Why everybody hates you: Health - part 1
Reputation is formed from three main components: your own behaviour, the manner in which your behaviour is communicated, and the context in which that behaviour takes place. It is possible to change your behaviour, and you can certainly influence the manner of communication but in order to either of those things you need to understand the third – context. Many of the issues that affect your reputation are exceedingly complex. Money, race, gender, inequality, climate change – how can you possibly be expert enough in each of these areas and more in order to stay ahead of your critics and be (seen as) a ‘good company’?
This essay is the latest in a series that explains the context in which your corporate reputation is being formed, so that you can guide your own company safely through. Today we will discuss the way in which companies affect the health of their employees, customers and the rest of the world. Health changes everything. A healthy individual is happier, more successful in their career and more able to spend time building social connections. It is no surprise, therefore, that when companies imperil our health they suffer some of the longest-lasting, most substantial effects on their own reputation.
Given the many and varied ways in which our lives intertwine with business, there are also multiple instances in which companies can be bad for our health. Let’s start by dividing those into:
Direct – they do something to us that is bad for us, and
Indirect – they influence us in a way that makes us behave more unhealthily
This week I will look at direct harms and next week we will be delving into the ways in which companies indirectly shape our health.
Companies – like people – exist within a complex society and web of relationships. It is easy to mock the term ‘stakeholder’ but the reason it gets used a lot is because it is evocative of the broad range of people that a company relies upon: customers, employees, investors, regulators, the media, advertisers, suppliers, and so on. Any company that cares about its reputation has a clear idea of who the most crucial of these people are (if you don’t yet, start here!) but it is worth repeating that we live in an increasingly interconnected world and that means that our actions can ripple outwards to a broader, global community. Our network, our relationship footprint, is unique to each organisation and each relationship has an impact. At times this will be positive: employees gain a sense of satisfaction, some friends and a salary. At others it may be negative: a poor culture creates mental health issues among staff, or your factory has a negative impact on the environment for the local community.
Here are some of the highest profile negative health impact stories of recent years:
Because of the amount of direct contact businesses have with their employees, the potential for making an impact is massive. Amazon has battled ongoing stories about poor working conditions in its warehouses, including targets so ambitious that workers did not feel able to take toilet or food breaks. The online giant is so concerned about this narrative that they recently started offering tours of their fulfilment centres, advertised with perky vox pops from their ‘associates’.
Mental health is also a major concern for employers, with the numbers of workers affected so large that Deloitte estimated the costs to UK business as £45 billion per year. Contributing horror stories include rampant sexual harassment as well as bullying and intimidation. It is no surprise that the Weinstein Company currently has one of the worst corporate reputations around.
Some of the most egregious harms inflicted in recent years include the Rana Plaza collapse of 2013, which resulted in 1,134 deaths and drew attention to the terrible conditions still experienced by many workers in the clothing industry. Elsewhere, farmers risk exposure to harmful chemicals and mobile phone supply chains are riddled with human rights violations.
Coronavirus has brought the importance of supply chains front and centre but even before that the largest corporates were being challenged by NGOs and external campaigns to take responsibility for the actions and working conditions of their suppliers.
You don’t have to work for a company to be under threat. Consider the Bhopal disaster– possibly the worst ever industrial accident. In December 1984, a gas leak at the Union Carbide pesticide plant in Bhopal, India, resulted in the exposure of over 500,000 people to methyl isocyanate gas in the small towns located near the plant. The incident caused more than 3,700 deaths and 558,125 injuries.
Impacts on local communities aren’t always the result of major accidents. If you prefer your corporate reputation education in movie format then look no further than Mark Ruffalo’s latest: Dark Waters. This film follows a lawyer determined to bring chemical manufacturer DuPont to justice for poisoning the water in Parkersburg, West Virginia – a multi-year crusade that eventually resulted in a $671 million settlement by DuPont. Along the way DuPont’s Teflon side-products increased the incidence of a range of cancers, birth defects and other illnesses. The worst part of this story is that DuPont knew about the risks and knowingly continued to inflict them upon the Parkersburg community. We will come back to lying next week but be assured – lying is never the right way to react when you discover a problem.
Often the products that do us harm aren’t stealthily leaching into our water system – we buy them and bring them home. Perhaps the best-known example of this is tobacco. Now government regulation means that tobacco products come with explicit warnings about the impact they could have on our health but for years tobacco companies knew about these risks and did not make them clear to consumers. The result? Decades of litigation, hundred of millions of dollars in fines, legal fees, and settlements and a total loss of reputation for the tobacco sector, which usually ranks at the bottom of any reputation scale. That poor reputation has real-world consequences ranging from taxation levels, to the ability of company officials to be heard on regulatory or economic issues and onwards.
Very often when I speak to clients about the tobacco example their reaction is one of incredible complacency, the assumption that tobacco is a special case. Yes, tobacco is exceedingly bad for smokers and those near to them – the World Health Organization (WHO) believes it kills half of users and causes 8 million deaths globally each year – but 80% of the world’s smokers now live in low- and middle-income countries. In the rich West, where tobacco is highly regulated, suspicion is moving elsewhere. Alcohol, for example, which the WHO tells us is responsible for 5.1 % of the global burden of disease and injury, and sugar. Recent investigative reporting has brought to light evidence that the sugar industry may have deliberately pushed the blame for dietary diseases on to fat.
Another area where regulation (and evidence) is still developing is the impact on human
health of some of the chemicals involved in manufacturing plastics – the prime suspects being the endocrine disrupters bisphenol A (BPA) and phthalates. BPA is most often used in rigid transparent plastics (like water bottles and tupperware), while phthalates are plasticizers used in flexible products such as PVC and in lots of body care products, like shampoo. These chemicals are pervasive – BPA is now found in well over 90% of urine samples – and we are only just beginning to understand the impacts that they may have on neurological development, our endocrine system and our likelihood of getting certain types of cancer.
Some authorities have taken action to ban BPA in baby bottles and the EU is also phasing out the use of BPA in receipt paper in 2020. Products such as these present clear reputational risks for companies that either ignored risks of which they were aware, or preferred not to heed warnings of potential harms. As well as immediate reputation risks, there are also the commercial risks inherent in not developing alternative materials: the costs of moving swiftly to a new manufacturing process are usually higher than a gradual approach, and waiting for competitors to develop new materials puts companies at further risk of increased input costs when supply is controlled by external forces.
Rest of the world
Economists will be familiar with the term ‘externalities’: “a consequence of an industrial or commercial activity which affects other parties without this being reflected in market prices”. For all of your closest stakeholder groups there is some payback mechanism. Treat employees badly and you will have problems with high turnover, or need to pay them more. Harm your consumers and they will stop buying from you. Harm your political allies and they will withdraw regulatory support and stop taking your calls. Beyond these are the externalities: consequences that do not directly affect you. These are the easiest to forget – there is no immediate cost to you from these and often the rest of the world doesn’t even notice what is happening. The most obvious current example is climate change – for more information on which you can read my earlier essay on climate change and corporate reputation.
A further example would be the ‘clean diesel’ scandal which started in 2015 with the discovery that car company Volkswagen had installed software into its cars that was specifically intended to thwart testing regimes for nitrogen oxides. Nitrogen oxides causes respiratory symptoms, amplify the effect of particulate pollution that causes heart problems, contribute to acid rain and add to smog. One peer-reviewed study estimated that between 2008 and 2015, the excess pollution in the United States produced just by VWs with the defeat device installed would have caused 59 premature deaths.
Further testing in the wake of the scandal revealed that large numbers of diesel vehicles (from multiple manufacturers) actually emitted significantly more nitrogen oxide than expected – in the UK trials not a single model was under the legal limit – though VW was the only firm found to have deliberately created software to hinder testing.
The reputation impact was instant. When Harris Poll released their 2016 Reputation Rankings for the most visible companies in the United States they found that:
“In light of its recent emissions scandal, Volkswagen Group declined steeply, dropping 20.5 points overall from a “very good” (75.21) score in 2015 to a “very poor” (54.75) rating in 2016. The only company to receive a “very poor” RQ rating this year, Volkswagen Group also fell more than 25 points on Emotional Appeal (includes attributes of trust, admiration and respect) and 20 points on Social Responsibility (includes attributes of environmental and community responsibility).” Harris Poll 2016
The commercial impact was similarly devastating. The market valuation dropped by 30% in the first year, and the carmaker reduced its workforce by 30,000, largely to make sure it could pay the fines of $50 billion or more that it has amassed. Industry insiders believe that adjustments to make diesel cars meet even the existing legislation (doh) will prove expensive enough to make these models exceedingly uncompetitive in the future, effectively removing diesel from the consumer market.
These effects are similar in scale to what we are seeing in the oil industry. Last week ExxonMobil, the largest US oil company confirmed plans for over $30 billion in capital spending per year for the next five years, most of it on big oil and gas projects, and said that they refused to get caught in “a beauty match, a beauty competition” about carbon targets. After the announcement, the oil major’s shares fell more than 4%, bringing it close to the lowest price in 15 years, and meaning it is currently worth half what it was in 2007. That loss is in part because markets expect that pressure from both consumers and regulators for companies to decarbonise will grow and ignoring this is both a reputational and commercial risk.
Humans and distance
Sadly there are too many examples to quote for each of these sections – pesticides, opioids, toxic food colouring, mad cow disease, the horsemeat scandal… I’m sure there will be a few more that you can name without much effort. Some of these affected you – but many others did not and yet, you remember them. Here then, is the nub of the problem for corporate reputation. We care deeply about our own wellbeing and we don’t like organisations who put at risk our lives or those of our loved ones. We remember the scandals and we penalise companies for them.
Sadly, it is clear that in business and in reputation terms, not every human life matters to the same degree. In general, firms get punished less for harms that occur farther away from their primary ‘stakeholders’. The Rana Plaza disaster, for example, resulted in apologies from some of the firms involved and donations to a compensation fund, but ultimately brands such as Primark have continued to prosper in the West while poor conditions threaten the health – and lives – of workers in far-flung countries. When I worked at Populus we ran some rough and ready analysis of the Top Ten Most Noticed news tracker. There weren’t enough data points to publish anything conclusive but indicative results showed that news recall of a disaster was proportional to number of fatalities and distance from the UK.
For any cynics reading, this doesn’t necessarily mean you can stop worrying about health impacts a long way away. Health scandals tend to have a long shadow and they are also cumulative. The drip-drip of stories about Primark’s ethics mean that the brand gets more scrutiny than many others from journalists, Select Committees and, yes, consumers. That’s why they have to give up precious in-store advertising space to campaigns such as “People. Respect. Planet” and, for example, have now acted early to release biodegradable face wipes. Or consider the reputation of Nestle which is permanently connected (in some markets) with the baby milk scandal – from the 1970s. We may care less about humans who are far away but these scandals are stored away in our minds as indicative of a company culture that values profits over human outcomes – and that reputation is hard to shift.
What to do about it? Four key takeaways
Health impacts can seem some of the most clear-cut in the corporate reputation world. Simple: don’t knowingly kill people, don’t put profit before mental or physical heath, be honest about risks posed by your products. But the truth is more alarming and more complex. Few people go to work with the aim of hurting their fellow humans. Instead most of the harms catalogued above were inflicted as side-products of other goals: to cut costs, increase efficiency, rush a new product to market, deliver predictable product quality, offer value to customers and so on and so on. All of these goals have a place but must be balanced against the costs – one of which is the toll on human health and the devastating impact that can have on corporate reputation. The best path to avoiding this is to keep a clear view of the impact your organisation creates and to stay informed. It is very easy, especially when work is pressured and stressful, to keep your head down and focus on the metrics right in front of you; the examples above show the importance of being aware pf external research and debates so that you can identify threats early.
In future, I’ll talk far more about how organisations can navigate these tricky issues (subscribe here if you want to be sent my articles as they appear each Wednesday) but for the time being, these are my key takeaways:
Map the impact that you have on ALL of your stakeholders and make sure that your analysis includes impacts on health. If you need help with this, get in touch with me, or there’s a quick start guide here.
Audit the way in which your organisation discounts for distance. Keep an eye out for this common (and very human) mistake, which can blind you to the importance of stakeholders who are geographically further away from you but important either in their own market or for your overall reputation.
Stay connected to the world. Make contacts with critics and competitors, allies and wildcards. Create opportunities to hear outside opinion – even when it isn’t comfortable. Whistleblowers, new research and debate are actually your friends.
It’s the cover-up that gets you. Health harms are usually caused by ignorance rather than evildoers. But the once the initial problem is discovered, the clock is ticking. Companies that choose either to remain wilfully ignorant or to deliberately cover up harm, these are the ones that will be judged most harshly.