Preventing Crisis

Companies with Bad Reputations are Hurting Their Right to Operate

Posted Feb. 2 2017, 01:00:12 am

Julie Steininger

Senior Vice President


“Freedom to operate” is a phrase you may not be familiar with, but it has become more and more important for companies that serve consumer markets. Before buying a car, a tablet or even a cup of coffee, many customers are asking:

  • Does this company operate in a responsible manner?
  • Does this company have a positive impact in the communities where it operates?
  • Is this company financially stable?

In short, many consumers are taking a company’s reputation into account when making buying decisions.

Standing Partnership’s 2016 Reputation Risk Report studied how companies manage risks and respond to reputational issues. A couple of key takeaways relate directly to perceptions, expectations and freedom to operate from the consumer lens.

  • First, who you are matters more than what you make. This indicates a need for companies to define and manage their reputations. While products are important, the corporate entity behind the product has become more important.
  • Second, important attributes are driving consumer perceptions of companies – Citizenship (typically having a positive influence on society and environmental impact), Workplace and Governance (fairness, ethics, compliance).

In short, the study revealed that companies with bad reputations spend more money acquiring customers, training employees and navigating regulations than companies with good reputations.

Access Our Free Reputation Risk Infographic

Starbucks is known for making business decisions based on responsible business operations, positive social impact and financial stability, while at the same time listening to and openly communicating with stakeholders. (That’s what you do over a cup of coffee, right?)

In 2014, Starbucks was feeling pressure from activist shareholders to switch to non-GMO, organic milk. COO Troy Alstead responded to this request: “What’s always critically important to us is the interest of our customers, and, of course, the interest of our shareholders. And, as you well pointed out, we have a full organic offering in our stores with soy … I think I would say our commitment to you is two-fold. One is: we will always listen to the concerns of our customers, and do everything we can that’s reasonable and appropriate to respond to those in the best ways we can…”

To help address the societal issue of Americans starting college and not actually finishing, Starbucks began its collaboration with Arizona State University in 2014. The company is providing its employees the opportunity to finish their bachelor’s degree with full tuition reimbursement. This is an investment that could have multiple benefits – educated employees typically earn more; educated employees are more productive; and communities often share in increased prosperity.

While not always an easy road, Starbucks is marrying performance as a Fortune 500 company with authentic engagement. The company is working to actively manage its reputation, answering the questions of and meeting the needs of its customers and others.

At Standing Partnership, we work with companies like yours to understand the vulnerabilities and opportunities that could impact your organization’s reputation. If you are concerned about freedom to operate, why not find out where you stand by taking advantage of our Reputation Audit and Risk Assessment? It’s a process that takes an in-depth look at your key stakeholders and provides an analysis of your company’s current reputation and perception gaps. Together, we will develop a strategy that deepens understanding, builds trust, mitigates risk – resulting in consumers who support your products and business.

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