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Does Creating Shared Value Drive Corporate Reputation in Australia?

The short answer: More than you might think.

Porter and Kramer’s 2011 article “Creating Shared Value” spoke about the lack of customer trust in the corporate world and that the focus of companies on corporate social responsibility (CSR), including corporate philanthropy, has been unsuccessful in building trust with the general public. This is in part because customers have trouble believing the company ultimately cares about anything other than its own profitability.

Our own data collected over the past few years supports this premise. We have seen no increase in the importance of philanthropy and other forms of CSR in building trust and a good reputation.

The newer concept of creating shared value (CSV) was suggested by Porter and Kramer as having a direct impact on reputation because CSV involves programs that improve revenue and/or profit for the company while simultaneously providing benefits to the broader society. It is potentially a more credible demonstration that the firm cares about the society within which it operates and thus has the potential to build trust.

We decided that it was worth testing this hypothesis.

To do that we measured the reputations of Australia’s largest (by revenue) 60 organizations, using the Reputation Institute’s RepTrak™ model and interviewing 5,527 members of the Australian general public ages 18-64. This assessed the emotional connection between an individual and an organization: the amount they trusted, admired and respected that organization.

We also asked those surveyed to rate the organizations on whether they felt the firms significantly contributed to the community through sponsorship and donations, thus providing a measure of perceived corporate philanthropy.

We then asked those same individuals to rate the organizations on their creation of shared value, including putting long-term needs of workers/customers ahead of short-term profit and contributing to building a better Australia.

What did we find?

The results showed a strong relationship between CSV and reputation. In fact, they showed a much stronger and clearer relationship between CSV and reputation (correlation of .87) than between corporate philanthropy and reputation (correlation of .32). In the graphs, the closer the dots are to the angled line, the stronger the relationship.

      

Seven of the top 10 CSV organizations also made the top 10 list for reputation: Australia Post, JB Hi-Fi, Virgin Australia, Nestlé, Toyota, Wesfarmers and Aldi. Only two of the top 10 perceived philanthropic organizations also ranked in the top 10 for reputation: Virgin Australia and Wesfarmers. The top 10 CSV companies are the companies that Australians perceive are currently creating the most shared value. That is they are viewed as having a long term focus, considering community attitudes when making decisions and helping to build a better community.

At the other end of the scale, four of the top 10 philanthropic organizations were rated in the bottom half of organizations for reputation: CBA, Westpac, NAB and Telstra. None of the top 10 CSV organizations scored in this lower reputation group. It’s not that Australians weren’t aware of the significant contribution to the community of the large banks and telcos, it’s just that those specific activities did not translate into trust and reputation.

Overall these results strongly supported the idea that if you want to improve a company’s reputation with the public, it may be far more useful to invest in creating shared value (CSV) than merely corporate philanthropy. At least in Australia, the public believes that active involvement in growth oriented partnership with the community is more important than writing a check, or at least that just writing a check isn’t enough.

Oliver Freedman is Managing Director of market research firm AMR and is their resident expert on corporate reputation. He is frequently cited in the media on the changing corporate landscape in Australia and New Zealand.