As reputational risks surge, why are so few companies equipped to tackle the issues?

In an increasingly interconnected yet deeply divided world, reputation management has become a labyrinth of challenges for organisations. As companies navigate economic instability, leaders find themselves juggling a myriad of reputational risks while striving to achieve more with less.

Drawing insights from over 2,700 C-Suite leaders across 27 markets, including Australia, a new report from Sandpiper has revealed that 97% of leaders recognise the importance of reputation for commercial success. Yet, nearly three-quarters (72%) say their organisations faced negative impacts due to reputational weaknesses in the past year.

The repercussions are significant: 61% indicated a diminished ability to engage with customers, 54% struggled to attract and retain talent, and 54% found it challenging to recover from crises. Financial losses were reported by 53%, while government and community relations suffered for 51% of respondents. Compounding these challenges, 56% of leaders believe managing reputation has grown more difficult in today’s ecosystem.

The Sandpiper Reputation Index highlights that Reputation Strategy and Crisis & Issues Management are the areas where organisations exhibit the highest percentage of “Trailblazers” – those that successfully navigate these complex waters. In contrast, ESG & Sustainability Strategy, Executive Profiling & Thought Leadership, and Media Engagement rank the lowest.

In Media Engagement, 69% of leaders feel they are not engaging with media adequately. Despite 84% acknowledging the effectiveness of media training, only 46% mandate it for all spokespeople. Consequently, 74% believe the quality of their spokespeople could be improved, and 66% admit that their representatives do not always reflect the organisation accurately.

Regarding Executive Profiling & Thought Leadership, 95% find thought leadership activities effective in building trust, and 88% feel their organisation has clear topics and themes. However, only 38% strongly agree that their leaders are recognised as industry thought leaders.

When it comes to ESG, 83% regard progress in sustainability as a vital reputational component, yet only 39% rate their organisations as strong in this area.

This discrepancy is supported by multiple weaknesses: less than half of organisations have a sustainability or ESG strategy, and only 44% produce annual sustainability or ESG reports. A critical barrier is resources, with only 13% having dedicated sustainability or ESG teams. Concerns also linger over the quality of ESG communications, as 43% doubt their accuracy. Alarmingly, just 29% have established a climate communications strategy.

Emma Smith, CEO of Sandpiper, stated, “Amid increasing sustainability issues globally and as we approach the mid-point of the decade of action, the findings are clear that more needs to be done to advance sustainability goals.

“As stakeholder activism grows and greenwashing regulations increase, organizations that are unprepared risk being caught off guard and experiencing major reputational damages.”

Moreover, 90% of leaders express strong concerns about emerging reputational risks, including misinformation (97%), data privacy and cybersecurity (96%), impact of AI on communications (95%), DE&I prioritisation (95%), and employee, customer and stakeholder activism (95%).

Yet, despite these concerns, fewer than 40% feel adequately prepared to manage these issues. Significant gaps exist, particularly in addressing misinformation and disinformation (a 67-point gap), employee activism (67-point gap), geopolitical tensions (66-point gap), and greenwashing.

Smith emphasised, “As the risk landscape increases and communications channels are increasingly fragmented and complex, the rules of reputation management have changed.

“Business leaders need to employ a holistic and multi-dimensional approach to reputation management that hyper-targets stakeholders, all while navigating emerging digital risks that have the potential to destroy reputations in seconds. In this environment, visibility, accountability, and transparency are the crucial ingredients for success.”

The Index starkly reveals a gap between strategy and action. While 97% of leaders acknowledge that a strong reputation is vital for commercial success, and over 80% consider all nine areas of reputation management important, less than half rate their organisation’s performance as strong in any of these domains.

Furthermore, many leaders feel disempowered regarding reputational matters, with only 67% of CEOs and 50% of Corporate Affairs Leaders feeling a high level of responsibility for their organisation’s reputation. Over half lack access to critical audience insights, which hampers their ability to engage effectively.

Recognising these challenges, over 70% of leaders plan to increase investment in reputation management over the next year.

“A significant strategy-to-action gap is a consistent theme throughout the data, showing that organisations have all the right intentions but are failing to mobilise plans. The appetite to increase investment in resources for reputation management efforts in the coming year is a positive sign,” Smith stated.

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