Corporate reputation accounts for $566 billion of the Canadian resource industry’s shareholder value

By Robert Simpson

Corporate reputation now accounts for $566 billion, or more than $1 in every $5 of shareholder value in Canada’s resource sectors according to calculations made using the latest Reputation Dividend report.

The ninth annual study, based on analysis of US largest public companies, found that the proportion of market capitalization attributable to the confidence inspired by their reputations increased by 2.5% points, to an average of 20.7% across the index and we’ve taken these numbers and correlated them to Canada’s resource industry companies trading on the Toronto Stock Exchanges.

Reputation has long been recognized as a cornerstone of corporate value. Warren Buffet’s much repeated mantra, ‘We can afford to lose money – even a lot of money. But we can’t afford to lose reputation – even a shred of reputation’, has long been asserting the case, but just how much those precious assets actually contribute and the cost to gain and maintain a good reputation has only become clear in recent years.

Communication success is key

A recent report, about gaining and maintain the reputation of the mining sector Changing the Game, Communication and Sustainability in the Mining Industry, published by The International Finance Corporation (IFC), the International Council on Mining and Metals (ICMM) and Brunswick Group, concludes “In the face of significant business challenges to the mining sector, communications is playing an increasingly strategic role…Communication success is key.”

The sector is rife with examples of projects stalled, stopped or abandoned because stakeholders were not sufficiently engaged, trust was weak leaving corporations’ reputation damaged and eroded.  The study revealed that the industry is grappling with the “Need to evolve from ad-hoc and reactive communications to a more proactive and structured model, able to engage in dialogues with all stakeholders and anticipate issues (both internal and external) before they appear.“

Mining companies have traditionally had a business-to-business mentality around communication but that attitude appears to be shifting. Companies need to recognize the value of engaging in a wider set of relationships, and looking at a more consumer-oriented model with “brand equity, reputation management and relationship building front of mind,” according the to Study authors. “This means the communication function can no longer be the sole crafter or guardian of the message. Together with other functions communication must develop opportunities to share the company’s experiences and to build trust with neighbors and potential partners, as well as adversaries.”

Five trends were identified from the research about the role of communications in the context of managing risk and adding value for all stakeholders.

Create an environment for effective dialogue

Companies need to move away from one-way communication being pushed out by the organization to planning pro-active campaigns to engage key audiences-rather than tactical ad hoc communication. If communication teams are set up to serve as nerve centers to coordinate and integrate, rather than merely disseminate information – the best of which include representation from diverse departments-they will achieve a more cohesive company voice and tie the impact of communications to measurable business outcomes.

Use transparency to build trust

If you have nothing to hide, then why not talk about it? While many company’s communications include regular disclosure of key decisions, performance metrics and contributions to local and national economy those who stand out are investing in telling their story in an open, proactive and structured economy. “This includes strong content creation to ensure that communication conveys a strong story with facts and anecdotes that truly represent the state of the business. By building in time and budget for staff to share their stories, the company receives regular feedback on whether its values and mission are reflected in the work the organization is proud of. If a mismatch is found internally, it is very likely to be felt by external stakeholders.”[1]

Integrating communication to enhance sustainability efforts

More effort needs to be paid to understanding stakeholder concerns and communication teams should be empowered to help the organization convey the views of a myriad of stakeholders so that decisions can be taken with and accurate understanding of both external and internal environments. “Stakeholder engagement training for staff, ranging from corporate leadership to community staff to exploration geologists, was mentioned in the Study as an area where interviewees wanted to invest more.”[2]

Prioritize internal communication and corporate culture

Ensure the entire company has internal communication across all business units. Invest in more internal communications activities – effectively engaging with employees and business partners to convey information and build a common culture. “With more access to information and powerful communications platforms, companies know that employees are their best ambassadors – or potentially a source of discontent and reputational risk.”

Measure Impact

An ongoing challenge for communications professionals in mining companies is “making the case” for the function’s direct impact on the “bottom line”. Communication professionals should develop new approaches beyond perception audits to measure the value of communications and linking these two key performance indicators (KPIs).

What is clear from both studies, is companies embracing the full breadth of the communication function in turn, maintain better reputations, increase shareholder value and create better outcomes for everyone.

Robert Simpson is the president of PR Associates, a communications firm which breakdowns complex scientific and engineering concepts to communicate them in ways that are easy to understand. Through our focus on strategic communication and training, the company helps science-minded professionals and their organizations build favourable reputations and achieve success.

[1] Changing the Game, Communication and Sustainability in the Mining Industry, published by The International Finance Corporation (IFC), the International Council on Mining and Metals (ICMM) and Brunswick Group