Corporate Social Responsibility and Reputational Risk

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In a fast-paced digital world, reputational risk should be a business owner’s most important intangible asset. Reputational risk management is defined as the process of identifying, assessing, and controlling threats to an organization’s capital and earnings. If a business owner overlooks their reputational risk, it can cause decreasing sales, lost time, negative press, and issues on social media. According to Harvard Business Review, “70% to 80% of market value comes from hard-to-assess assets such as brand equity, intellectual capital, and goodwill.” Organizations are vulnerable to anything that is a threat to these intangible assets. 

Over the last couple of decades, there has been a shift in customer mindset. Customers want to see their own values reflected in the companies they purchase products from. Some examples of these values include sustainability, diversity, equity, inclusion, and authenticity. For a while, corporate social responsibility had typically focused on sustainability, climate action, and an approachable brand image. When the COVID-19 pandemic occurred in 2020, consumer mindsets shifted. This caused a change in what consumers wanted to see in corporate social responsibility strategies from companies. 

After 2020, consumers wanted to see what businesses were doing for their communities, how they were treating their employees, COVID-19 health practices, and re-shifting priorities toward equality and justice. According to the 2015 Cone Communications Millennial CSR Study, “More than nine-in-10 Millennials would switch brands to one associated with a cause (91% vs. 85% U.S. average)”. Business owners need to be aware of and invest in matching services and products to meet the needs and values of their customers or future customers. 

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