The latest Reputation Quotient from Harris Interactive, which measures the reputations of themost visible companies in the US, ranked Microsoft, Johnson & Johnson, 3M, Google and Coca-Cola at the top last year. Microsoft scored highly as a result of its leadership and financial results. But CEO Bill Gates’ philanthropy also helped to boost public opinion of the company. As one respondent said: “It is hard to separate the image of Bill Gates’ charitable foundation from the image of the IT company.” Paul Miller, a senior analystwithCision, a global media monitoring and reputation management company, says that while financial performance is still paramount, ethics and environment are becoming increasingly important components of corporate reputation.

Stuart Rose at Marks and Spencer, with the chain’s ‘Plan A’ sustainability programme, and James Murdoch at BSkyB, which has developed their ‘The Bigger Picture’ responsible business plan are examples of UK chief executives leading the way in this area, Miller says. “A few years ago this work would not have showed up on the radar at all.”

Chris Tuppen, director of sustainable development at BT, also observes a stronger link between reputation and ethics. The telecoms provider’s work into the relationship between corporate responsibility and customer satisfaction has found that customerswho believe the company takes its responsibility to society and the community seriously are more likely tobe satisfied with BT. “The main motive behind BT’s work to cut carbon emissions is not just to reduce energy costs, he says, “but to improve the company’s reputation and brand”.

Ethical selling points

More often, companies are gaining ground with customers byusing ethics as their unique selling point. In its seven years of existence, Innocent Drinks has seen the fruit smoothie business gain a 68% market share and increase its turnover to £100 million, arguably on the back of its image as a company selling natural products. A company spokeswoman says Innocent Drinks has tried to match its products to its way of doing business. “We pride ourselves on always being open, honest and natural. If you stay true to your values and keep coming up with new ideas, then we believe that consumers will respect that and will continue wanting to buy our drinks.”

Ethics may be gaining ground, but for it to affect reputation it must first have business benefits. As Miller points out, investors are only interested in ethics in as much as it hits the bottom line.

Adnams, the UK brewer and leisure retailer, has installed solar panels on the roof of its distribution centre, tends to a strip of beachon the Suffolk coast, donates money to charities and has designed a light weight beer bottle to reduce carbon footprint during delivery. “First and foremost, we do this because it is the right thing to do,” says Andy Wood, Adnams MD. But ultimately, he points out, the company is measured by the value it creates for shareholders.

Taking an ethical approach is just one way of achieving that returnby securing sustainable and consistent growth. “We would never say this is the only way to run a business. But it works for Adnams,” he adds.

BT uses a risk register tomeasure its biggest social, ethical and environmental risks. Among other areas, the register monitors supply chain working conditions, climate change, outsourcing and health and safety. Each risk is analysed to determine the potential cost to the company. Such tools allow BT to determine where and how much to invest in building and protecting its reputation. “To understand risks you must quantify them in financial terms,” Tuppen says. However, Miller notes that companies have yet to identify a definitive method to link reputation to the bottom line. “It appears that there is a certain level of poor coverage that a company can withstand, but once you hit a critical mass, that is when poor reputation starts to hit revenues.”

Take McDonald’s as an example. Revenues at the fast-food chain had sustained years of poor PR. Even when the McLibel case was in full swing in the 1990s, customers were still queuing for Big Macs. But a succession of damaging media reports, served with a not-so-tasty side of reality in the documentary film Super Size Me, slowly took their toll. Once the media’s interest focused on child obesity, it was one bad story too many. Customers left for the delicatessens and shares tumbled.

Backing up promises with results

Protecting a company’s ethical reputation, says James Wright, CSR director at public relations firm Trimedia Harrison Cowley, is a matter of backing up promises with hard results. “This is not an opportunity to get some easy PR coverage,” Wright warns. “Governance is vital. Companies must have more than just a policy in place; they need targets and they need to be delivering on those. Only then can they talk to stakeholders – whether that is internal audiences, consumers, non-Governmental bodies, MPs, trade bodies, or other organisations in your industry.”

Karen Fraser of Fraser Consultancy, which publishes the Ethical Reputation Index, a survey of more than 1,000 consumers’ views of the ethics of leading UK companies, says that companies get it right when their work around ethics and environment pervades everything they do. Marks & Spencer was a high performer in this year’s Index. And as Fraser observes, you can’t move for all the communication in stores about its ‘Plan A’ initiative, its ethical sourcing policy, and the consideration it gives to climate change.

Creating a consistent message is key, she explains. “The consumers we survey say they acknowledge advertising about British food and sourcing locally. But when they go into shops and see bananas from Brazil and runner beans from Kenya it creates dissent.” To ensure this consistent message, marketing and communications teams must work hand-in-hand with the CSR department, she says.

For Adnams, it is not about “putting slogans on the wall” or creating a CSR policy, but bringing sustainable approaches to life in tangible ways. “Our distribution centre has a green roof, it is made of wood and it uses grey water to wash our vehicles and flush the loos,” says Wood. Once you have built these brand values, he says: “You have to nurture them and talk about them internally tomake it clear to staff that whether they are on the phone or delivering to a pub, this is part of the brand experience.”

Above all, he adds, whatever the message a company is promoting, it has to be led from the top. “Directors are integral to the brand and what the company stands for. You can’t say one thing and behave totally differently in another part of your life.”

If it is ethics a company wants to promote, then personal actions must match that of the company’s. But there are limits. While driving to work in a Bentley at the same time your firm is extolling the eco-virtues of public transport may not be appropriate, Wood doesn’t think the board has to go to extremes. In other words, it’s OK to leave the hair shirt at home.