearance shown through mortgage ‘holidays’, frozen loan repayments and credit card extensions was very well received and built positive sentiment among stakeholders and the public. The sector was stepping up at a time of crisis, having been seen more negatively for much of the previous decade.

Whilst the crisis point of the pandemic has passed, the need for societal support has not. We are in another crisis – the cost-of-living crisis – and this requires an even greater emphasis on the ‘Social’ aspect of ESG. Ipsos data from October 2022 shows 64% of Britons think that things in the country “are on the wrong track”, whilst 43% of the country has inflation as their number one concern – that this was 19% at the beginning of 2022 highlights how much this has ballooned over the year ³. Worryingly, at the start of 2022, just over half the population reported to be either ‘just about getting by’, ‘finding it quite difficult’, or ‘finding it very difficult’ to manage financially ⁴, and six in ten British adults now think their disposable income will fall over the next year5.

All of this taken together means there is a space created for banks and building societies to step in with a support net and help society navigate through this crisis, in a similar way to how it helped in COVID-19. However, pandemic level support may no longer be sufficient to win support in the current climate. Stakeholder expectations of the sector have understandably risen off the back of the pandemic, and the level of intervention required to win support will only have climbed further in-line with soaring profits. With ‘greedflation’ an  increasingly common term, organisations and sectors that are performing well at the current time will also be  those that are expected to contribute most.

Beyond the actions and steps taken to support those in need, how businesses communicate these initiatives will also be crucial, and there are some guiding principles that should always be considered when sharing ESG news with any kind of stakeholder. First, when a company has chosen an issue to focus on, it needs to be prepared to make a sustained investment of time, money and energy on that issue. Failure to do so raises doubts of inauthenticity, and this can have a detrimental effect on the reputation of a business. Moreover, the impact that is being made needs to be demonstrated through measurable actions. The link isn’t always clear between societal contribution and the alignment of business objectives, so measurement to demonstrate impact is required, as is clear and digestible reporting.

Finally, and arguably one of the biggest risks surrounding the whole ESG agenda, is to ensure that what is being said is being done. Talking a lot about ESG but not backing it up with actions will be interpreted as a form of ‘washing’; businesses need to identify which issues align with its core purpose before thinking about what actions should be taken and then finally what can be communicated. There have been countless examples of misalignment between business actions and business words – what we call the ‘say-do’ gap. For example, taking a position on reaching net-zero ambitions whilst simultaneously making new investments in intensive carbon emitting industries will raise justifiable concerns around authenticity. Avoid these sorts of contrasts when making commitments in order to protect perceptions of integrity and honesty.

In short, companies must find the issues that matter most to their stakeholders, identify the actions they can take that are seen as credible and where they can have a positive impact, measure that impact, and then communicate it effectively to the right people. In the times the country is living through right now, supporting society is where most impact could be made, and the financial services sector is in a uniquely strong position to provide this support.

1 Ipsos: UK Survey of Business Journalists, Summer 2021
2 Ipsos: Trustworthiness Monitor 2021
3 Ipsos: What Worries the World – October 2022
4 Ipsos: Global Perceptions of Inflation, 2022 5 Ipsos: Global Perceptions of Inflation, 2022

For more information visit: www.ipsos.com/en-uk/corporate-reputation
The views, opinions and positions expressed within guest blogs are those of the authors and do not necessarily represent those of the BSA.