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Reputation & Sustainability Matter: Linking Sustainability & Reputation to Financial and Behavioral Performance

Reputation & Sustainability Matter: Linking Sustainability & Reputation to Financial and Behavioral Performance



Presented to the Cleveland Corporate Sustainability Network by Pamela Cohen, Ph.D., head of Dix & Eaton's Reputation Valuation practice in Cleveland and Chicago.

Presented to the Cleveland Corporate Sustainability Network by Pamela Cohen, Ph.D., head of Dix & Eaton's Reputation Valuation practice in Cleveland and Chicago.



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  • Measure impact and change, not just outputs (example of # of students at events)First few years, baseline, scrubbing data, establish goalsPerformance metrics: reduced water use, reduced costs etcData, quantify the unquantifiable (example?) – measure knowledge, awareness, behavior change (only for major campaigns where significant resource investment)Not shown here: Organized into phases, and tables with who is responsibleFairly straightforwardNext iteration of plan will include baseline surveys of knowledge so can evaluate the impact of particular campaigns/communications and whether they are influential and for what reason.

Reputation & Sustainability Matter: Linking Sustainability & Reputation to Financial and Behavioral Performance Reputation & Sustainability Matter: Linking Sustainability & Reputation to Financial and Behavioral Performance Presentation Transcript

  • Reputation & Sustainability Matter:Linking Sustainability & Reputation toFinancial and Behavioral PerformancePamela Cohen, Ph.D.Chicago and ClevelandCorporate Sustainability NetworkFebruary 24, 2012 1 © 2012, Dix & Eaton Incorporated
  • What Is Behavioral Economics? Traditional economics teaches that people act rationally in ways that maximize their well-being. Behavioral economics embraces the idea that people possess “bounded rationality” (Simon, 1957) meaning that they make biased decisions that sometimes run counter to their best interests. Even most traditional economists acknowledge that some people are not fully rational.  However, traditionalists and behaviorists disagree whether bounded rationality significantly impacts the market. Many decisions are made subconsciously and automatically on the basis of information that our conscious, rational brains are rarely aware. © 2012, Dix & Eaton Incorporated 2
  • What Is Behavioral Economics? Behavioral economists, as stated succinctly by Dan Ariely, argue that we are not as much in control of our decisions as we would like to think.  There are many factors that subconsciously influence the choices we make. Behavioral economics draws from the knowledge and research of many disciplines: economics, psychology, sociology, anthropology, and other social sciences. © 2012, Dix & Eaton Incorporated 3
  • Hot Intangibles1990s 2000 2005 2007 2011 Trust Image Intellectual Social Property Leadership Responsibility Sustainability © 2012, Dix & Eaton Incorporated 4
  • Regarding Attitudes, Behaviors and Sustainability…. We know from numerous long- and short-term studies in sociology and psychology that attitudes do not correlate with or predict behavior well. Researchers have also found that pro-environmental attitudes are poor predictors of pro-environmental behaviors. There are a lot of reasons given for this lack of linkage. Some barriers include the social context as well as cognitive factors such as perceived behavioral control and efficacy. However, environmental attitudes can serve as powerful predictors of behaviors in certain situations. 5 © 2012, Dix & Eaton Incorporated
  • Regarding Attitudes, Behaviors and Sustainability…. While people generally express a strong inclination and motivation to act in a manner that fosters sustainability, it is usually not a predictor of actual behavior. Sustainability is not yet considered the social norm, and people tend to conform to social norms, while not readily embracing new norms. 6 © 2012, Dix & Eaton Incorporated
  • Corporations Are Often Reluctant to Discuss Sustainability Efforts Corporations and institutions are often concerned about perceptions of green washing or green blushing. Some of this reluctance comes from increased transparency of efforts on the Internet. Difficulty in knowing what to highlight and what to leave alone. 7 © 2012, Dix & Eaton Incorporated
  • Complex Set of Relationships Exists in Current Society Web 2.0 Stakeholder Sustainability Social Media Buzz Folksonomy Relations Efforts Podcasting Wireless RSSManagement Blogs Media relations Tagging Finance YouTube Grassroots Promotions outreach Search engines Online outreach Strategy Press Execution releases Wikipedia Pitching Consumer- reporters Public affairs generated content Special Employee Viral Citizen marketing journalism Investor events communications IR CSR Relations Advergaming Branding Third party Metaverses outreach Facebook Recruitment, Messaging MySpace Social Retention networking Twitter Flickr Content optimization Innovation SyndicationDeveloped at CCW © 2012, Dix & Eaton Incorporated 8
  • Valuing Reputation 9 © 2012, Dix & Eaton Incorporated
  • Linking Reputation and PerformanceWhat the reputation model does: Calculates the actual impact of reputation on financial and behavioral performance outcomes. Identifies the key drivers that influence corporate/institutional reputation. Measures the current impact of each driver on reputation, and on financial and behavioral performance outcomes. Measures the potential impact of reputational improvement on aspects of performance. Measures the potential risk, or cost of reputational damage, on aspects of performance. © 2012, Dix & Eaton Incorporated 10
  • Many Interested Parties © 2012, Dix & Eaton Incorporated 11
  • Methodology in Print Beyond The Green Corporation “…Few Wall Street analysts, for example, have tried to assess how much damage Wal-Marts reputation for poor labor and environmental practices did to the stock price. But New Yorks Communications Consulting Worldwide (), which studies issues such as reputation, puts it in stark dollars and cents. calculates that if Wal-Mart had a reputation like that of rival Target Corp. (TGT), its stock would be worth 8.4% more, adding $16 billion in market capitalization.” “….a more sophisticated understanding of the power of perception is starting to take hold among savvy corporations. More and more are finding that the way in which the outside world expects a company to behave and perform can be its most important asset.” “And while the value of a reputation is vastly less tangible than property, revenue, or cash, more experts are arguing it is possible not only to quantify it but even predict how image changes in specific areas will harm or hurt the share price.”Developed by Pam Cohen at CBI, Predictiv, and © 2012, Dix & Eaton Incorporated CCW 12
  • Developed by Pam Cohen at CCW © 2012, Dix & Eaton Incorporated 13
  • Process Flow Chart Run model to assess causal relationships between drivers, index and outcomes Collect data Analyze data Assign labels Model produces Identify (multiple to form groups to reputation awareness ratings and critical sources) for that define drivers based opportunities for eachperformance analysis drivers of on definition driver of performance outcomes reputation outcomes Simultaneously control for industry specific variables © 2012, Dix & Eaton Incorporated 14
  • Sample Models with Scores and Impacts © 2012, Dix & Eaton Incorporated 15
  • Sample Matrix Showing Messages Deserving Focus FOCUS PROTECT Low Score, High Impact High Score, High Impact Product Design Pricing Product Quality Prestige InnovationPotential Impact CEO Sustainability Customer Relations OBSERVE MAINTAIN Low Score, Low Impact High Score, Low Impact Current Score © 2012, Dix & Eaton Incorporated 16
  • Case Study:Major U.S. Beverage Company 17 © 2012, Dix & Eaton Incorporated
  • Global Beverage Company Reputation Model – Market Value Awareness Opportunity Performance Messages About: Message Awareness: Increase in Impact IndexTM Outcome from 10-point change in Message Awareness: 10-point change $316M Overall Brand 79.02 -$365M Investment Potential 82.65 $222M -$248M $240M Human Resources 64.88 -$280M $207M Innovation 76.05 -$232.M Impact Market Value IndexTM $225.5bn Responsible Marketing 71.71 $554M 52.21 -$620M $1,236M +$1.62bn Environmental Responsibility 69.74 -$1,377M Local Community 72.66 $483M -$1.98bn -$662M Well-Being 62.73 $576M -$645M*Opportunity = the change in market value in millions of dollars as a result of a 10-point positive or negative change in any score © 2012, Dix & Eaton Incorporated 18
  • Model Diagram Focusing on Water Drivers of Value Water Use Institutional Data/Actual Measures Water Source Sustainability Market Value Index Publicly Available Data Water Quality Media Water Extraction Stock Index Country of Origin Water Volume © 2012, Dix & Eaton Incorporated 19
  • Global Beverage Company Market Value – Backcast Model 2007 – 2010 1.3 1.2Performance Relative to Dow 1.1 1 c/d.1 predicted 0.9 R2= .87 0.8 0.7 1 24 47 70 93 116 139 162 185 208 231 254 277 300 323 346 369 392 415 438 461 484 507 530 553 576 599 622 645 668 691 714 737 760 783 806 829 852 875 898 921 944 967 990 Number of Trading Days 2007 – 2010 © 2012, Dix & Eaton Incorporated 20
  • Case StudyNational Real Estate Developer © 2012, Dix & Eaton Incorporated 21
  • Project Scope Assist real estate developer in achieving its stated goal of understanding and enhancing the impact of sustainability on key identified performance outcomes. Determine primary sustainability drivers and whether these impact bottom-line performance. Determine rank ordering of sustainability drivers in terms of potential impact on bottom-line performance. Link Company’s sustainability efforts to an overall Reputation Index and then to selected performance outcomes. © 2012, Dix & Eaton Incorporated 22
  • Project Methodology Estimates and expected degrees of linkages were calculated using both means and the differences in stated satisfaction levels in post- occupancy evaluations (POE) of green versus non-green buildings in available studies. The model also drew from LEED’s rating system structure in assessments. This consists of five categories: sustainable sites, water efficiency, energy and atmosphere, materials and resources, and indoor environmental quality (IEQ). Comfort, air quality, lighting, acoustics, cleaning and maintenance, overall satisfaction with building and overall satisfaction with workspace were included in these assessments. © 2012, Dix & Eaton Incorporated 23
  • Data Sources: External Center for the Built Environment, University of California Berkeley U.S. General Services Administration University of San Diego + CB Richard Ellis (CBRE) U.S. Green Building Council Journal of Sustainable Real Estate LEED (criteria) Urban Land Institute © 2012, Dix & Eaton Incorporated 24
  • Aggregated Average Sustainability Ratings Levels of Satisfaction, Green Building Means Versus National Average* Satisfaction Green (%) Non-Green (%) Air Quality 68 46 Cleanliness 86 62 Thermal 47 39 Acoustic 47 38 Lighting 75 75 Productivity Benefits 87 71 Overall Building 94 53*calculated using existing data from sources previously cited © 2012, Dix & Eaton Incorporated 25
  • Proxies for Occupant Experience in Green Buildings Drivers Satisfaction Level Impact of Impact Performance Outcome 1 percentage IndexTM point increase Productivity Benefits (87%) $35m* Thermal Comfort (47%) $18m* Acoustics (47%) $20m* Impact Cleanliness (86%) $53m* Index Market Cap $2.33 B Average Air Quality (68%) $49m* 63* Lighting (75%) $35m* $221m* Overall Building (94%) $90m* *Based on average reported ROI from increased occupancy of 7.38% from studies included Note that margin of error is wider due to lack of internal data; amount estimated to vary by up to +/-20% (e.g., effect of one-point increase in Impact Index by $177m - $265m) © 2012, Dix & Eaton Incorporated 26
  • Proxies for Occupant Experience in Green BuildingsRank Ordering Opportunity* Score ImpactAir Quality Medium HighOverall Building High HighCleanliness High HighProductivity Benefits High HighLighting High HighAcoustic Low LowThermal Low Low *Determined as a function of score and impact, where lower score and higher impact are considered to yield the greatest ROI with the least effort invested. Such scores tend to be easier to move than high scores that have reached a point where it is hard to gain more satisfaction. © 2012, Dix & Eaton Incorporated 27
  • Case StudyMajor University © 2012, Dix & Eaton Incorporated 28
  • Reputation and SustainabilityShowing that Sustainability Matters… Background and genesis of this work: … there is a need to show clear linkages to desired outcomes in order to persuade people that any effort should matter to them. The same holds true for universities and colleges… This is especially true in organizations when there is a necessity to show linkages to bottom-line performance in addition to building stakeholder value. © 2012, Dix & Eaton Incorporated 29
  • Benefits of a Measurement ModelSupporting the Mission: Connect sustainability initiatives to broader University outcomes. Demonstrating returns helps key stakeholders within the University – leadership, alumni, faculty, staff, students – understand both the need and the positive impact of the undertaking. Creates an informed awareness of how best to allocate budget toward sustainability efforts. Helps justify the budget toward increased sustainability. Allows for cross-time measurement and management of efforts. © 2012, Dix & Eaton Incorporated 30
  • Inclusion of Social Media Data in Addition to Traditional Metrics Is Critical www.studentsreview.com just started her senior year at Central York High School. She has been stressed out by so many A.P. classes and is looking forward to go to college to continue her /college_rankings. education. She has been studying Science and Industry for the past three years, and has a particular interest in Information Systems and other related technology. She is also on the varsity field hockey team and wants to continue playing throughout college. enjoys playing piano, painting, and attending football games. She especially enjoys Dynamic University & watching the Penn State football games with her parents. Being a Penn State football fan, is also extremely interested in participating in the student section during games.has been thinking about applying for colleges soon, and Penn State is one of the top choices on her list. She really hopes that Penn State can provide many activities for her to become involved with. She did some research using the “Choosing a College” domain and found out that Penn State has a unique Information Systems College Rankings and Technology Program which involves project-based learning rather than the traditional textbook-and-exam style learning. She also learned that Penn State offers such a broad variety of programs and activities that she would not have any problem doing everything that she wants. also discovered that most students have access to Penn State football games for a discounted price. All of this information was easily accessible through the “Choosing a College” domain.Bob and Susan, parents, noticed that she had been researching about Penn State as a potential and likely college. is their first and only child to attend college, so they both don’t really know what to expect of the costs, financial aid, housing, and services. Feeling lost, they decided to use the “Choosing a College” domain, which had recommended to find more information about Penn State. Bob and Susan went to their computer and searched in the “Choosing a College” domain for pricing information. They had an idea of how much they wanted to spend per year, which was under 25 thousand. Through the “Choosing a College” domain, they were able to compare prices with other similar universities. They found that Penn State is less than what they were willing to pay per year. They also found that financial aid is available based on academics and financial need. Bob and Susan were also interested in the housing that is available and different services which are provided to help the student adjust to university life. They found that on-campus housing is OFFICIAL Rankings required for first-year students, but is not guaranteed after the first year. However, off-campus housing is available close to campus. The “Choosing a College” domain provided Bob and Susan with all the information that they were looking for.Since is just starting out her senior year in high school, she is confused about the application The Top 50 process and requirements for Penn State University. The next day, she went to see Jessica, her guidance counselor. brought up issues regarding minimum GPA requirements, SAT score requirements, as well as A.P. credit transfers. Jessica got on her computer and went straight to the “Choosing a College” domain to look for more The Top IVY information. She clicked on the parents/advisors link and easily navigated to her areas of interest. She found that the average high school GPA of the accepted is 3.5 and that the average SAT score is 1175. She also found out that most of A.P. credits will be easily transferred if she scores above the requirements. Jessica saw that exceeds the requirements on every level and is a possible candidate for the Schreyer Honors College. She found a brief summary describing the Schreyer Honors College and Top Creative printed it for is intrigued and decides to apply to Penn State, as well as the Schreyer Honors College. completed her application and submitted it for review with the help of information found on the “Choosing a College” domain.Gertrude is an admissions officer at Penn State. Three weeks after Sally submitted her application, Gertrude finds it Biggest Reputation on her desk waiting for review. She decides to finish her Cheetos before opening the envelope. After eating her fourth pack of Cheetos, she licks her fingers clean and opens the envelope. Gertrude’s way of determining acceptance into Penn State is to compare the raw numbers. She wipes her greasy hands on her jeans and gets on the ALL RANKINGS “Choosing a College” domain. Using this domain, she acquired the average GPA and SAT score of the accepted students at Penn State. Sally’s scores blew them out of Just Added Comment: the water and Gertrude immediately stamped ACCEPTED on her application. She then proceeded to open another bag of Cheetos. The application process was streamlined by the use of the “Choosing a College” domain. “I came here based upon the advice of a Jessica is Sally’s high school counselor. She has been a counselor for 30 years and has been assisting students in finding suitable colleges for most of her life. Jessica graduated from Penn State in 1976 and she still remembers how much fun she had there.New! Perceptual Rankings -- You Vote on friend, he said that it is a fairly good Jessica is helping Sally in her college application process. She needs to check requirements and recommendations for applying for Penn State and then relay the information to Sally. She knows that Sally is a bright girl, and possibly may be a candidate for the Schreyer Honors College, but she needs to find out more details about the Best! [beta] that program. school with a huge chance to get Gertrude is a college admissions officer at Penn State University. Her job requires for her to review applications and determine whether a student is qualified enough to involved in social activities. come t...” attend Penn State University. She is the one who will be reviewing application. Gertrude’s particular areas of interest are mean SAT scores and GPA of undergraduate acceptants © 2012, Dix & Eaton Incorporated 31
  • Data Tracking + Analysis © 2012, Dix & Eaton Incorporated 32
  • Primary Components of Reputation © 2012, Dix & Eaton Incorporated 33
  • Primary Components of SustainabilitySTRENGTH MESSAGES POTENTIAL REPUTATION PERFORMANCEOF CURRENT ABOUT: IMPACTS IMPACT INDEX OUTCOMESMESSAGING Predicted 65 Leadership 2.00 Performance Impacts of 1 pt 73 Mitigating Campus Impact Index 0.62 Effects Change Governance Over 65 0.12 System .035 Revenue 70 78 Communication 1.20 .086 Mitigating Campus 67 Effects 61 Climate Planning 1.80 .012 Yield 72 57 Cost to Implement 1.00 .170 Alumni Support 70 75 80 Advancing Knowledge 1.20 .056 Extramural Funding 70 82 Social Responsibility 1.24 75 Building Constituencies 0.85 80 Campus Visibility 0.85 © 2012, Dix & Eaton Incorporated 34
  • Contact Pamela Cohen Behavioral Economist Dix & Eaton, Cleveland University of Chicago Graham School, Sustainability Program phone: 734-276-1237 email: pcohen@dix-eaton.com pacohen@uchicago.edu © 2012, Dix & Eaton Incorporated 35
  • Reputation & Sustainability Matter:Linking Sustainability & Reputation toFinancial and Behavioral PerformancePamela Cohen, Ph.D., Behavioral EconomistChicago and ClevelandCorporate Sustainability NetworkFebruary 24, 2012 36 © 2012, Dix & Eaton Incorporated