Why monitoring external factors is key to corporate reputation



Posted: In: Industry Insights & Trends

Corporate reputation has surpassed profitability in its importance to business success—today’s customers, employees, investors, and other stakeholders have many choices, and they are leaning toward companies with a stellar public image.

While this puts communications and PR front and center as the stewards of corporate reputation, PR pros also have a formidable challenge of monitoring and addressing multiple internal and external influencers that affect their brand perception. 

While you’re likely familiar with ESG (Environmental, Social and Governance) performance as one of the most important measures of corporate reputation, we’d like to introduce a similar tool called PESTLE analysis. It helps a company to better understand Political, Economic, Social, Technological, Legal and Environmental factors affecting its image, value and growth.

In the age of social media, managing corporate reputation is a complex undertaking. In our new blog series, we’ll discuss how to do that with the help of PESTLE analysis and using sentiment monitoring, social listening and trending topics to understand how macro factors are affecting your brands and competitors—so that you can influence your organization’s success where it matters most.

The link between sustainability and corporate reputation

In the past twenty-five years, we’ve seen an exponential growth of investor interest in environmental, social and governance (ESG) performance and the parallel increase in the number of companies reporting ESG data.

According to Wikipedia, ESG is an evaluation of a firm’s collective conscientiousness for social and environmental factors. It’s a form of corporate social credit score based on specific metrics related to a company’s intangible assets, which have become critical in business valuation. Ultimately, ESG is used to measure sustainability and societal impact of an organization. 

Corporate reputation, and therefore, business growth are increasingly impacted by a company’s ESG score. Customers, employees, investors and other stakeholders want to deal with companies that embrace practices such as fair trade, consumer protection, employee diversity and inclusion, and responsible governance.

A recent Harvard Business Review article (Harvard Business Review, The Comprehensive Business Case for Sustainability) highlighted exactly how incorporating sustainability into corporate strategy is good for business. To start with, it promotes innovation and reduces risk that comes with challenges and disruptions caused by climate change and diminishing natural resources. Good ESG practices were also overwhelmingly found to decrease costs, improve business performance and as a result, increase stock prices. 

Perhaps most importantly, sustainability in business dramatically increases customer loyalty and employee retention. Multiple studies show that today’s consumers increasingly turn to brands known for their social and environmental responsibility. In fact, Unilever claims its “brands with purpose” are growing at twice the rate as others in their portfolio. 

When it comes to employee recruitment and loyalty, sustainability strategies make a difference by providing value to society and promoting a sense of purpose within the corporate culture, as well as treating employees as critical stakeholders.

PESTLE analysis can serve as a similar measure of corporate reputation. This useful tool provides a bird’s eye view of your external environment, which makes it an even more important indicator of your company’s public image than what you say about yourself and what journalists say about you in the media—because it is earned, not paid for. 

Perceptions measured by ESG and PESTLE are earned by generating key stakeholder trust and affinity over time, which is at the heart of the communications function. 

For decades, communications pros have been perfecting the art and science of earning trust through building long-term relationships with their audiences, communities, the media and other stakeholders. This ability is rooted in listening and developing ways to initiate and join conversations that contribute to mutually beneficial outcomes.

Now is the time for communicators to take the lead in shaping their corporate reputation at an even greater scale by having their finger on the pulse of ongoing changes and knowing their environment so well that they can guide their executive team in making reputation-enhancing decisions in the face of any adversity. The opportunity for PR pros to step into the role of a strategic advisor to the C-suite about possible consequences of various business decisions has never been greater than it is today.

By advocating for PESTLE analysis as an input into an organization’s overall strategic plan, communicators will not only get a seat at the table, but they will also be one step closer to proving the value of PR to their executives. 

By making a business case for new strategies based on a thorough understanding of the political, economic, social, technological, legal and environmental dynamics and implications, you can positively and tangibly influence business performance, customer loyalty and employee retention

Stay tuned for the next blog in our 4-part series next week, where we’ll provide a detailed overview of PESTLE and the benefits of adding it to your PR toolkit.