The business lobby group CBI is gearing up for its annual conference tomorrow under the banner “Growth for All”. Britain’s self-proclaimed voice of business will be hearing from Ed Miliband and Archbishop of York John Sentamu as its members discuss “shared prosperity” and “higher living standards for all”.
What’s going on, you may ask? Has big business suddenly grown a conscience? It has certainly grown an awareness: an awareness that when public trust hits rock-bottom, the bottom line suffers.
Another string of banking scandals, headlines about tax avoidance and news of exorbitant pay packets for those at the top are making life hard for the CBI’s director-general, John Cridland. Rewind 10 months and his New Year message was that 2014 would be the year of the pay rise. He also vowed to make it a year in which business cleans up its image.
“If 2013 was the year that business trust took a hammering on a range of issues from corporate taxation to energy prices, then 2014 must be the year that business leaders take action to rebuild that trust,” Cridland declared.
Well let’s not talk about the pay rise – not least because there hasn’t been one to talk about. But on the second point, there is also scant progress to report: so little progress that Cridland told the Guardian in an interview last week that making the case for pro-business policies was an uphill struggle. “It will be hard to win those arguments unless we put our own house in order,” he said.
Businesses know it is not just their collective ability to influence policy that is suffering. What they will really care about is what a bad reputation means closer to home. Is it costing sales? Is it deterring investors?
On the customer front there is evidence that people do care more about the behaviour of companies, and technology is giving them the power to show it.
The polling group YouGov has been tracking the reputation of people in power, both public and private: so alongside politicians, it monitors business leaders too. YouGov president Peter Kellner recently warned the Institute of Directors conference that it is not just the image of politics that has suffered a decade of decline. All forms of power and authority are falling out of public favour and the reputation of business leaders as a group has declined roughly in line with that of politicians.
Kellner points out that while some voters focus on policies, many also consider wider, emotional concepts. They ask things like: “Is this party; is this leader, trustworthy? Are they up to the job? Do they understand people like me?” Businesses, too, have to have good answers to those questions if they want to be successful. Consumers really do care about behaviour. They care about tales of zero-hours exploitation and big bonuses, in Kellner’s experience.
And if they do not like what they see, there are more ways than ever to vent and protest. There are review sites like TripAdvisor, while Twitter is awash with disgruntled customers. Or there is the more old-fashioned method of contacting a company directly. The airline Ryanair, for example, last week revealed it had received 80,000 complaints in the last year – 40% fewer than the year before, when boss Michael O’Leary took what he described as a strategic decision to stop “unnecessarily pissing people off”. Being nice, he said, was “working like a dream” as he reported a jump in half-year profits.
Investors, meanwhile, are putting more pressure on companies to clean up their image – not because they have suddenly started worrying about working conditions, low pay or the environment, but because they worry about reputational damage and its costs.
Savvy campaigners for greener, fairer business know this and appeal directly to this bottom-line instinct. So when responsible-investment charity ShareAction last week briefed investors on why the companies they put their money in should pay the living wage, they put it in risk-reward terms.
Using models of three FTSE 100 companies in the industrial, retail and service sectors, ShareAction found that moving to the living wage was likely to result in only a single-digit reduction in corporate earnings. That is, the charity argues, “relatively modest in comparison with the potential risk of pay-related reputational damage, particularly for consumer-facing businesses”. It predicts companies will increasingly face questions on pay policies from investors, who want to mitigate reputational risk and encourage socially sustainable practices.
So with the growing push from customers, investors and within companies, perhaps 2015 can be the year business gets its house in order. That may even mean some real changes for the better if consumers and investors wield their rising power.
But there is just as much chance it will be another year of business behaving badly. Hard-pressed consumers are more likely to complain about rising prices than pay policies; you only have to look at the booming sales of discount supermarkets and Primark to gauge the hunger for bargains. Investors will continue to think about reputation and not ethics. And as for businesses, make no mistake, the age-old practice of getting away with what they can will continue. Any change will be more about profit than principles.
