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These stories and metaphors distill the essence of reputation, sustainability, and the pitfalls of greenwashing for lasting recall.
For every organization, the external image is of high importance. In this video, we're talking about reputation, and we know that once ruined, reputation is very hard to rebuild. We are focusing on how to strengthen corporate reputation through ESG accountability and avoiding greenwashing, meaning we are looking at how organizations can truly build a sustainable image and have a sustainable reputation so that clients genuinely believe in their sustainability actions.
How do we do so, and what are we doing in this video? First, we want to understand what corporate reputation is, how it is built, and the factors that can damage it. Second, we want to explore the concept of greenwashing—meaning having a bad reputation or gaining a bad reputation because the sustainability measures are not the ones the organization is claiming. We will look at how neglecting ecological responsibility severely harms a company's reputation. Lastly, we want to familiarize ourselves with the ESG score to have an objective framework for assessing organizational sustainability and measuring the impact of an organization's sustainability measures on the environment.
Let's take advantage of an example. We want to look at the public image of the company Nestle. In the field of reputation, we often see that the media plays a key role. On one hand, the media constructs the external image of an organization by reporting about it. On the other hand, it reflects it by showing how the public thinks about that organization and communicating public opinion. Let's look at some headlines about Nestle. For instance, Coca-Cola and Nestle are both accused of misleading eco claims, making environmental claims that are perhaps not true, possibly related to environmental damages and plastic pollution. Nestle belongs to the group of companies mainly producing plastic waste that can be found in the environment. Nestle is also in discussions in certain countries, like India, with food regulators. One headline states that Nestle is one of the most hated companies in the world, showing it has a really bad public image. The main reasons for this criticism are plastic pollution—Nestle is one of the world's largest producers of plastic bottles—and using these bottles for their bottled water brands. They are also criticized for water usage, extracting water from areas, such as California or drier regions, to put into bottles and sell, which is seen as irresponsible. Finally, Nestle is criticized for deforestation, as some of their palm oil brands contribute to rainforest destruction, leading to land conflicts and environmental harm.
Now, what is reputation? Reputation is a multidimensional construct that includes rational, emotional, and moral dimensions, as well as opinions about an organization. It is seen as a collective evaluation of an organization, meaning there is a more or less common understanding among people about the organization. This collective external perception is called corporate reputation. The organization has an idea of how it wants to be perceived and sends out messages to build and maintain a certain public image. However, external sources like Greenpeace, other NGOs, and the media also influence how the organization is perceived. Stakeholders evaluate the external image as neutral, positive, or negative, leading to a company having a positive or negative reputation. It can have a reputation for being very green, for having high-quality products, or for polluting the environment—just as Nestle is known for plastic pollution.
Organizations can influence external perception by many means. Different stakeholder groups—regulators, investors, employees, customers, and the local community—each form their own perceptions. Companies might signal their social or environmental performance through reports, show compliance with regulations, offer good working conditions to attract employees, and engage in corporate philanthropy or sponsorship to build trust and goodwill in local communities.
What are the advantages of a strong organizational reputation? It reduces perceived risk for customers, increases employee job satisfaction, provides access to better-quality applicants, and can serve as a market entry barrier for competitors. It can also attract professional service providers and improve perceptions in financial markets.
Looking at examples: Apple is known for innovation, tech leadership, design, and a loyal customer base. Amazon is known for convenience in e-commerce, its large ecosystem and marketplace, and logistical excellence, although it sometimes faces criticism over working conditions. A company can be known for both positive and negative aspects.
Now, focusing on the ecological performance of a company and what can go wrong with that reputation, we come to greenwashing. Greenwashing misleads stakeholders about actual environmental performance, creating a false impression of transparency and accountability. It can happen through omission of information, false information, vague claims, or lack of meaningful comparisons. Greenwashing can be intentional or unintentional, and can occur at any stage of the product or service cycle. If not addressed, it undermines trust in the organization, harming its reputation, even if no stakeholder was directly harmed.
Types of greenwashing include selective disclosure (only showing positive information), empty claims (promises that can't be fulfilled), omission of relevant details, using vague information, showing inconsistencies between marketing and official documents, incomparability (lacking meaningful benchmarks), misleading visuals, outdated data, or even outright lying.
Besides moral issues, avoiding greenwashing is important because new EU frameworks on sustainable finance reporting hold companies accountable for it. There could be legal sanctions, reputational risks, and shareholder activism pushing for transparency. Greenwashing negatively affects consumer trust, brand value, investor confidence, and can prevent companies from becoming industry leaders in sustainability.
Measuring greenwashing is challenging. To help, the ESG score was introduced. ESG stands for Environmental, Social, and Governance. These are nonfinancial factors reflecting sustainability-related areas of corporate decision-making. ESG indicators translate sustainability topics into business language, allowing companies to measure and evaluate their responsibilities and performances. The E stands for environmental issues, S for social issues, and G for governance and leadership style. ESG scores consider industry and firm-specific risks and opportunities, making comparisons complex but providing a holistic perspective beyond just economic criteria.
In summary, we discussed the importance of corporate reputation and how it is influenced by sustainability practices, transparency, and responsible governance. Greenwashing, through misleading claims and selective information, damages an organization's reputation and erodes public trust. ESG factors are increasingly critical for corporate accountability, with growing pressures from shareholders and regulators demanding transparency and sustainability efforts.
Hopefully, you enjoyed this video and look forward to our next one.
for every organization the externalimage is of high importance in thisvideo we're talking about reputation andwe know that once ruined reputation isvery hard to rebuild so we are focusingon how to strengthening corporatereputation through ESG accountabilityand avoiding greenwashing meaning thatwe are looking at how organizations canreally build and sustainable image andhave a sustainable reputation in orderfor the clients to really believe intheir sustainability actionsso how do we do so and what are we doingin this video first of all we want tounderstand what corporate reputation ishow it is build and the factors that candamage it and to for second we want toexplore the concept of greenwashingmeaning like having a bad reputation orlike getting a bad reputation becausethe sustainability measures are not theones that an organization is claimingand we're looking at how to neglectecological responsibility and how thisseverely harms a company's reputationand in the last step we want tofamiliarize with the ESG score in orderto have kind of an objective frameworkfor assessing organizationalsustainability and to have a for havinga framework or an indc on U measuringreally how the impact of anorganizational uh sustainabilitymeasures is for theenvironment let's take advantage of anexample first of all and here we want totake a look at the public image of thecompanynestly and um in the in the field ofreputation uh we most often hear thatthe RO the media plays a key role so onthe one hand side the media isconstructing the external image of anorganization by reporting about it butit's also reflecting it somehow um by uhyeah showing how the public is alsothinking about an organization andthereby also communicating the publicopinion about organizations but take alet's take a look about certainheadlines here about nesle so forinstance um Coca-Cola the Coca-Colacompany and nesle are both accused ofmisleading Eco claims so makingclaims um uh about uh the ecologicalperformance that are perhaps not true uhperhaps related also to due toenvironmental environmental damages andplastic pollution and N belongs into uhthe into the the group of companies thatare uh mainly producing uh plastic waysthat then can be found in theenvironment so Nestle is also uh in indiscussions in certain companies herefor instance in India with the foodregulator um and uh here this lastheadline even states that nesle is oneof the most hated companies in the worldthereby showing that it has really a badPublic Image out there and here the mainreason reasons for that um nesle iscriticized so for first of all wealready saw it in the in the headlinesit's plastic pollution and uh nesle isone of the world's largest uh producersof plastic uh bottles for instance andthereby contributing to plastic wastenot directly because Nestle per se isnot throwing away these bottles but byproducing them and not having other ummaterial used to rep products or uh yeahso thereby they are uh criticized uh bygreen pece and other groups for uh yeahusing so much plastic they are also useduh criticized for water usage so theyare extracting water from from areas uhsuch as California but also other moredry areas um to put it into bottles andsell it um and this uh use for bottledwater uh different B water brands uh isuh yeah is really criticized and seen asuh yeah an irresponsibility that thiscompany shows it's uh finally it's alsocriticized for deforestation so neslehas uh certain brands that produce palpalm oil um especially in uh SouthAmerica but also in Southeast Asia sonext or close to to Rainforest areas andby doing so they contribute somehow todeforestation and uh to land conflictsin these areas uh yeah conflicts aroundusing it or keeping it as it is asrainforest or using the land forproducing uh palm oil so this is uhthese are major reasons uh yeah onpublic out tries around nly and uhthereby harming its corporate reputreputation okay but what is reputationnow so first of all reputation is a yeaha very multi-dimensional constructmeaning that um it includes uh rationalbut also emotional and moral dimensionsand thereby opinions about anorganization and um it's seen as uh yeaha collective evaluation of anorganization meaning Collective heremeans uh yeah that that there is amore or less common understanding ofpeople out outside there about anorganization and how they see theorganization and yeah what image theyhave about this um organization and thisis then called reputation so corporatereputation first of all the organizationhas an idea of how the reputation shouldbe the so it's about uh what the companywants external parties to see and howthey want want to be perceived they willalso send messages around that rightthey will try to maintain build andmaintain a certain Public Image aboutthemselves but um based on thatinformation that the company is sendingbut also on the information thatGreenpeace or other organizations willsend or the media there will besomething that we call the constru uhexternal image about a company sothere's uh anexternal um image of a company companyhow this is a scene and this is calledthen later um yeah what reputation isthis Collective external perception ofthe organization and this image is thenby external stakeholders also evaluatedand seen as neutral positive or evennegative and thereby uh yeah a companycan have a positive or negative contrireputation in the public and morespecific organizations can have areputation for something right areputation for being very green or areputation for having high qualityproducts or reputation for polluting uhthe environment with plastic as in thecase of nesle right so it can be veryspecific the reputation and in fact acompany can also have reputation formore than one thing and even perhapspositive aspects and negative aspects umcan be covered in the corporate reput aso um organizations can influence theexternal image by many different meansand the important thing is there uh as Ialready said there might be differentexternal perceptions due to thedifferent stakeholder groups and howthey uh perceive the organization sothere could be a reputation in the mediauh which might correlate somehow withthe local and general uh public opinionabout the organization but you can alsohave a certain reputation with yourRegulators or with with the financialCommunity the the investment banking orthe invest investors out there but alsowith potential employees in the labormarket and organizations will try toconstrue the external perception forthese different stakeholder groups bydifferent means for instance um they canuh send signals regarding their socialuh or their environmental perperformance by uh giving out reports orso about how they perform they will alsoinform the greater public on thefinancial performance on their strategyright toconstru a certain external perceptionthey will comply with regulationsthereby show that they are a goodcorporate citizen when it comes to lawthereby building up uh uh reputationwith Regulators they will send signalsto the uh to potential EMP employeesright so uh talk about uh standardsworking standards uh working conditionsbenefits uh and also working hours orworking surroundings in the organizationto maintain um uh public perception ofbeing a good employer but there willalso be um yeah things signaling to thelocal community that the company is alsoa good citizen in the uh greater Societyby doing something like corporatephilanthropy or uh yeah being a sponsorof uh let's say uh local football clubsor something like this right so bydifferent means organizations canthereby uh yeah build and maintain apositivereputation so now we learned a littlebit more about what is a reputation andhow organizations can build a reputationlet's now think a little bit more aboutwhat are the advantages of really astrong organizational reputation helpinghas to better understand how crucial itis to um maintain and to get a positivereputation so first of all um having astrong organizational reputation helpsto reduce the risk customers perceivewhen buying a product so when a customerchooses between different products andthere's one organization that um has avery good reputation of course customersmight think about less being risky tobuy these products and are more in favorof buying these products than fororganizations for example with a betterreputationthe reputation can also help to uhincrease employee job satisfactionpeople might identify with thisorganization because this organizationhas a very good reputation and isgenerally seen as a positiveorganization in the greater public andthereby uh yeah leading also theemployees to having a greaterself-esteem by being employed by thisorganization then of course a goodreputation provides access to betterquality and employees when recruiting sowhenever employers are choosing betweencompanies and the one organization witha better reputation of course alsoattains or attracts the employees thatare more qualified um and that are umyeah more suitable perhaps for thejobs it can also be a signal to to tocompetitors right I mean uh it can serveas a market entry barrier if there's anorganization in an industry that has avery strong reputation for let's sayquality or is generally positively seenum then this might serve as a marketentry barrier or as a sort of competcompetitive advantage in themarketplace combined also to theargument with the better employees orthe quality of the employees is also theargument that a good reputation providesaccess to the best professional serviceproviders so also professional serviceproviders are of course influenced bythe reputation of an organization andreputation can help help also on the uhFinancial market right right so if it umif there was an organization with apositive reputation then thisorganization might not have scandals inthe future thereby uh perhaps uhperforming better in the future therebybeing seen as a good investment case onthe financial market so uh in someorganizations with a positive reputationmight have uh yeah positive effects withthese various stakeholder groups wehighlighted before let's take a look atsome organizations and their reputationswhat uh what they are known for in thegreater public so when looking here atdifferent examples uh we can stick forexample to the example of Apple ofcourse apple is one of the biggestbrands in the world at the moment whenyou think about Apple uh we directlythink about Innovation Innovative Techleadership of course about the design ofthe Apple products for example theMacBook or the iPhone they have acertain design um of course also theirreputation is based on customer basebecause when today you're thinking abouta smartphone you're either Apple orSamsung so the two big um smartphoneproviders so once you choose the Applenormally people are staying with anApple product and of course also aboutthe global influence of theorganization let's take a look at asecond example let's pick Amazon here soAmazon is known as a company that uhwhere you can buy online in a very veryconvenient way so here we stated somehowthe convenience king of e-commerce rightuh Amazon is also known for themarketplace and it's big big ecosystemof various players that sells throughthe Amazon uh um Marketplace but beyondthat also having other offerings uh withum music videos and so on so havingdifferent players also contributing ondifferent uh yeah to differentdimensions of the Amazon ecosystem andoffering uh World finally it's alsoknown as a company that that Mastersomehow Logistics right so it brings uhproducts and so on very very and a veryuh yeah easy and and fast way toConsumers um so this is also somethingAmazon is known for but at the same timeit's also uh from time to time discussedabout working conditions in theirinternal Logistics right so you see byuh by looking at this here A company canhave a positive reputation and beingknown for something but also for thesame things it might be also to somedegree um criticized which alsohighlights here again uh the logic ofthe triple bottom line while Amazon isvery very profitable and it's known forits uh operations around Logistics thenon the social Dimension it's somehowcriticized for working conditions uhwhen it comes to Logistics Let's uh keepthat in mind when looking now moreclosely at uh yeah the reputation forthe the uhecological uh performance of a companyand what can go wrong with thatreputation so whenever organizationsface a bad reputation of coursereputation is not directly only linkedto sustainability right so reputationcan as we have seen in our apple or alsoAmazon example or also shown here on theslide for Google Tesla and Coca-Colareputation is kind of a feeling indifferent dimensions of the organizationhowever when a reputation is ruined orsomebody or some company has a bad reputation in the term of sustainability weare going into the direction ofgreenwashing because greenwashing issomething we Define it here thatmisleads stakeholders about the actualenvironmental performance to create afalse impression of transparency andaccountability so greenwashing is oneform of like kind of creating areputation in this sense kind ofcreating a reputation that theorganization is environmental friendlythat the organization um so for examplefollowing the triple bottom line and thethree pillars of the triple bottom linebut when critically rethinking aboutthis image one can get the impressionthat this transparency is not astransparent as it seems to be and thatthere are false information to createthis reputation so this is what we callum greenwashing greenwashing is theomission of information or provision offalse information and can vary or likecan um come up because of different umreasons first of all of of course andthis is the worst case if it'sintentional because if it's intentionalthen it's really to um yeah create afalse image image about the organizationhowever it could also be unintentionalit can Arise at any stage of the cycleof products services or Investments andcan arise in specific disclosures ornon-compliance with general principlesso greenwashing can also become acritical issue when thinking about umcomplying with principles andgreenwashing can also be triggered byThe Entity responsible forsustainability communication or thirdparties so greenwashing does not have tostart internally of an organization butcan also be triggered like externally umfrom other parties um external to theorganization the problem of greenwashingis if it's not addressed it underminestrust in the organization and itspolicies regardless of whether anystakeholder was harmed or an unfaircompetitive Advantage has occurred sowhen there is the accur the accusationof green washing in a company it clearlyhas to be addressed because otherwisethe reputation of that company isdamaged so let's take a look at uhdifferent types of different examples ofgreenwashing that could occur in uh infourorganizations first of all there's uhThe Selective disclosure so this is kindof a type of greenwashing highlightingonly positive information while omittingnegative information the second one arefor example empty claim cles so makingpromises that cannot be fulfilled thenthere could be an Omission or lack ofdisclosure so companies could notdisclose relevant details what's goingon in the operations or forget about uhyeah disclosing certain facts they canalso use uh vague information or uh takeadvantage of ambiguity meaning that theyuh make unclear or very unspecificclaims and thereby do not discloseeverything inconsistency for example canalso be a type of greenwashing so whenthere are contradictions betweenmarketing and official documents whenmarketing for example is statingsomething that is not stated in officialdocuments in comparability is also kindof a type of green washing lackingmeaningful comparisons or benchmarks soif they are just like numbers or claimsand you cannot compare them and youcannot see kind of a benchmark then it'shard to figure out whether this is rightor wrong companies could also usemisleading uh visuals or tables andthereby create somehow false impressionsin With Their audience so it's it'sdeception then in that case right umthey could also use outdated informationor they could even lie about certainfacts so they could make certain claimsthat sound positive but uh uh yeah infact the organization has no uh realpositive en environmental impact becauseit's uh yeah outdated based just oninformation that has been gathered yearsand years ago and has nothing to do withthe today's uh working procedures androutines that the organization us it oras said uh they could just lie about uhcertain things goingon so we now know that green washing ofcourse is also a moral thing becauselying or like making false assumptionscan clearly um damage the reputation ofan organization and under moralstandards is um absolutely not okayhowever there are also other um otherpoints that highlight the importance toavoid greenwashing for exampleaccountability so with new EU Frameworksand there's a framework on sustainableFinance reporting companies are fullyheld responsible for greenwashing soleadership can no longer evade theirduties there might be sanctions andlitigations so authorities couldpenalize uh organizations that coulduh uh yeah penalize violations of umreporting standards uh and thereby uhlegal cases that are related to climatechange are rising so if an organizationis doing something wrong reporting aboutit in a yeah greenwashed way then therecould be uh yeah a legal case aroundthat of course we already talked aboutreputational risk so green rushingreally um yeah has serious damage on thereputation of an organization and thenof course also on the C consumer trustand the long-term brand value at allthroughout the last 30 years activismhas uh yeah increased right so there aremany different shareholders or or uhstakeholders group that somehow demandtranspar transparency from organizationsand with these increas in activism fromuh stakeholders around there alsoshareholders become more and moreconcerned about transtransparency uh so that organizations uhtry to closely uh adhere to ESG uh yeahstandards and of course it's also aboutmow leadership so transparency at allattracts investors and establishedcompanies as industry leaders insustainability so the more transparentan organization is the more um it getsum yeah attraction in an industry andthe more it can also become an industryleader when it comes to sustainabilityso now we know about greenwashing and wealso know about um the reputation andthe linkage between greenwashing and thereputation of an organization theproblem that we have with uhgreenwashing is on the other hand thatit's so hard to measure because as wealready heard about the different formsof green washing it is very hard from anexternal perspective to to say okay thiswas green washing or this was no greenwashing so there was um kind of an indicor an index introduced on reallymeasuring greenwashing in anorganization and this is called the ESGscore so let's deep dive a little bit inwhat the ESG score is and what the ESGscore holds as potential instrument ofcontrol against greenwashing and forsustainability so the term ESG standsfor environmental social and governanceso ESG so it's the nonf financial thesustainability related areas ofcorporate decision making andresponsibility so in short the ESG scoreis the idea of having a score thatmeasures the environmental social andgovernance aspects of an organizationwhen it comes to sustainability andresponsibility so the ESG scoreindicators or the ESG indicators help totranslate sustainability topics intobusiness language meaning thatsustainability topics will be heldmeasurable and that there are kpis formeasuring sustainability and evaluatingsustainability and responsibility oforganizationsso as I already said the E refers toenvironmental issues such as pollutionthe use of Natural Resources EnergyEfficiency Greenhouse um emissions thatcompanies face due to their businessactivities so e is everything likerelated to the uh influence of anorganization on the environment the Srefers to social issues such asoccupational health and safety productSafety Human Rights and socialcommitment often also um yeah knownunder the term of corporate socialresponsibility and then the G is um thecorporate governance and leadershipstyle including topics such as corporatepurpose the rights of representation ofshareholders and other stakeholders andexecutive compensation so ESG at the endis the is the idea of measuring in thesethree dimension and of having indices inthe three dimensions to at the endevaluate a company's sustainability andresponsibility strategy so an easg scoregives a a broader measurement of yeahlet's say the performance of anorganization going Beyond just economicuh the economic perspectives and thereby providing a more holistic perspectivebut how is this done and uh usually uhin the media we hear a lot about soallESG scores so what is an ESGscore um there are many many data pointscollected about organizations and uh ofthese organ of these data uh yeah beingthat companies have to uh publish forinstance in the annual report but alsouh from based on other legislation thereare a lot of data collected aboutorganizations and there are around 450different data points that are usedsomehow for ESG metrics out of thesedata points there are uh yeah around 180different measures that arecreated um uh to reflect these threepillars of the NG score right theenvironmental the social and thegovernance pillar of the SG score theseaggregated measures are then aggregatedto these different uh yeah categoriesright and then they are integrated intoone overall score the problem however isthat um depending on the kind ofindustry I'm in depending on thecompetitive environment but also thekind of resources that we use and so onum ESG scores differ tremendously acrossIndustries and firms so therefore umcomparing ESG scores is uh no easy thingright so it really depends um onspecific as aspects uh specific to thisindustry right so the risks andopportunitiesAssociated uh with a certain industrywhen it comes to ecological social andgovernance um yeah they are uh reallydiffering across Industries but eveninside an industry might differ so let'stake a look at the example here that wehave here in our bullet points let's uhtalk about the healthcare industry andthe energy sector healthc care might bemore related um with uh yeah uh yeahlet's say working conditions but also umthe the overall impact that they have uhon on social uh Health right but lessper se with energy consumption or carbonemissions um compared to the energysector where uh yeah the uh the focuswould be more on uh carbon emissionscompared to uh compared to healthcaretherefore uh somehow the risks the riskassociated with that industry should besomehow weight in the construction ofthe overall ESG score or the pillarratings and this is uh what What's alsodone uh in order to make e G scores compcomparable inside an industry but alsoBeyond right to take into account theseindustry characteristics the characterisof the overall environment and even firmspecificcharacteristics so what did we learn inthis video first of all we spoke aboutthe importance of corporate reputationand how it is influenced bysustainability practices transparencyand responsible governance and uh thisalso impacts then at the long run howstakeholders perceive company or anorganization we also talked aboutgreenwashing and we talked aboutgreenwashing through misleading claimsand selective information and we alsotalked about how greenwashing can thenreally damage an organizational umreputation and of course also erodepublic trust and in the last step wetalked about the ESG score theenvironmental social and governancefactors that play a critical role incorporate accountability with growingpressure from shareholders andRegulators that are really demandingtransparency and complyingwith sustainability efforts hopefullyyou enjoyed this video and you'relooking forward to our next video
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