Corporate reputation is measurable, with a market value of $7 trillion globally

• The study reveals that companies with a strong institutional reputation achieve an additional return in shareholder value of approximately 5% • The study warns that the way companies deal with their employees in the age of artificial intelligence constitutes a major threat – and an opportunity at the same time – to their financial value

A recent research study conducted by Pearson, a global communications and public relations consulting firm, revealed that corporate reputation has now become a measurable value. Companies with a strong corporate reputation can achieve additional annual returns to shareholders of up to 4.78%. According to the estimates contained in the study, the total market value of this new asset amounts to about $7.07 trillion globally. The study conducted by the specialized consulting company under the title: “Corporate Reputation: A New Asset for a New Era” adopted eight main indicators to measure the actual value of institutional reputation, which are social responsibility, creativity, governance, innovation, leadership, performance, products and work environment. The study succeeded in determining a financial value for institutional reputation, and moving it from an intangible concept to a measurable asset. The analysis concluded that, among the companies studied, the size of the “reputational return” could contribute between $2 million to $202 billion in additional revenues for companies, beyond the usual expectations based on traditional financial performance indicators. Commenting on these findings, Corey Dubroy, Global CEO of Pearson, said: “For decades, business leaders have understood the importance of corporate reputation based on their business experience, but were never able to measure its value as a financial asset; today, that has become possible. Our study shows that corporate reputation is an interconnected system that, when managed efficiently, can generate billions of dollars in measurable returns, enhance organizational resilience in the face of economic challenges, and give leaders the confidence needed to make bold decisions.”

Artificial Intelligence and the Work Environment as Key Determinants of Corporate Reputation Although companies with an established corporate reputation outperformed across the eight indicators, the research study indicated that the work environment represents both an opportunity and a challenge at the same time. Although it ranked last in terms of perceived importance (at 11%) among institutional reputation indicators, it recorded the highest performance gap between institutions, with a difference of 11.8% between the best and worst performing institutions. The study warned that this gap could turn into a crisis for organizations that have not dealt wisely with the process of integrating artificial intelligence technologies. In this regard, Matt Reed, Global Head of Corporate and Public Affairs at Pearson, and CEO of Pearson Buchanan in the United States of America, explained: “Companies must go beyond having ‘artificial intelligence tools’ to creating an ‘artificial intelligence strategy that concerns employees’, because how they manage this transformation will clearly reflect the extent to which they value their employees. Companies that invest in reskilling their employees Supporting their participation in shaping the future will reap the benefits of their good reputation, while companies that view artificial intelligence as a tool to reduce the number of employees will pay the price for this in their reputation, and any gains in operational efficiency will be offset by huge losses in terms of institutional reputation.”

Leading companies are those that put their corporate reputation first: Leading companies do not overlook any gaps that might weaken their corporate reputation: the best performing companies excel across all eight corporate reputation indicators, achieving an average increase of between 11 and 15 points in each area. The most important features were innovation (15.5 points), products (15.2 points), and governance (14.4 points).

Unconventional recovery path (in aviation and energy): In sectors where failure has serious consequences, or in industries facing a conservative societal outlook, corporate reputation is rebuilt from the “inside out” (i.e. from improving internal processes and organizational performance). The two airlines included in the study achieved the greatest reputational gains not by promoting their advanced product technologies, but by focusing on operational integrity by improving governance (+7.9%) and work environment (+6.2%). Likewise, reputational gains for the energy sector come not only from sustainability rhetoric, but through a tangible focus on improving the business environment (+0.9%) and enhancing social responsibility (+0.9%). A multi-billion-dollar reputational loss in the financial sector: The study results indicate a continued decline for financial sector companies across the axes of leadership (-24%), governance (-11%), and social responsibility (-15%). For the companies included in the study, this decline puts the value of corporate reputation estimated at $4.3 billion, equivalent to 38% of the total value of their reputation amounting to $11.4 billion, under direct threat. Dubrois concluded by saying: “Our analytical tools confirm that historical models for studying corporate reputation were at best rigid, and at worst inapplicable. Since corporate reputation is considered an ever-evolving practical concept, and accordingly, diagnosing its strong elements and those that need improvement, It enables organizations to direct their efforts towards anticipating and enhancing the key factors that shape public perceptions and influence financial performance.”