Corporate approaches to environmental, social and governance (ESG) issues play a significant role in company reputation, according to a new report from Signal AI.
The report also stated that reputation and trust, of which ESG factors are a significant determinant, are among the leading factors in financial performance.
Signal AI’s research found that the majority (72%) of business leaders felt that, over the next five years, reputation will be a bigger driver of business performance than profit. The report stated that recent research showed close to 30% of market capitalization was underpinned by a company’s reputation.
According to the report, ESG was likely to be a significant factor in determining how good that reputation will be. For example, 92% of the leaders surveyed thought that ESG issues would impact corporate reputations in the next 12 months.
The report, which surveyed 1,000 business leaders and CEOs from companies with more than 250 employees, signalled that ESG was becoming increasingly tied to corporate reputation. Companies such as Danone and Apple have started to tie executive bonuses and compensation to corporate performance on ESG themes.
Alongside a positive ESG reputation, improvements in harnessing reliable, quantifiable reputational data could also increase revenue, Signal AI’s report said. Half of the surveyed respondents estimated a quarter of revenue was lost, at least, by the inability to harness reputational data. If applied to the Fortune 500, this amounted to approximately $3.5 trillion, according to the report.
David Beningson, CEO and co-founder of Signal AI, said: “The global business environment is in the middle of a quiet revolution, fuelled by the convergence of two trends: the explosion of data and the growing demands on reputation management in an increasingly complex environment, and the emergence of reputational ESG issues and their impact on corporate reputation and therefore business performance.
“From social unrest to the climate crisis to mandated transparency on corporate governance, to the inextricable link between trust and company performance, the need to understand the external ecosystem and how the world perceives you, has changed forever.”
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