Sustainability and reputation/image - The Sustainability Management Wiki

Authors: Meret Bruns
Edited by: –
Last updated: October 8, 2025

Executive summary

This article explores the relationship between sustainability and corporate reputation, emphasizing its strategic importance for organizations. Reputation is identified as a critical intangible asset that influences financial performance, stakeholder trust, and competitive advantage. The literature review highlights three dimensions of reputation—being known, being known for something, and general favorability—and explains how sustainability practices strengthen these dimensions.

The paper underscores the reciprocal relationship between sustainability and reputation: sustainable practices enhance reputation, while a strong reputation facilitates credible sustainability communication. Practical implementation strategies include defining measurable goals, creating an internal foundation, and ensuring transparent external communication. Risks such as greenwashing, media scrutiny, and stakeholder skepticism are discussed, along with mitigation strategies.

Key recommendations for organizations include integrating sustainability into core business strategy, prioritizing transparency, and leveraging stakeholder engagement. The conclusion asserts that reputation management is an ongoing process requiring continuous monitoring, proactive communication, and alignment with stakeholder expectations to achieve long-term success.

1 Introduction

In the context of today’s highly competitive market, consumers have the privilege of choosing from a wide range of product and service providers. These market dynamics require companies to differentiate themselves from competitors, attract customers and build lasting, loyal relationships to ensure long-term survival. However, companies can no longer rely solely on product quality or competitive pricing to attract customers and generate financial returns. Instead, today’s consumers demand more, expecting companies to act ethically, engage in moral practices and demonstrate social and environmental responsibility. By demonstrating responsibility and commitment, a company can increase its attractiveness and standing in the minds of stakeholders.¹ These qualities have been identified as contributing to the enhancement of a company’s intangible assets, particularly its reputation.

1.1 Core concepts and relations

Research indicates that the importance and impact of intangible assets on firm value has increased significantly in recent decades. There has been a remarkable shift: while estimates suggest that in the 1970s intangible assets accounted for roughly 20% of a company’s total value, more recent estimates indicate that “today [they] account for more than 80%”.² In line with this, research has identified corporate reputation as a company’s most valuable intangible asset, with studies suggesting that around “25 % of a company’s market value can be directly related to its reputation”.³ Although reputation is an intangible asset that cannot be bought or sold and therefore does not directly impact financial returns, it does have a significant impact on stakeholders buying decisions.⁴ Its indirect impact on corporate financial performance, customer attraction and the development of long-term, supportive stakeholder relations has led to increased recognition of its value in both practice and academic discourse. Today, practical sources acknowledge that the “integration of reputation management [is] a pivotal component of modern corporate governance“.³ Research has identified a number of diverse benefits that result from a strong reputation, contributing to overall firm survival and superior financial performance. Given the growing recognition of reputation as an important and valuable asset, an increasing amount of research has been undertaken to understand the underlying dynamics. Nevertheless, as asserted by various authors, the concept of reputation remains to be fully elucidated and, as such, necessitates additional investigation.⁵^,⁶

In addition, sustainability and CSR have been identified as critical issues of our time, indicated by the scientific literature and confirmed in practice.⁷^,⁸^,⁹ This is primarily attributable to the climate change and a growing awareness of environmental and social issues. As a result, companies are under increasing public pressure to position themselves sustainably and demonstrate their commitment to environmental responsibility. As a significant contributor to global carbon emissions, companies are expected to take proactive measures to reduce their environmental impact, implement sustainable practices and transparently communicate their efforts externally. BCG (2022) highlights the negative consequences of “failing to [integrate] climate and sustainability into [its] strategy and day-to-day operations [warning that it] will result in the loss of capital, customers and talent”10 which potentially leads to business failure. Conversely, actively working to improve carbon footprint and reducing negative environmental impacts can have a positive impact on a company if communicated correctly. In addition, research also suggests that simply showing commitment and demonstrating care can already have beneficial impacts.¹⁰^,¹¹ This highlights the role of effective communication and disclosure as important means for this bachelor thesis.

The recognition of both reputation and sustainability as key factors influencing a company’s performance, underlines the importance to understand their relationship and the dynamics of their interaction. A review of global studies observing the field of corporate reputation in practice indicates that approximately 40% of a company’s reputation is based on its CSR performance.⁹^,¹²^,¹³ Ullah et al. (2020) observe “the decision of [a] company to join or stay away from CSR actions may change the reputation.” (p. 198)15. Thus, several authors have identified a correlation between reputation and CSR practice or its absence.¹⁴^,¹⁵^,¹⁶^,¹⁷^,¹⁸ As a result, in recent years, corporate reputation, influenced by the growing demand for sustainability, has become an increasingly important topic of research. Nevertheless, the subject remains a topic of discussion within academic discourse, as it is not yet fully explicated and further research is required.⁶ This underscores the necessity to address this research gap in order to enhance theoretical understanding, thus enabling the provision of practical advice. The importance of this assertion is further developed in the title of this bachelor’s thesis, “Corporate Reputation and Sustainability: A Literature Review and Practical Implementation”. In accordance with the title, the thesis’s primary objective is to furnish a fundamental and comprehensive understanding of reputation and its interplay with sustainability. Subsequently, it offers practical guidance on managing the interplay between reputation and sustainability, with the objective to provide managers and others with the knowledge to achieve optimal outcomes for their companies.

1.2 Relevance, objectives and structure

In more detail, the first part of this bachelor thesis examines the concept of reputation, its various influences and dimensions, with focus on its connection to sustainability. In this context, the theoretical emergence of a reputation for sustainable behaviour is identified and analysed. The mentioned positive correlation between reputation and CSR reveals a number of compelling outcomes that not only ensure a company’s survival, but also contribute to its long-term financial success. These findings provide a strong motivation for companies to actively integrate reputation management into their business practices. The outcomes demonstrate that focusing on reputation management is not only beneficial but essential to maintaining competitive advantage and sustainable growth. The second part of this study focuses on the practical implementation and management of the interplay between reputation and sustainability. The initial step is to raise awareness of the risks and barriers that companies face in practice regarding reputation, and how they can effectively overcome these challenges. Moreover, the primary objective of this part is to establish a structured, practical guide for companies to integrate sustainability into business practices, with the aim of ensuring a positive impact on corporate reputation. This elaboration is primarily based upon findings and suggestions from consultancies and other parties of practice. These insights are synthesised into a comprehensive approach that demonstrates its practical effectiveness, as it is rooted in practical recommendations.

It is evident that “every company has a reputation”, irrespective of its size.¹⁹ Consequently, the findings and analyses of this bachelor’s thesis are relevant to all members of a company involved in managing corporate reputation and communicating sustainability practices. As indicated, recognising reputation as an integral aspect of any business, companies should actively seek to shape it in a favourable way to secure and maintain stakeholder support, long-term customer loyalty and financial results.²⁰

The current need for a deeper investigation of the relationship between reputation and sustainability is justified by the fact that consultancies describe reputation in combination with sustainability as a “new challenge”.¹ According to a survey of CEOs around the world, “most senior managers are not entirely satisfied with what is available in terms of the information necessary to help them understand corporate reputation”.¹ Moreover, an analysis of practical examples reveals that many companies are experiencing difficulties in integrating sustainability into their business models in a way that positively impacts their reputation. This observation highlights a commonly faced problem in which companies lack the necessary expertise to effectively integrate sustainability practices into their operations, thereby undermining their ability to enhance their reputation through sustainable initiatives. These findings underscore the necessity of clarifying the multidimensional construct behind corporate reputation making it more understandable and tangible, and, as a next step, enabling its effective management in practice. Nevertheless, a number of companies are already providing good examples for managing the interplay between corporate reputation and sustainability. The behaviours and methodologies demonstrated by these companies are adapted and translated into a three-step approach, providing a basis for other companies to manage the interplay between corporate reputation and sustainability. Rebuilding on the premise of a highly competitive market, a single company cannot risk being outperformed by its competitors, especially with regard to the sustainability demands of stakeholders. Consequently, it is imperative for all companies to implement, manage, demonstrate and communicate sustainability, as well as to build a strong and favourable reputation. Consequently, the research question arises of how companies can integrate sustainability into their reputation management, with the prior step being the understanding of the underlying theoretical construct of reputation.

2 Literature review

2.1 Definition

2.1.1 Definition and composition of corporate reputation

Reputation represents one of the most important and valuable assets that a company can possess, as it “influences how stakeholders behave toward[s] [a] company” (p. 11).²¹^,²²^,²³^,²⁴ As such it can give rise to a number of beneficial outcomes ranging from financial to non-financial. Dealing with reputation is revealed as a complex issue as the definition of the term, its antecedents, formation and its outcomes have become complicated.¹⁸^,²⁵^,²⁶ Lange et al. (2011) suggest that the definitional complexity is based on the “underlying theoretical pluralism”.¹⁸ Despite extensive research conducted by scientist in this field, there is still no consensus on a common definition.²⁶ This results in a diverse range of definitions, which, despite their differences, share several fundamental similarities.²⁷ Analysis reveals that these similarities are frequently based on Fombrun’s and Van Riel’s proposed definition (1997):²⁰^,²⁷^,²⁸^,²⁹^,³⁰

“A corporate reputation is a collective representation of a firm’s past actions and results that describes the firm’s ability to deliver valued outcomes to multiple stakeholders.” (p. 10).³¹

The core ideas of this proposed definition are: reputation is collectively built, it is based on past actions and it reflects a firm’s ability to deliver value. A more recent definition, proposed by Charles Fombrun in 2012 defines reputation as “a collective assessment of a company’s attractiveness to a specific group of stakeholders”(p. 100).³²

According to more recently proposed definitions, reputation can be regarded as representing a company’s attractiveness in the minds of their stakeholders.³³ Reputation means, how stakeholders see and evaluate a company and its policy based on the entirety of its past actions that have come to their attention.²⁸^,³⁴^,³⁵ This identifies judgement and access of information as crucial elements.²² The aspect of judgement and evaluations can be based on direct interactions, such as experiences with a company’s customer service or products, and on information disclosed either by the company itself or by third parties.¹⁸^,³⁶^,³⁷^,³⁸ This also addresses the possibility of access to information, as stakeholders can only make judgements based on what they have heard or personally experienced.³⁹ Consequently, communication and disclosure must be seen as playing a crucial role in shaping a company’s reputation.³³ By evaluating a company’s past actions, stakeholders aim to infer the future behaviour of the company in question and their ability to create value.³⁵^,⁴⁰ In that case, reputation is used as a heuristic.

Reputation is built, when many of these individual evaluations and judgements come together and share similarities.²² Highouse et al. (2009) posit that “reputation cannot be held at the individual level” (p. 1490).²² This means that one single person cannot own a company’s reputation, it is rather the result of many people sharing similar perceptions, with individual perceptions contributing to, but not constituting, reputation on their own.²²^,³¹^,³⁶ This conceptualises reputation as a social construct, that demands exchange of stakeholder’s opinions about a company and identifies collectiveness as a key characteristic.¹⁸^,⁴¹ Attributable to the fact that reputation is the shared perception of many stakeholders, it is more resistant to short-term fluctuations and individual opinions.²²^,⁴² In other words, in the event of a negative experience being had by a single customer, reputation is unlikely to change. In consequence, reputation emerges as a resilient and durable resource, which is according to several sources superior to the resilience of other assets.²¹^,⁴³^,⁴⁴^,⁴⁵ Nevertheless, it can still be damaged or destroyed in a relatively short period of time if a significant number of people collectively disapprove of a company’s behaviour.²²^,²³ This disapproval can be the result of scandals, ethical misconduct or breaches of trust.⁴⁶ As Warren Buffett (1995) well states, “it takes twenty years to build a reputation and five minutes to ruin it”.⁴⁷

Building on these various characteristics of reputation and the scientific discourse regarding this topic, it becomes evident that reputation is an asset that cannot be purchased, it must be earned and built over time.⁴⁸ It is therefore challenging, if not impossible, to replicate, which aligns with the VRIN model’s categorization – valuable, rare, inimitable, and non-substitutable.²²^,⁴³^,⁴⁹ It seems to be a more valuable asset than a tangible one.⁴⁸

2.1.2 Differentiation between identity, image, status, and reputation

In order to effectively derive concrete implementation approaches from this work, it is essential to thoroughly understand the underlying theory. Therefore, distinguishing the concepts of identity, image, and status from reputation seems to be important, as these terms are often confused and used interchangeably.⁴¹^,⁵⁰ This provides a more detailed insight into the development of reputation, as it is often characterised as an accumulation of these concepts, in addition to other inputs for example sustainability.³¹^,⁵¹ This paper compares the four concepts, which are occasionally compared in pairs or trios, but rarely all four are considered within a single study.

Identity

The concept of corporate identity is regarded as the fundamental basis and a significant influence on the other threeterms.²¹ Originally tied to individual identity and personality, in corporate context it refers to an organisation’s internal self-perception, encapsulated by the question, “[w]ho are we as an organisation?” (p. 80).⁵²^,⁵³ Despite the absence of a standard definition, there appears to be a consensus among the scientific literature regarding a number of key characteristics, particularly those pertaining to the internal character of corporate identity.²² In contrast to reputation, corporate identity only exists without external judgement.²¹^,⁵⁴ Harvey (2014) defines it as how “employees understand their organisation” (p. 6).⁵⁴ In a similar way, Barnett et al. (2006) describe corporate identity as the “character of the firm” (p. 33), including core values, missions, visions, and culture.²¹^,⁴¹^,⁵⁵ Herbst’s (1998) approach of applying human characteristics to corporations can be utilised to derive the composition of corporate identity in an adaptive manner.⁵² Furthermore, identity has a reciprocal effect, as it is shaped and lived by internal stakeholders (employees) while simultaneously influencing their behaviour.⁴¹^,⁵⁴

Regarding the establishment of an environmental reputation or the enhancement of a corporate reputation through sustainable practices, corporate identity plays a fundamental role as it influences the subsequent dimensions.⁵⁶ Therefore companies must initiate this process internally by aligning sustainability with their culture, values and missions, the core elements of corporate identity.⁵⁵^,⁵⁶ This internal alignment constitutes a pivotal stage, since a robust corporate identity is a necessity for the effective communication of sustainability strategies.⁵⁷

Image

In an attempt to clarify the relationship between corporate reputation and corporate image, and to define image itself, Gotsi and Wilson (2001) examined four distinct assumptions from the academic discourse:⁵⁸

1. Reputation and image as synonymous
2. Reputation and image as totally different and separate concepts
3. Interrelated – Reputation as one dimension of corporate image⁵⁹^,⁶⁰
4. Interrelated – Image as one dimension of corporate reputation²¹^,³⁸^,⁶¹

Today, scholars describe the concept of corporate image as the externally perceived impression of an organisation’s identity held by individual stakeholders.⁶² Conversely to reputation, which develops as a collective and enduring assessment over time, corporate image reflects immediate, individual reactions based on personal emotions and experiences.⁴¹^,⁶³^,⁶⁴^,⁶⁵ Consequently, there is always a wide variety of different images, as each individual forms their own perception of a company.²⁰^,⁶⁶^,⁶⁷ Balmer (2009) describes image as the “immediate mental picture an individual has of an organisation” (p. 558), thereby emphasising its transitory nature in contrast to the stability and durability of reputation.⁴¹^,⁶⁸^,⁶⁹ Highhouse et al. (2009) assert that “[a] company may have a reputation, but […] it does not have an image” (p. 1490), thus highlighting the volatility and the challenge of maintaining corporate image, especially as they change rapidly with every new information that emerges.²²^,⁵⁵^,⁷⁰

Since corporate image is built on corporate identity, it does not require a reputation, whereas a reputation only emerges when several images of similar stakeholders come together.²¹^,²²^,⁴¹ This assumption serves to support approach 4 as the most compelling, a position which also receives the most widespread acceptance within the academic discourse.³⁷^,⁵⁸ As a consequence, the concepts of image and reputation exhibit an asymmetrical relationship, with corporate image constituting a fundamental aspect of reputation, thereby exerting a direct influence.⁴¹^,⁵⁸^,⁷¹ Conversely, reputation has only an indirect effect on individual images. This explanation also serves to refute approach 372. Given the resilience of reputation, its strategic importance and its ability to exert a greater influence over it than image, it is recommended that companies assign reputation a higher priority. However, given the significant influence of image on corporate reputation, a comprehensive understanding of the nature and the process through which it is shaped remains essential for further investigations regarding reputation.

Status

The concept of corporate status represents another theoretical construct that influences reputation.²⁷ Status, originating in sociology and being transferred into management research, complements corporate reputation, which comes from economic literature.³⁵^,⁷²^,⁷³ Despite their different origins, both are subject to the evaluation and judgement of external stakeholders, shaped by past performance and experience.²⁷^,⁷²^,⁷⁴^,⁷⁵

In general, the concept of status represent a form of ranking or social standing that confers financial and non-financial privleges.⁷³^,⁷⁴^,⁷⁶ Sauder et al. (2012) define it as “the position in a social hierarchy” (p. 268).⁷⁷ Additionally status is frequently associated with lasting quality and value, fostering favourable perceptions such as prestige, while enhancing corporate visibility and credibility.³⁵^,⁷² As would be anticipated, a high status is associated with a number of advantages, including political power, a perception of superior product quality, and trust premiums.⁷³^,⁷⁵^,⁷⁸ Conversely, a low status can result in penalisation and disadvantages.⁷³^,⁷⁷

When it comes to sustainability, status has an important impact on reputation. Park et al. (2020) examined the relationship between corporate status and corporate reputation by testing the halo effect theory to assess how high status affects perceptions of a company’s sustainability efforts using regression analysis.³⁴ For context: the halo effect is a psychological phenomenon, that describes the human tendency, to make an assumption that is consistent with existing impressions of a subject.⁷⁹^,⁸⁰ Nisbett and Wilson (1977) aptly describe that when “we like a person, we often assume that those attributes of the person about which we know little are also favourable” (p. 250).⁷⁹ Adaptively, unknown characteristics of a firm are inferred from known ones. In line with the results of the study the following halo effect was observed: a company with a high status also holds a more favourable reputation for sustainability, regardless of their actual performance on that subject. This finds application, when stakeholders rely on status as a heuristic, since they receive limited information on the actual (sustainable) performance.⁸¹ As stated by Park et al. (2020) “[a] firm’s high status increases audiences’ positive perceptions of its environmental reputation“ (p. 468).³⁴ Therefore their result is, that a corporate´s “status significantly enhances […] environmental reputation” (p. 464) and thus represents an interesting and promising influence for corporate reputation.³⁴

As visualised in figure 1, all three concepts (identity, image and status) have a direct or indirect impact on reputation.⁷² They serve as components that significantly shape a company’s reputation, while also providing a framework for its strategic management.

*Figure 1: Relationship between Reputation, Identity, Image and Status (own illustration)*

2.1.3 Dimensions of corporate reputation

Beside the differentiation of reputation from related concepts, it is also useful to examine the dimensions of the concept itself in order to deeper comprehend the connection and differences between corporate environmental reputation and corporate reputation. Lange et al. (2011) reviewed numerous papers in order to gain a more detailed understanding, identifying three main sub-perspectives of reputation, labelling them: being known, being known for something and general favourability.¹⁸ Their review has since become a fundamental reference, cited in many subsequent papers published up to the present day.⁸^,⁸²^,⁸³^,⁸⁴^,⁸⁵ Although their review was published in 2011, their findings can still be used to explain the connections and differences between corporate reputation and corporate environmental reputation as well as the influence of sustainability. This distinction is based on the findings of the review by Lange et al. compared with three frequently quoted papers which they themselves used as a basis.³⁶^,⁵⁵^,⁸⁶ The purpose of the comparison is to explain the three dimensions of reputation in a more detailed manner to apply them to the topic of this thesis and to gain an understanding of the connection between reputation and sustainability.

Lange et al.¹⁹(2011)	Barnett et al.⁵⁵(2006)	Rindova et al.⁸⁷(2005)	Fischer and Reuber³⁶(2007)
Being known“awareness of the firm without judgement”¹⁹	Awareness	Prominence	——
Being known for something	Assessment: involves evaluation and judgment	Perceived Quality	Componential Perspective
General favourability	Asset	——	Aggregate perspective

Table 1: Comparison on the Three Dimensions of Corporate Reputation

A comparison of the results in table 1 reveals that all of the four papers employ similar categories, but with different labels. As Lange et al. refer to the sub-reputations as being known, being known for something and general favourability.¹⁸ Barnett et al. also divide into three categories, which they refer to as awareness, assessment and asset.⁵⁵ While the other two papers address only two of the perspectives, the three-folded view remains valid, as each neglects a different perspective.³⁶^,⁸⁶ Rindova et al. refer to the two mentioned dimensions as prominence and perceived quality, not taking into account the general favourability, while Fischer and Reuber focus on the componential and aggregate perspective, neglecting the being known perspective.³⁶^,⁸⁶ Therefore the results in table 1 emphasise the three-dimensional perspective presented by Lange et al.¹⁸, postulating their findings as being well-founded. Hence, the nomenclature proposed by Lange et al. will be referred to.

Being known

‘Being known’ simply represents the overall visibility of a firm.¹⁸^,⁸⁷ Thus it primarily reflects the extent to which stakeholders have heard of a company or recognise its logo, to increase trust. This can result in a heuristic, whereby stakeholders prefer companies they have heard of over those they are completely unfamiliar with.¹⁸ Rindova et al. (2005) describe the ‘being known’ dimension as the “organisations’ prominence in the minds of stakeholders” (p. 1033).⁸⁶ That implies, that stakeholders are aware of the existence of a company but they do not yet form an opinion based on specific attributes.⁵⁵ Although this dimension does not address the aforementioned aspect of judgment, it still serves as foundation for the following dimensions. Also the aspect of collectiveness is of particular significance in this part of reputation. A company’s reputation for ‘being known’ increases with the level of recognition it achieves among the public.⁸⁶ Since simply ‘being known’ is only based on the general fact of prominence, this perspective out of the mentioned three appears the easiest to control and change.¹⁸^,⁸⁷

In the context of sustainability, evidence indicates a positive correlation between visibility and the impact of CSR practices as well as disclosure on reputation.⁸⁸ This is attributable to the fact that the higher the visibility of a company, “the more information is available for stakeholders to evaluate its commitment to social and environmental responsibility” (p.93).⁸⁹ Consequently, larger companies bear a greater potential for accelerated scrutiny and heightened observation by stakeholders, particularly in the context of sustainable disclosure as well as higher expectations for the company to act environmentally responsible.⁸ On the beneficial side, Lange et al. (2011) observe that “reputation is stronger if awareness of the firm is broader” (p. 155).¹⁸ This can be attributed to the fact that, that if a company is known to a smaller number of people, a single image has a higher percentage share and therefore a higher impact on the reputation than for larger companies. Moreover visibility can result in augmented financial performance, as consumers are frequently willing to pay a premium for well-known brands while also offering the benefit of reaching a wider audience of potential buyers.⁸⁶^,⁹⁰ Still, ‘being known’ remains a “double-edged sword”, as it is challenging to regulate, may give rise to unfavourable perceptions and higher scrutiny, yet also offers notable benefits.⁸^,⁹¹

Being known for something

The ‘being known for something’ dimension is closely related to the strategic character of the company and is defined by the attributes which a company is known for.¹⁸ As illustrated in table 1, all four papers refer to this dimension. Fischer and Reuber (2007) characterise it as the ‘componential perspective’ (p.57), which focuses on specific attributes or characteristics of a firm rather than on its overall perception.³⁶ According to Alon and Vidovic (2015) “reputation is issue-specific [and it] requires differentiation among various reputations that companies may have” (p. 340).⁸⁴ In general, a number of scholars endorse the proposition that a single company may possess multiple reputations, each associated with a distinct attribute.¹⁸^,³⁵^,³⁶ It is noteworthy that the degree of favourability associated with these attributes can vary significantly: for example, a company may be known for its high quality products while simultaneously being criticised for its negative environmental impact.⁸⁴ The establishment of these reputations is based on the evaluations of specific attributes by stakeholders, which are shaped by the company’s past actions, behaviour in the specific areas, and communication efforts.⁵⁵ In turn, these evaluations give rise to assumptions about the company’s future behaviour within the certain field.¹⁸^,³⁶^,⁸⁶^,⁹² Additionally they often work as a heuristic and affect the trustworthiness and interpretation of new information within that field.⁹³ To illustrate, if an organisation is perceived to have a poor reputation regarding sustainability, new, more positive information in this field may initially be met with scepticism.⁹⁴ Consequently, a company’s prior reputation on a particular issue can affect how stakeholders react to positive updates. This can lead to the possibility, that even though a company engages in sustainable efforts, those efforts are not acknowledged by stakeholders and thus less effective.⁹⁴^,⁹⁵

In summary, the findings from table 1 indicate that a company can establish a reputation based on sustainability.⁹⁶ When a company is perceived as acting environmentally responsible, the resulting environmental reputation functions as an intermediary, enhancing the company’s general reputation.⁹⁴ In the context of growing external demand for corporate environmental responsibility, the degree to which environmental reputation influences overall reputation is becoming increasingly significant.²³ Moreover, in today’s highly competitive market, where consumers have more choices than ever before, a strong environmental reputation is a promising strategy for companies to differentiate themselves from the competition.³⁶^,⁴⁹ In general, any form of ‘being known for something’ differentiates a company from its competitors. To have a beneficial impact, it is important, that perceived attributes are favourable.

General favourability

The third and final dimension of reputation is the ‘general favourability’.¹⁸ This dimension represents the overall impression, character and esteem of a company, rather than specific attributes.⁸^,⁵⁵ Generally, this dimension represents the extent to which a company is perceived as negative or positive and liked in its entirety.⁸ With the term ‘general’ already suggesting, this dimension incorporates the two aforementioned dimensions, which exert a significant and integral influence on the ‘general favourability’ of reputation. As a consequence the influence of corporate sustainable behaviour and the establishment of an environmental reputation exert an increasing influence on this dimension of reputation. A particular part of this reputation is represented by corporate character traits such as: trustworthiness, reliability, and legitimacy.²¹^,⁹² Such characteristics serve to reinforce stakeholders’ perceptions by aligning with prevailing social norms and demonstrating an ability to adapt to their expectations and needs.²⁰ So it is possible to build a reputation that is widely seen as admirable and favourable.

Stakeholders use ‘general favourability’ to estimate the likelihood that a company will act in a particular positive way in the future.¹⁸^,⁹⁷ That is especially evident in cases where information emerges about a topic or attribute for which external stakeholders haven’t yet established a topic-specific reputation. In such circumstances, reputation in form of ‘general favourability’ is used as a heuristic, which incorporates all other forms of specific and strategic reputations that influence stakeholder perceptions.¹⁸^,⁸⁷ As this perception is markedly influenced by a company’s past behaviour, it affects stakeholders’ future assumptions.⁸^,¹⁸^,⁹⁸^,⁹⁹ Fombrun aptly summarises it as “a perceptual representation of a company’s past actions and future prospects that describe the firm’s overall appeal […] when compared to other leading rivals”.²¹ Consequently, another crucial aspect of this dimension is the comparison, as the ‘general favourability’ is typically evaluated in relation to other comparable companies.¹⁸ This presents a challenge for companies to consider not only their own actions and reputation, but also those of their competitors.³⁶ Implemented and managed correctly a favourable reputation is one of the most valuable assets that a company can possess, offering a number of key Advantages (e 3.4).³⁷^,¹⁰⁰ This is attributable to this dimension incorporating stakeholders awareness of the company (‘being known’), its strategic character (‘being known for something’), and its qualitative characteristics.¹⁸^,⁸⁷

*Figure 2: Reciprocal Interplay between Reputation and Sustainability (own illustration)*

This three-dimensional approach is particularly relevant when a company seeks to build a new reputation based on a specific attribute, such as sustainability. As has been demonstrated, ‘generalised favourability’ exerts a significant influence on the manner in which external stakeholders perceive and interpret new information, thereby contributing to the development of a ‘being known for something’ reputation.¹⁸^,⁹⁷ On the other hand, irrespective of a company’s general reputation, sustainable efforts can result in the development of an environmental reputation through consistent behaviour over time.¹⁶ Such a reputation for a desirable concrete attribute, such as sustainability, has been shown to enhance overall favourability and significantly strengthen a company’s competitive advantage.⁸⁴^,¹⁰¹ As a result, it is imperative to understand this dual function that a general favourable or unfavourable reputation can have in the context of sustainability, as well as the influence of corporate sustainability efforts on a company’s general reputation.

2.1.4 Definition and composition of corporate environmental reputation

Definition of corporate reputation for this bachelor thesis

In conclusion, given the absence of a standard definition of reputation and the review of relevant and diverse literature, the following definition is used in this bachelor thesis:

• Reputation is the collective judgement on different attributes and the general
attractiveness of the company by many stakeholders who share similar perceptions
(images) of a company

O Reputation is the result of long-term development, based on all available information that is evaluated by its stakeholders

O Environmental reputation represents a part of the general reputation

2.2 Historical background and scientific discourse

This section presents an analysis of the scientific discourse on corporate (environmental) reputation, tracing the emergence and evolution of theories from their earliest formulations to the present day. By analysing the progression of approaches over time, the section also highlights the increasing influence of sustainability on reputation and their relationship.

How the concept of reputation developed

Until the late 1980s/ early 1990s the term reputation was often used synonymously with the concepts of corporate identity, corporate image, and status.⁵⁸ That confusion can be traced back to the previous decades when those terms were primarily viewed in isolation rather than in relation to one another and were therefore mixed up.²⁸^,¹⁰²^,¹⁰³^,¹⁰⁴ With the publication of Fombrun and Shanley’s paper “What’s in a name?” (1990) and their observation that reputation and financial performance could influence each other, corporate reputation received increasing attention.³⁴^,³⁸^,⁴⁹ With the growing interest in reputation, attempts were made to distinguish it from the related concepts.²¹^,²⁸^,³⁸^,⁶¹ Since then, theoretical and empirical research on the subject has grown until today.⁴⁹ An increasing number of scholars began to consider the concepts, especially image and reputation, as different.²¹^,⁵⁰^,¹⁰⁵ Fombrun, Shanley, van Riel, and others have laid crucial and lasting groundwork within that field of research.¹⁰⁶ Their work continues to be referenced and cited in related academic literature attempting to define the multidimensional construct behind the term reputation.²⁸^,¹⁰¹ It remains challenging to understand the mechanisms underlying reputation to a full extent, as it is an abstract concept with multiple influences, dimensions and high complexity. A common definition hasn´t been agreed on so far.²⁷

Current scientific discourse: Reputation and sustainability

Up to today, reputation has become one of the most important and valuable intangible assets a company can possess, as it gives rise to a number of positive effects.³⁷^,¹⁰⁰^,¹⁰⁷ As asserted by Kim and Kim (2017) “[c]orporate reputation related research has received ever-greater attention” (p.10), as environmental sustainability issues became more important. Consequently, the relations between sustainability and reputation are increasingly being examined.²²^,²³^,²⁴^,⁸² As a result, two main areas of research have emerged in recent years.⁸⁸

1. The influence of sustainable practices on corporate (environmental)
reputation T sustainability as a variable/ driver

1. How does a favourable corporate (environmental) reputation help to credibly communicate sustainable efforts?

Regarding the first subcategory (1.), scholars currently discuss the extent to which a company can influence, enhance or harm its general reputation and thus corporate performance through sustainable practices, their absence or disclosure.¹⁰⁸ In this field sustainability represents a variable which may lead to a positive or negative reputation regarding corporate environmental performance.¹⁰⁹ With the development of a positive environmental reputation through sustainable practices, a company can benefit from gaining particular recognition for its commitment to environmental issues. This, in turn, exerts influence on the ‘general favourability’ of corporate reputation and may further enhance the positive effects of reputation.¹⁰⁷

In accordance with the second subcategory (2.), scholars examine the influence of corporate reputation, or if existing corporate environmental reputation, on the disclosure of sustainable and CSR efforts.¹⁰⁹^,¹¹⁰ The majority of papers in this field of research examine the potential benefits of a favourable reputation for the implementation and external associations of CSR practices.⁸⁶^,¹¹¹ This involves investigating the extent to which a favourable (environmental) reputation may help to ensure the veracity and external acceptance of CSR practices and disclosed information.¹¹² Thereby reputation is seen as a medium through which sustainability initiatives can be presented as credible and transparent, or conversely, as lacking in such qualities.

While the majority of current papers indicates a reciprocal relationship between CSR practises and reputation, the mechanisms and interdependencies connecting the two remain insufficiently examined and have yet to be fully elucidated.⁵^,⁶^,¹⁰⁹ In fact, only a limited number of “studies have explored how sustainability performance impacts reputation” (p. 229)17 (research area 1.). However, scholars appear to have reached a consensus, indicating a positive correlation between practicing CSR and the influence on corporate reputation.⁹⁴^,¹⁰⁹ This approach presents a promising foundation for future exploration, particularly with respect to leveraging the relationship and deriving the associated benefits.⁶

2.3 Drivers of corporate (environmental) reputation

*Figure 3: Drivers of Corporate Reputation (own illustration)*

The development of a strong and favourable environmental reputation and ultimately a favourable general reputation relies on understanding and addressing the key drivers effectively. These drivers may act as catalysts in effecting the desired outcomes (e 3.4). Through a comprehensive review and comparison of various papers, several key drivers of the general reputation have been identified.¹⁴^,²³^,²⁴ These can be broadly categorized into three interconnected categories: the stakeholder dimension, the attribute dimension, and the media exposure/ communication dimension. Each category influences and is influenced by the others, forming a complex, dynamic framework for managing reputation.⁵⁸ With regard to the most recent developments in this field, current papers indicate that all three categories are increasingly influenced by the growing emphasis on sustainable demands.⁸²^,¹¹³ Sustainability therefore represents a driver for all three aspects with the potential to enhance or severely damage a company’s reputation.¹¹¹ This positions sustainability as both an interesting lever for corporate success and a significant challenge that must be carefully addressed. Therefore, understanding its pivotal role as an influential driver is critical to the long-term and beneficial cultivation of (environmental) reputation.

2.3.1 Stakeholder dimension

The stakeholder dimension encompasses all factors directly related to a company’s stakeholders. The subsequent analysis will concentrate on (potential) buyers, although other stakeholder groups, particularly employees, also present valuable opportunities for further research regarding this dimension under the influence of sustainable aspects. Important influences of (potential) buyers are their individual images, based on their interactions with a company.²⁰^,⁶⁷ This also encompasses factors such as experienced product quality, customer service, and more.¹⁸^,²²^,¹¹⁴ Besides images as an influence, this dimension is also driven by stakeholders’ expectations, needs and demands.¹¹³^,¹¹⁵ As already stated, there is currently a strong trend in expecting companies to act in a sustainable manner by adopting CSR practices.²³^,¹¹⁶ In order to gain a concrete understanding of the impact of CSR on corporate reputation and the formation of an environmental reputation, it is imperative to analyse both presence and absence of CSR practices. This is attributable to research indicating that the outcomes are more complex than a simple opposite.¹⁷^,⁸²^,¹¹⁷ This finding indicates that corporate reputation and corporate environmental reputation are “affected by both behaviour and non-behaviour” (p. 190).¹⁷

By integrating CSR into their practices, companies are addressing or even meeting stakeholder expectations.¹¹⁸ Failing to do so, on the other hand, may result in unmet expectations.¹¹⁸ In terms of fulfilling expectations a review of the extant literature indicates that engaging in CSR exerts “a greater positive effect on reputation than not practicing” (p. 408) has a negative effect.⁸² Lin-Hi and Blumberg (2016) provide a more detailed examination of the relations between CSR and reputation as they identified three different signals that a company can send.¹⁷ For practicing CSR they differentiate between participation in voluntary CSR engagement ‘doing good’ and alternatively the engagement in CSR only for the purpose of ‘avoiding bad’.¹⁷ By practicing ‘avoiding bad’, companies attempt to ensure that they act in accordance with the social norms, in order to prevent being perceived as acting irresponsible.¹⁷ By adopting this approach, companies merely fulfil the most basic requirements for which they are implicitly expected by stakeholders to do so but utilise it as a driver.¹¹⁹ However, not all companies adhere to the principles of ‘doing good’ or even ‘avoiding bad’, leading to a reputation for irresponsible behaviour on CSR issues and sustainable performance.¹⁷ Referring to Lange et al., companies risk developing a reputation for irresponsible behaviour by neither ‘doing good’ nor ‘avoiding bad’, which can ultimately damage their overall reputation.¹⁸ Consequently, the decision not to engage in sustainable practices can exert a disadvantageous influence on reputation or lead to a reputation associated with a lack of environmental concern. Although the negative impact is generally less harmful than the opposite, these findings highlights the imbalance between these two outcomes.

A number of researchers have identified a positive correlation between engagement in CSR practices and the enhancement of corporate reputation.¹⁷^,³⁸^,¹¹⁸ The most impactful results are observed in companies that not only practice ‘avoiding bad’ but also engage in voluntary CSR initiatives in form of ‘doing good’, identifying CSR practices as a compelling driver.¹⁷ It is therefore evident that the combined effort of ‘doing good’ and ‘avoiding bad’ is perceived by stakeholders as genuine and sincere.¹⁷ By demonstrating consistent behaviour over time, companies can reap numerous benefits. Additionally, stakeholders’ sustainability demands could be strategically employed to build a reputation for ‘being known for something’, thereby further leveraging the positive correlation between CSR and corporate (environmental) reputation.¹⁷^,¹⁸^,⁹⁴ Consequently, stakeholder engagement, specifically meeting current stakeholder demands, can serve as a valuable influence for enhancing reputation. Indeed, several scholars highlight CSR as current key drivers of reputation, as stakeholders frequently tend to ascribe a superior reputation and attributes to organisations that demonstrate a greater commitment to CSR than their competitors.²⁹^,³⁸^,⁴¹^,¹¹⁰ This emphasis on attributes gives rise to the subsequent dimension of drivers.

2.3.2 Attribute dimension

The attribute dimension is closely related to the one mentioned before, as it also shapes and influences the relationship between a company and its stakeholders, yet focuses on the key qualities.⁸⁹ The difference with the previous dimension is that the former embodies the company’s operative actions and its responsiveness to stakeholder demands for specific behaviour, while the attribute dimension captures the external perception of general qualities of the company. This encompasses essential qualities such as trustworthiness, legitimacy, and credibility.²²^,¹¹¹ Together, these attributes constitute a basis for the external interpretation of corporate behaviour and communication.²³^,⁹² The importance of these attributes becomes particularly evident in stakeholder dialogue and information disclosure, as such actions inherently create an information asymmetry between the company and external parties.¹²⁰^,⁸⁶^,¹¹³ In the case of emerging information published by the company itself, stakeholders rely on the perceived reliability and trustworthiness of the firm to interpret and evaluate the disclosed information.¹²¹ Fombrun (1996) emphasises that organisations associated with these attributes are more likely to maintain a favourable reputation.²¹ On the contrary, companies that develop character traits for being unreliable or as lacking trustworthiness are at risk of developing a less favourable reputation.⁹² In alignment with the signalling theory, these attributes can exert significant influence on the establishment of both a corporate environmental reputation and the general reputation, and are therefore identified as important drivers.²²^,⁹² When it comes to sustainability, these attributes play a critical role in ensuring the reliable disclosure of information necessary to reap the benefits of implementing CSR into corporate business, ultimately influencing reputation.

A crucial task for companies is the cultivation of trust/ trustworthiness as pivotal driver for the establishment of robust relationships with stakeholders. Trust is often seen as a situational factor, whereas it is the quality of being trustworthy that creates trust.¹²¹ Morgan and Hunt (1994) characterise trustworthiness as the “confidence in the [counterparts] reliability and integrity” (p. 23).¹²² In the context of sustainability several studies indicate a positive correlation between trustworthiness, reputation and voluntary CSR practices (‘doing good’) suggesting, that companies can enhance their reputation and perceived trustworthiness through CSR initiatives.⁴⁸^,¹²¹ Consequently, it is scientifically acknowledged that trustworthiness is of importance for the enhancement of reputation.¹²¹ An additional attributive driver is credibility, which exerts particular importance when disclosing information.³⁷ In the context of sustainability disclosure, credibility is a crucial factor in ensuring that stakeholders have confidence in the accuracy of the communicated information.¹¹³ A highly effective strategy for enhancing credibility is the verification of information by third parties and the assurance of information on sustainable performance by professional auditors.⁸⁴^,¹¹³^,¹²³ This serves to reinforce stakeholder confidence in the accuracy and reliability of the disclosed information.⁸⁴^,¹¹³ Additionally, obtaining assurance can serve to establish legitimacy, which also represents an important driver, influencing reputation.⁴³^,¹²⁰^,⁸⁴^,¹¹³ As with corporate reputation, legitimacy is based on the evaluation and judgement of stakeholders, and is positively correlated with financial returns.¹⁶ The term legitimacy is typically defined as the stakeholders’ perception that a company’s actions are desirable, suitable, and in accordance with accepted norms and expectations.⁴³ One method of increasing corporate legitimacy is through CSR communication, as favourable practices within that field are perceived as desirable, suitable, and in line with accepted norms.⁸⁹^,¹¹³ Nevertheless, legitimacy in general, and particularly in relation to sustainable activities, can only be established over an extended period of time.¹⁶^,¹²⁴ In order to rapidly profit from the benefits of legitimacy, some companies engage in greenwashing, a practice that may yield short-term gains but often backfires in the long-term due to associated reputational risks.¹⁶

In summary, this attribute dimension serves as a mediator between the other two dimensions: stakeholders and media exposure/ communication.³⁷^,¹¹¹ It is already evident that trustworthiness, credibility, and legitimacy exert a positive and favourable influence on the outcome of media exposure and communication.

2.3.3 Media exposure/ Communication dimension

A crucial element in leveraging sustainability as a significant driver is the recognition of CSR or non-CSR practices by stakeholders.¹⁴^,²⁴ Without this dialogue, efforts would have no impact on the company’s reputation, neither improving nor damaging it. Thereby it is important to understand, that corporate (environmental) reputation is not solely grounded upon the information disclosed by the company itself, rather on the entirety of the information available about a firm, divided into unintentional and intentional.³⁸ In fact, the impact of CSR practices on reputation is based on “how the firm communicates its CSR activities and how its activities are reported in the national media and other communication mediums”.¹²⁵ Consequently, companies must carefully consider both channels of information and strive to influence and manage them in the most effective manner.

The unintentional form refers to information disclosed to the public by third parties without the company’s involvement or influence, and so beyond the company’s control.⁴⁸ Third parties possess the ability to direct attention towards companies and report on them, thereby strongly influencing reputations and stakeholders.²¹^,⁸⁷ Their involvement can either have a beneficial or a detrimental impact on the companies concerned.¹²⁶ For external stakeholders, information provided by third parties, particularly those of a prominent nature, is regarded as a more reliable source of data.⁸⁷ It is important to note, that “reputations do not exist without the intermediaries and networks that create, maintain, destroy, and give meanings to them” (p. 653).²⁸ This form of information disclosure lies beyond the control of companies, but they might mitigate this by demonstrating favourable and responsible behaviour as well as proactively disclosing information themselves.¹²⁷

The second channel of information is characterised by enhanced manageability. It consists of the company’s intended communication about itself. This enables the company to exercise direct influence over the content, address its stakeholders and strategically counteract any potential negative statements made by third parties.¹²⁷ “According to legitimacy and stakeholder theories, disclosure is part of the dialogue between a company and its stakeholders, allowing the company to effectively manage reputational risks” (p. 121).¹¹³ Thereby companies can disclose information in form of financial and sustainability reports, interviews, social media posts, or other self-presentations.¹¹³ By disclosing information, companies seek to address the stakeholder dimension, specifically responding to stakeholders’ current needs and demands, by showing corporate sustainable commitment.¹¹³^,¹¹⁵ This is an important and commonly used approach to enable companies to realise the potential benefits associated with these efforts to a fully extent.⁸⁴^,⁸⁹

A recent meta-analysis conducted by Barroso-Méndez et al. (2024) indicates that there is a “significant positive correlation […] between corporate sustainability disclosure and reputation” (p. 1).¹⁰⁸ CSR disclosure can serve as a strategic tool to enhance corporate (environmental) reputation.⁸²^,⁸⁴ This effect is further enhanced with a higher quality of the disclosed information.⁸⁴ In accordance with the signalling theory, that correlation strives out the importance of disclosing high quality information in order to establish or enhance attributes like an environmentally friendly reputation, credibility, trustworthiness and transparency.⁴⁸^,⁸²^,¹¹³ Conversely, a company’s favourable reputation can facilitate the reliable disclosure of CSR information, thereby engendering stakeholder trust.¹⁵ As previously stated, the efficacy and trustworthiness of such publications in the minds of stakeholders are further reinforced by the assurance of external third parties.⁸⁴ Thereby it is advantageous if a company’s sustainability report aligns with an independent source, such as a sustainability rating, in order to enhance credibility, trustworthiness, and again corporate reputation.¹²⁸ Also positive and reinforcing effects of these efforts typically unfold over an extended and consistent behaviour over a period of time, rather than showing immediate results.¹⁶

Avoiding CSR practices or having a poor disclosure may have the opposite effects and will therefore lead to an unfavourable reputation in the long term.⁸² It is possible for a company “with a poor sustainability performance […] to get away temporarily with restricted reporting” (p. 237) or even a form of greenwashing.¹⁶ But in addition to the ethical concerns raised by this practice, there is a risk of long-term reputational damage to the company, as well as negative changes in its relationship with its stakeholders, as they may feel betrayed.¹⁶

2.4 Outcomes of corporate (environmental) reputation and sustainability

As a valuable intangible asset, reputation, including an established environmental reputation where it exists, can lead to a variety of positive financial and non-financial outcomes.³⁷^,¹⁰⁰ It must be acknowledged that these days, a favourable reputation is frequently a result of sustainability efforts. An environmental reputation is directly linked to corporate sustainable practices. Nevertheless, in most cases it is the reputation that leads to the majority of beneficial effects, not the sustainable practices itslef.⁸⁴^,⁸⁶^,¹⁰¹ Companies with a favourable (environmental) reputation benefit from the following outcomes, whereas companies that are perceived irresponsible with regard to sustainability may “face public scrutiny, social sanctions, and loss of legitimacy” (p. 466), along with the opposite outcomes.³⁴

Competitive advantage: The cultivation of a favourable reputation while simultaneously managing sustainability provides businesses with a superior market position and increases the companies attractiveness.³⁶^,⁸² Research indicates that a company’s reputation affects the decisions made by stakeholders when choosing between competing yet similar firms.³⁷^,⁸⁷^,¹²⁹ In recent years, the intensification of competition between companies has led to an increased importance of corporate reputation, corporate environmental reputation, and corporate image.¹³⁰ It is therefore important for a company to establish a reputation that is more favourable than that of its competitors in order to maintain a competitive advantage over time.⁸⁴^,⁸⁶^,¹⁰¹ In times like ours “[c]onsumers prefer to buy products and acquire services from companies with a favo[u]rable environmental reputation” (p. 310).¹³¹ Fombrun et al. (2002) state “doing good […] improve[s] a company’s ability to attract resources, enhance its performance, and build [a] competitive advantage” (p. 85).¹²⁰ An extra benefit of a good and favourable reputation is that it is characterised as an asset that is difficult or impossible to duplicate (VRIN-attributes).³⁸^,¹²⁹

Financial performance: In accordance with the resource-based view, organisations that possess assets that meet the VRIN criteria may benefit from superior financial performance.⁴²^,⁴⁹ Latest research findings suggest a positive correlation between reputation as well as corporate environmental reputation and financial performance.⁸⁸^,¹⁰⁷^,¹³²^,¹³³ This indicates that a favourable corporate (environmental) reputation exerts an increasing influence on both current and future financial performance.⁸^,⁴⁹^,¹¹² Moreover, researchers found a reciprocal relationship between reputation and financial performance, identifying financial performance as both an outcome and again as a driver of corporate reputation.⁸²^,⁸⁹

A critical examination of the mechanism underlying the relationship between corporate reputation and financial performance reveals that the primary determinant is the fulfilment of stakeholder demands. According to Gomez-Trujillo et al. (2019) the interplay between sustainability and reputation may influence customers’ “satisfaction, [which] can influence their purchase and repurchase intentions” (p. 407).⁸² It can be reasonably deduced that a favourable reputation, particularly a corporate environmental reputation, has the potential to increase a company’s sale number, which in turn directly impacts financial performance.³⁷^,⁸²^,¹³⁴ Firms with favourable reputations may benefit from higher profit margins, as this favourable position often legitimises higher prices and buyers are willing to pay a premium price.¹⁸^,³⁷^,²¹^,³⁸^,⁴²^,⁸⁶^,¹³⁵ These companies may also be able to reduce their operating costs through economies of scale and “cost savings, as suppliers and employees seek to be associated with the [reputable] firm” (p. 12).⁴⁹^,¹⁰¹^,¹¹² Consequently, companies with a good reputation can benefit from an increase in their sales and prices while simultaneously reducing their costs. Research indicates positive outcomes in relation to the stabilising effects on stock value.⁴⁹ It was also found that a favourable reputation may serve to “enhance firm equity and investor awareness” (p. 1481).²² A positive link between CSR practices and a firm’s stock value has been observed.⁴⁸

Loyal customers: A further beneficial outcome is that companies with a favourable reputation tend to enjoy long-term effects and stability. Research indicates, that companies with a positive environmental reputation are more likely to build these lasting, strong, and beneficial relationships with their stakeholders, especially with their buyers.⁴⁸ A loyal customer base, represents a crucial part for a company’s financial performance. This is attributable to their direct influence on the outcome of corporate financial performance through their monetary actions, including (re)purchases and recommendations.¹⁴^,²²^,⁶⁹ Ullah et al. (2020) state that “studies have shown that CSR is a good marketing strategy to find a loyal customer” (p.195).¹⁴ This can be linked to the outcome of the competitive advantage gained by providing additional value to customers. Improving a corporate environmental reputation represents an effective strategy for achieving this objective, as it encourages stakeholders to support companies that are perceived as ‘doing good’.¹⁴^,¹¹⁷^,¹²⁹ This has the effect, that it may result in the emergence of non-financial stakeholder support.¹⁶ This form of support assumes particular importance in the event of a crisis, as loyal customers are of great significance. Should a company lose this support, its reputation is at risk. On the other hand, the positive alignment with stakeholders has been shown to enhance the company’s understanding of their needs and demands, thereby enabling more effective management of diverse risks and drivers.⁸⁹^,¹³⁶

(Loyal) employees: Another outcome of a favourable reputation attributed to a group of stakeholders is the fostering of employee loyalty and the attraction of a more qualified workforce.¹⁸^,⁸²^,¹³⁵^,¹³⁷ The academic literature reveals a preference among individuals for working in organisations that align with their personal values and are widely regarded as reputable by others.¹²⁹^,¹³⁸ A look at more recent literature indicates that this is currently the case for companies that are known for holding a positive environmental reputation.¹⁰⁰^,¹³¹ In those circumstances employees are inclined to work more productively and demonstrate greater loyalty to their employers, which leads to lower fluctuation.⁴⁸^,¹¹¹^,¹³⁸ Loyal employees not only represent a beneficial outcome, they also represent an important influence for reputation, as they play a crucial role in maintaining a corporate reputation. This can be seen as a mutually reinforcing cycle.

Trust and decrease in uncertainty: Trust and perceived trustworthiness both a driver and an outcome of reputation.⁸⁶^,¹¹¹ The conceptualisation of trust as an outcome enables the reduction of customer uncertainty through the establishment of a favourable reputation.²¹^,³⁶^,⁸⁶ This is particularly evident in instances where the disclosure of CSR and sustainable practices result in the development of a positive reputation.²³^,⁸² The beneficial outcomes for companies based on “characteristics such as trust, reassurance, reputation, image and responsiveness [are that they] are seen as more durable and less likely to suffer from competitive erosion” (p. 403).¹²³ All this leads to loyal customers and increased support.¹⁶^,⁴⁵^,¹²¹

Crisis management: In the event of an internal or external crisis a favourable reputation might serve as a “buffer”8 by mitigating the emerging risk.³⁷^,³⁸^,⁸²^,⁸⁸^,¹³⁵ As with status, this ‘buffer’ effect of reputation manifests itself in the form of a halo effect, as stakeholders tend to interpret information in a way that is consistent with their pre-existing perceptions.⁸ Thus, stakeholders holding a company in high regard, are very likely to give it the “benefit of the doubt” (S. 169), by offering the organisation a second chance or overlooking inconsistent and unfavourable information as they emerge.¹⁸^,²² Furthermore, a favourable reputations also helps to foster strong relationships with these stakeholders, increasing the organisation’s chances of survival and helping it to manage and recover from crises.³⁷ It has also been shown that in the event of a crisis, companies with an established favourable reputation or environmental reputation are in a good position to rebuild stakeholder trust by engaging in proactive CSR reporting.¹³⁵ Consequently, companies with favourable reputations experience smaller market declines during internal or external crises and can profit form the reciprocal relationship with sustainability.⁹⁷

3 Practical implementation

This literature review shows, that companies must understand how to manage their reputation proactively. Reports from management practice show, that the number of purchases made by consumers varies significantly in accordance with the level of sustainability management undertaken by the company.¹³⁹ They also suggests that corporate environmental responsibility enhances a company’s reputation, enabling it to differentiate itself from competitors and underline the consensus with the academic literature.¹⁰^,¹⁴⁰ Practice also demonstrates that the establishment of a favourable reputation, whilst simultaneously addressing sustainability demands, is of critical importance for avoiding corporate damage and ensuring the company’s long-term survival.¹⁴¹ Companies such as RepTrak and Deloitte, who collaborate with organisations to enhance their competitive advantage and reputation, strongly recommend the integration of sustainability into a company’s strategy to minimise risk.¹⁰^,¹⁴⁰ An unfavourable reputation is seen as a beginning for “many other risks, particularly economic ones”.¹⁴²

3.1 Risks, barriers and tensions in practice

Managers often find it difficult to control reputation at all due to its multidimensional and multifaceted nature, as well as their lack of understanding and expertise in this area.¹⁴¹ To quote Warren Buffett, “risk comes from not knowing what you’re doing”.¹⁴³ This barrier includes a lack of knowledge regarding the following barriers and tensions, a knowledge that must be identified and understood. Given the variety of factors that influence a reputation, there is a corresponding multitude of potential risks. Potential risks have the capacity to damage a reputation and “come in many forms, seen and hidden”.¹⁴⁴

External crisis: In recent years, external events such as natural disasters, the climate crisis, wars and the global pandemic have had a significant impact on the perceptions and reputations of organisations.⁹^,¹⁴⁵ Such crises have consequences, such as a reduction in purchases, and further Deloitte demonstrates the importance of these events for the reputation of a company.¹⁴⁶ They propose that reputational risks emerge subsequent to other risks.¹⁴⁶ This implies that, in addition to the general (e.g. financial) negative effects on a company, they can also give rise to reputational risks.¹²^,¹⁴⁶^,¹⁴⁷ Additionally, they can lead to a shift in stakeholder demands, as demonstrated by the climate crisis and the increasing demand for sustainability. These shifts often require companies to adapt their business strategy in a short period of time or risk a loss of reputation by failing to meet expectations. These events have also been shown to be a risk to the trust relationship between a company and its stakeholders and therefore increased and more careful communication can be highly beneficial.¹⁴²

External stakeholders – buyers: Fombrun et al. already identified “each stakeholder group [as] a source of reputational risk [that must] be managed” (p. 88).¹²⁰ Similarly, in practice external stakeholders are recognised as a crucial part of a company’s success and survival, given their role as (potential) buyers.¹⁴⁸ Because of their impact on a company’s financial position, it is imperative for any company to cultivate and maintain positive and tension free relationships with them.¹⁴⁹ A failure to address these stakeholders in the right manner can pose a significant risk, as it can result in an unfavourable reputation and consequently lead to disadvantageous outcomes and even penalisation. The correct communication and disclosure of information is therefore essential (d 4.3.3), yet practice shows that many companies struggle to manage this effectively. In practice, this challenge of communication and disclosure is frequently neglected, resulting in miscommunication, reputational damage, and limited strategic success. Global players, may have the additional difficulty that even the same stakeholder group (e.g. buyers) can have different preferences and trending desires depending on their location and country.¹⁵⁰ Consequently, a company may have a resilient reputation in one country and simultaneously a declining reputation in another, which presents a challenge in implementing the right implications.¹⁵⁰

CSR – a stakeholder demand: Another barrier, closely related to stakeholders is the growing demand for a company to act responsible, with a particular emphasis on sustainability.¹⁴² In particular, matters pertaining to CSR have evolved to be one of the most significant reputational issues.¹⁵¹ By not engaging or disclosing sustainability practices, companies are failing to meet this important and rapidly growing stakeholder demands.¹⁴² Engagement in the absence of disclosure has been shown to result in a failure to capitalise on the potential benefits of sustainable efforts.¹²^,¹⁴²^,¹⁴⁶ As a result, the potential positive effects on corporate reputation would remain unrealised.

Consequently, organisations are compelled to cultivate, not only to capitalise the advantages, but also to avoid the risk of sanctions through external stakeholders.¹⁵² A survey conducted by Woman Action Sustainability (WAS) has revealed that the disclosure of sustainable efforts is also subject to barriers and risks that must be addressed.¹² Poorly implemented ESG engagement and disclosure risks being perceived as insincere or greenwashing, while scepticism about genuine intrinsic commitment can further weaken its impact.⁷^,¹²^,¹⁵³^,¹⁵⁴ Both factors undermine stakeholder trust and the intended benefits of these initiatives. These circumstances taken together result in the significant revelation that both engagement and disengagement as well as disclosing and not disclosing entail risk. Practice indicates, that the benefits resulting from successful implementation and disclosure of sustainability practices outweigh the potential drawbacks.¹² As a result, companies need to ensure effective disclosure to profit from the benefits and avoid the perception of insincerity or greenwashing.¹²^,¹⁵³ Furthermore, companies have the capacity to control and mitigate this risk to a certain extent, as they are able to actively manage their communication strategy.¹⁵⁵

Media: The external media represent an additional burden that, similar to an external crisis, lies beyond a company’s control. This is attributable to the enabling of multiple source to report about everything combined with stakeholders access to a vast quantity of information from any location and at any time in an exceptionally rapid pace.¹ As a consequence, media has a significant impact on the information that stakeholders receive about a company and therefore on the outcome of the reputation.¹⁵⁶^,¹⁵⁷ Through the way they report and disclose information about different companies, they have the ability to either harm or support it. This characterises the media as a significant driver of increasing uncertainty and riskiness, a barrier that must be faced and that needs to be mitigated.¹⁴⁵ As a result, many companies seek to build relationships with the media in order to influence their reporting as much as possible.¹⁵⁷

With the rapidity of information, especially in times of social media, one identified burden is that companies often lack the time to respond effectively to information published about them, leaving them susceptible to immediate public scrutiny, criticism and judgement.¹⁵²^,¹⁵⁶ Furthermore, the revelation of unfavourable information has the potential to give rise to tensions in the relationship between companies and their stakeholders with regard to matters such as trust.³ In addition, the disclosure of information that a company wanted to keep confidential is more problematic when it is disclosed by third parties rather than the company itself, resulting in a perceived absence of transparency.¹⁵⁸ Similarly, the emergence of inconsistencies in communication or actions conveyed through media can serve to further erode trust.¹⁴¹ Together these examples demonstrate, that the media pose many different types of risk. Still, with the right knowledge, companies can mitigate these risks or even leverage external reporting to enhance corporate visibility, prominence, and attention. Despite the fact that external media may be beyond the control of the company, it has been demonstrated that companies can decrease the risk and leverage media through proactive communication and disclosure.

Internal stakeholders – employees: Characterised as an often overlooked aspect that can be a burden to reputation if not managed properly is the role of employees.¹⁵⁹^,¹⁶⁰ Their risk arises from their pivotal role for a company’s operative and also strategical business as well as their “[being] privy to extremely valuable information”.¹⁶⁰ Although this represents a further risk to a company’s reputation, it can be managed and influenced by the company.¹⁵⁵ Consequently, it is imperative for companies to establish relationships that engender satisfaction and loyalty, with a view to preventing employees from disclosing information that may be damaging to the corporate reputation.¹⁵⁵^,¹⁶⁰ Besides, companies bear responsibility for the behaviour of their workforce, as they embody the corporate identity, which leads to images that ultimately influence reputation. If employees do not represent this identity effectively, the result can be an inappropriate image that damages the company’s reputation.¹⁴⁰ Therefore an effective employee management is crucial. Without it, tensions can arise between the corporate identity and its external perception, undermining trust and credibility towards external stakheolders.¹⁴⁰

In conclusion, the effective management of reputational risk is critical to a company’s long-term success and financial stability. Organisations that fail to do so face the threat of negative business consequences, making reputation management a strategic priority.¹² While employee engagement plays a critical role in minimising reputational risks, other aspects of reputation are best addressed through strategic communication and transparent disclosure. By proactively managing these elements, companies can not only protect their reputation but also strengthen their financial performance.¹⁴⁶ It is therefore essential to analyse a company’s position, its stakeholders and to manage external communications.

3.2 Corporate analysis

Before a company can begin to influence or reshape its reputation, it is crucial to understand its current position and to gain a comprehensive understanding of its market, its stakeholders, and the most significant risks.¹⁴⁶ Before deriving implications that serve to enhance corporate (environmental) reputation, it is necessary to gather data and information.³ Without this fundamental knowledge, derived from both internal and external analyses, any attempts to influence reputation and to address the interests and expectations of its key stakeholders would be comparable to navigating blindly. To illustrate this point with a simple metaphor: it would be similar to buying shoes without knowing or considering the correct size – in most cases, they simply would not fit. When it comes to reputation, the case is much more complex.

Thus, the initial step in enhancing corporate (environmental) reputation is to comprehend one’s current position and the interests of stakeholders.¹⁴² In order to achieve this objective, there are a variety of methodologies that can be employed to analyse a company’s position.¹⁴⁴^,¹⁶¹ These include means like stakeholder analysis, SWOT analysis, benchmarking, trend analysis and reputation analysis, which again can be carried out by using a range of different measurement tools. Kalra (2024), a Forbes council member, proposes a multifaceted approach involving the use of diverse instruments to achieve a more nuanced and detailed depiction, enabling a company to make more informed and effective decisions.¹⁴⁴ The following is an illustrative three-step process.

Stakeholder analysis

As an initial step, it is important to identify the relevant stakeholder groups and understand their preferences prior to analysing their reputation of one’s company. It is imperative that companies identify the preferences, desires and the influence of their stakeholders.¹⁰^,¹²^,¹⁹ “Although a few years old, it’s still relevant”, with these words Young (2023) quotes the following older McKinsey report (2009) which asserts that organisations must “enhance their listening skills [in order] to reinvigorate their understanding of, and relationships with, critical stakeholders; and to go beyond traditional PR by activating a network of supporters”.¹⁹^,¹⁶¹ This underscores the imperative of understanding one’s stakeholders while also highlighting that their identification enables the development and implementation of more targeted and effective measures.

The objective of stakeholder analysis is to create a comprehensive overview of a company’s internal and external stakeholder groups, while also gaining an initial understanding of their characteristics and needs. This process involves the identification of factors such as the predominating age group, education level, interests and others Q. Given that “not all stakeholders [are] equally relevant for all companies”166 it is imperative to prioritise between relevant and less relevant parties. In this regard, Deloitte (n.d.) employs the approach of “[c]ontinuous engagement with [their] internal and external stakeholders [to gain an] understanding of who Deloitte impacts”.¹⁶² Based on these insights, decisions need to be made regarding who is most relevant and of the utmost importance for the company’s (financial) performance. In the majority of cases, customers, employees and the media represent the most significant groups of stakeholders with regard to reputation and therefore require enhanced and further attention.¹⁴²^,¹⁴⁴ Even if a company’s key stakeholders are in most cases quite similar, their attributes can differ significantly and thus require identification.

Reputation/ Data analysis

As asserted by McKinsey (2021), the previous step of identifying and selecting is foundational to the subsequent step of deeper understanding the specific stakeholders’ preferences, demands, needs and most significantly, their reputation of the company.¹⁶³ In order to gain an understanding and to gather information, Forbes (2024) proposes to address the relevant stakeholders directly, for example, “in the form of surveys, analysis of engagements on social media and word of mouth”.¹⁴⁴ Other possible steps are the monitoring of different communication channels or the evaluation of received feedback or rankings.¹⁶⁴

One of the simplest methods of ascertaining one’s reputational standing is the Net Promoter Score (NPS), which measures customer loyalty “by asking how likely customers are to recommend a product or service”.¹⁶⁵ The main advantage is the simplicity of assessment and evaluation, coupled with high participation rates due to the minimal time required. Nevertheless, NPS is merely a first indicator, as it lacks qualitative insight – knowing that someone wouldn’t recommend a company doesn’t provide clarity as to why or what improvements are needed. Although it serves as an effective initial indicator, it is imperative that it is supplemented by more profound analytical methodologies in order to identify areas for improvement.

These days, the internet provides vast quantities of data in a remarkably short period of time.³^,¹⁶⁶ It is often the case that stakeholders share their opinions unsolicited due to the low barrier to entry and rapid sharing capabilities of social media.³ The using of social media accounts, comment sections, or similar platforms enables companies to reach a large target audience and a quantity of public feedback with minimal effort. As previously indicated, these channels also pose certain risks, such as the potential for public backlashes, and other risks that must be recognised and effectively mitigated.¹⁶⁷ Nonetheless, if properly moderated and evaluated, this approach offers the advantage of real-time feedback and the opportunity to gain a diverse and representative view of one’s own reputation.¹⁴⁴^,¹⁶⁸ The sheer volume of data necessitates complex evaluation processes, due to the high quantity and the fact that it is often available in qualitative form.¹⁶⁹^,¹⁷⁰ The same challenge applies to other methods of data selection and analysis.

As a result, there is a need for more advanced analytical methods, which are frequently more expensive and more challenging to implement.¹⁷¹ On the positive side, the utilisation of artificial intelligence (AI) tools for the analysis of surveys, the monitoring of social media, and the evaluation of other feedback channels is becoming increasingly feasible and advantageous.³^,¹⁴⁴ The primary benefit of this technology (AI) is that it provides real-time data, reveals stakeholder sentiments, as well as simplifying and compressing complex information for easier interpretation.³ Forbes (2024) advocates the implementation of AI-tools, identifying it as a “strategy […] for [the] early detection and mitigation of potential reputation risks”.¹⁴⁴ However, when collecting and analysing data, organisations need to be cautious about the potential risks to privacy and ethical considerations, particularly when using AI technologies or other specific survey methods.¹⁶³

Prior to the emergence of AI, a range of concrete tools and models for measuring reputation had been developed. Among these, reputation platforms are particularly noteworthy. People of practice consider them highly valuable, as they provide robust and well-founded analysis, enabling companies to gain a deeper insight into their reputation by using a “combination of qualitative and quantitative data”.³^,¹⁶⁹ One of the most prominent platforms in this field is the RepTrak Company.¹⁷² Their “proprietary RepTrak model is the global standard for measuring and analysing the sentiment of the world using proven data science models and machine learning techniques”.¹⁷² It is employed by the company in order to analyse the reputations of the 100 most reputable organisations in the world.¹⁷²^,¹⁷³ As a consequence, RepTrak and other similar platforms have the capacity to facilitate a more profound comprehension of the values and interests that stakeholders consider important.¹⁷³ These reputation-related insights are frequently communicated independently of specific companies and can be applied across various industries, and so enable the identification of current trends, providing valuable cross-sectoral relevance. They assist companies to „identify growth opportunities, […] navigate potential challenges [, as well as] maintaining a stellar reputation”.³ This serves to mitigate the disadvantage of ranking exclusively the largest companies, as practitioners assert that smaller companies can also benefit from of these platforms in an adaptive manner.¹⁷³

SWOT analysis

In the final stage of the analysis phase, it is recommended to use a SWOT analysis to structure and interpret the insights gained. This facilitates the leveraging of the specific corporate position and the identification of specific approaches that have the potential to enhance reputation. Despite the absence of explicit mention of SWOT analysis in articles related to practice, its fundamental principles have been articulated. The recommendation of this approach is founded upon the observation that authors have, yet always only in part, highlighted the identification of “strength”³, “risk”¹⁴⁶^,¹⁵⁵ or “issue”¹⁰^,¹⁷⁴ (threats), “weakness”³, and “opportunities”³^,¹⁷⁴. When considered collectively, these elements form a SWOT analysis. Adopting this approach is conducive to the establishment of a comprehensive understanding of the company’s present situation and the most urgent CSR issues requiring immediate attention, as well as the identification of possible new chances and ideas.³^,¹⁰^,¹⁷⁴^,¹⁷⁵ As suggested by Deloitte, companies intending to enhance their corporate (environmental) reputation should prioritise the identification of their specific CSR risks and opportunities.¹⁴⁶

By systematically categorising the information gathered, companies can leverage their identified strengths and risks through appropriate management actions to maximise the effectiveness of their CSR initiatives.¹⁷⁴ Following the identification and categorisation of the four perspectives, targeted strategies can be developed with the aim of minimising weaknesses, building on strengths, leveraging opportunities and managing threats.

Strengths (intern)Being knownLoyal customersLoyal and qualified employeesStrong sustainability management…	Weaknesses (intern)Lack of transparencybad disclosure and poor communication¹⁴⁶Misconduct or irresponsible behaviour of employees¹⁴⁶Poor customer relations…
Opportunities (extern)Poor industry average in matters of sustainability and CSR  Opportunity for a company to differentiate itselfRegulations and voluntary guidelinesCooperating with NGOs.…	Threats (extern)Criticism from the media or pressNew regulatory requirementsBad ratings or reviews¹⁴⁶…

Table 2: Example for a SWOT-Analysis (own illustration)

3.3 Corporate (environmental) reputation strategy

For this phase the objective is to proactively manage the interplay between corporate reputation, corporate environmental reputation and sustainability. Therefore, corporate strategies and managerial approaches are presented in order to receive favourable outcomes while overcoming the aforementioned barriers, risks and tensions. Thereby, it is imperative to utilise the insights gathered to effectively align the company’s reputation management strategy.¹⁴¹ Based on the premise that every company is different, it is argued that there is no universal approach to integrating sustainability into business operations.¹⁷⁶ Instead, companies must develop an individual strategy that is aligned with their unique circumstances, as well as their desired images and reputation, whilst also meeting the expectations of their customers.⁶ Despite the apparent complexity and intricacy of the concept of reputation, an article published by Forbes (2023), says “your reputation is impacted by factors beyond your control, but [it is] not beyond your influence”.¹⁹ This may offer a sense of optimism and encouragement, because it suggests that reputation can be changed and even improved over time using the right approaches. After reviewing several reports and practical guides on the subject of facilitating CSR to enhance corporate (environmental) reputation, the most frequently recommended strategies were identified, synthesized, and structured into the following steps:

• Define measurable goals

O Create an internal foundation

O Communication and disclosure – (most critical step)

3.3.1 Define (measurable) goals

Following the execution of a corporate analysis, consultancies such as McKinsey recommend organisations to define clear goals for the desired reputational changes and outcomes they wish to accomplish.¹⁶³ Ideally, the goals are formulated in a measurable way, thereby enabling the monitoring and evaluation of the implemented changes and progress.¹⁴¹^,¹⁵³^,¹⁶³ The ability to monitor defined goals helps organisations in two ways. Firstly, it allows them to track their own progress effectively. Secondly, it enables them to demonstrate their achievements to the public with concrete evidence, a quality that is particular beneficial for the subsequent disclosure phase (i 4.3.3).

Since (potential) buyers represent one of the most important stakeholder groups for a company, it is recommended to formulate goals that are aligned with their expectations. This includes the undertaking of commitments on matters important to them, namely subjects concerning CSR, the integration of these practice into business operations, and their subsequent fulfilment.⁹ This commitment to meeting their expectations does not only contribute to enhance “reputation [, these actions] build the trust, loyalty, and growth that are key to long-term success”.¹⁰ The potential to build trust, particularly by demonstrating (measurable) CSR performance, also helps to mitigate risks, to undermine potential conflicts, and to reduce reputational damage.¹⁷⁷ The more effectively a company meets CSR expectations and the more precisely the related goals are formulated, the higher the likelihood of establishing a beneficial and favourable reputation.⁹^,¹⁰ As a consequence, it is recommended to formulate (measurable) objectives, work on them and communicate both the objectives and the results to external stakeholders.

To illustrate this recommendation in the context of sustainability, a formulated goal could take the form of a company setting a target to reduce its carbon footprint.¹⁵³ This objective is consistent with the stakeholders’ demand for greater environmental responsibility. A key benefit of the proposed goal is its quantifiable nature, which facilitates the comparison of results, namely the desired reduction in carbon footprint. Research indicates that carbon footprint assessment is an effective initial strategy in the context of corporate sustainability, as it “provides an overall view of your emissions, enabling you to implement actions to reduce them”.¹⁷⁸ Other illustrative examples could be performing “a materiality assessment or completing [CSR] data tracking using [common] standards like the TCFD (Task Force on Climate-related Financial Disclosure) reporting”.¹⁵³ This approach facilitates improved transparency, better risk management and a deeper understanding of the impact being made, while identifying areas for potential improvement.¹²^,¹⁵³ A further optionis the commitment to donate a specified amount, such as 1% of sales, to environmental causes. This approach has been adopted by companies such as Patagonia.¹⁷⁹ A significant benefit of this approach is its simplicity of implementation, with results being observed immediately and, most importantly, it does not require any modifications to the organisation’s existing business processes. The absence of necessary changes is a considerable advantage, as these changes often require time, substantial pre-investment, and a lot of expertise. However, Ross (Forbes, 2024) asserts that while this “project […] works for Patagonia, [it] may not work for you”184.¹⁸⁰ This further illustrates the fact that each company must develop its own strategy, customised in accordance with the desired impact, the intended reputation, and the company’s identity as well as their specific stakeholders.

3.3.2 Create an internal foundation

In order to achieve the formulated objectives and enhance the reputation, it is imperative to start by incorporating the internal stakeholders. Beginning at the strategic level of a company, leaders such as a CEO need to understand and embody the defined goals and reputation strategy. Understanding the strategy and goals enables them to articulate and communicate these priorities to the workforce credibly, ensuring their alignment, engagement, and effective implementation.¹⁴¹^,¹⁸¹ This responsibility identifies leadership as an important instrument for influencing the breadth of employees on reputation. Younger (Forbes, 2023) stated, “[i]f the CEO doesn’t own the company’s reputation strategy, [the company doesn’t] have a reputation strategy”.¹⁹ This can be attributed to the fact that the manager would be unable to motivate the employees with regard to the defined goals, and would not be able to communicate the intended approaches in a reliable and authentic way. A leader needs to set “a clear statement of the reputation a company aspires to, [otherwise] employees are left to improvise”20 in defining and representing it. As a consequence, the intended reputation might not be achieved.

With regard to the operational business, the breadth of employees is identified as an important stakeholder group relevant to the development of a corporate reputation.¹⁴⁴^,¹⁴⁶ RepTrak (2024) even defines them as a company’s “second most important stakeholder group, behind customers, whose influence on corporate reputation cannot be overstated”.¹⁰ It is important that the employees of the company can identify with the established reputation strategy and feel responsible for it.¹⁹ To achieve this, the strategy must be embedded in the corporate identity, which is embodied by the employees, who act as advocates for the company.¹⁰ As stated in the literature review, this identity is perceived externally, shaping individual images that collectively contribute to the overall reputation. In order to leverage the workforce as valuable advocates for the (environmental) reputation, it is essential to ensure their motivation and connectedness to the company, their culture and their values.¹⁰ In addition to the establishment of long-term and loyal relationships with suitable employees, it is also essential for the stability of reputation to attract further qualified employees and to reduce staff turnover. In order to address this necessity, the management must cultivate the aforementioned attributes and connectedness through means such as salary, general work conditions, or even by owning a favourable reputation.¹⁸² An additional and currently effective approach, which can significantly enhance employee loyalty, attraction and identification with the company is, again, a strong commitment to sustainability. This commitment has been demonstrated to attract qualified employees and to reduce staff turnover.¹⁸³

Niels B. Christiansen, CEO of Lego, which RepTrak ranked as the most reputable company in 2023 and 2024188, found words of gratitude and pride, referring in particular to the employees. By saying that their reputable position “is [a] testament to the dedication of [their] colleagues who all play a part in building a sustainable future and a better world […]”, he highlights the importance of the workforce in establishing and improving corporate (environmental) reputation.¹⁸⁴ Stating “[the] commitment of our colleagues to help keep our promises during a year shaped by significant challenges”,  Christiansen further underlines his recognition of the workforce as an important lever in managing reputation.¹⁸⁵

3.3.3 External communication and disclosure

After these two steps, an additional discipline that must be carefully considered and managed is the communication and disclosure of practices and defined goals related to CSR to the external world. External communication and disclosure has been identified as the riskiest step when it comes reputation, because communication and disclosure can backfire and exert the opposite effect to that intended.¹⁵³^,¹⁸⁶ This risk is particularly high if communication and disclosure are handled in a disadvantageous, restrictive or inaccurate manner.¹⁰⁸^,¹⁴⁴ For instance, if the message is perceived as insincere or revealed to be inaccurate, it can result in a loss of stakeholder confidence, which may ultimately lead to sanctions and a damaged reputation.¹⁵² Not disclosing information about ones sustainability performance is not a viable option, since this would prevent companies benefiting from the positive impact their sustainable efforts and financial investments could have on their reputation.¹²^,¹⁴²^,¹⁴⁶ Despite the potential for disclosure to negate the altruism that underpins such actions, Simpson (Forbes, 2024) offers a clear direction by asserting the imperative to “[p]rioriti[s]e transparency and communication: In times of low trust, silence is not an option”.¹⁴¹ A number of authors are urging companies not only to adopt sustainable and CSR practices, but also to disclose them.¹² This assertion is further reinforced by the observation that companies with a favourable environmental reputation “are those that have recognised the correlation between sustainability and their business activities and goals”.¹⁵³ Taken together, these findings indicate that corporate sustainability efforts and responsibility, combined with the right disclosure, currently represent the most effective strategy for enhancing corporate (environmental) reputation. With regard to communication, a distinction can be made between the disclosure of defined objectives prior to their implementation and the communication of actual business practices and results.

Disclosure of pre-defined goals – By clearly communicating these goals and the timeframe for achieving them, organisations can reap a number of benefits. These companies have already recognised the value of this approach:

Apple: “[O]ur ambitious goal [is] to make every product carbon neutral by 2030”192

Nestle: “We aim that above 95% of our plastic packaging will be designed for recycling by 2025”193

Siemens: By “2030, [we] intend […] to achieve a 90 percent reduction in CO₂ emissions” 194

By communicating such internally developed goals, companies enable stakeholders to monitor their promises and progresses towards the defined objectives.¹⁴¹^,¹⁵³^,¹⁶³ This has the advantage of showing externally “where you are on the journey and what the next stages are in your plan to become more eco-friendly”.¹⁵³ Additionally, it has been demonstrated that this constitutes an effective strategy for the purpose of strengthening relations and connectedness with external stakeholders, as well as enhancing transparency.¹² In addition, it facilitates stakeholder engagement and fosters a sense of integration, involvement and visibility among them.¹² A further advantageous aspect of communicating one’s set goals externally is that this act of communication represents the most immediate response to present social demands. To illustrate, for example, reducing a company’s carbon footprint takes a considerable amount of time, whereas communicating that the company’s goal is to reduce it by a certain amount within a certain timeframe can be accomplished in significantly shorter time and demonstrates the company’s awareness and responsibility for sustainability issues, while also conveying that they actively engage to improve within this field. Communicating defined goals can be seen as a first step towards environmental responsibility, as, “[e]ven if you are just starting with sustainability, customers will appreciate it”.¹⁵³ Consequently, the disclosure of defined goals can facilitate as a strategic approach, enabling a company to quickly respond to its stakeholders and to demonstrate early engagement and commitment to CSR and sustainability.¹² In order to ensure that these communicated goals have a positive impact, it is crucial that a company either already possesses a favourable reputation that should be further enhanced or maintained, or that the company has demonstrated reliable and trustworthy communication in the past.¹⁰ In the absence of either of these factors, external stakeholders may be sceptical about a company disclosing its goals.¹⁸⁷

In this case, it is essential to first cultivate a positive reputation through transparent disclosure of actual results and practices in order to establish the necessary qualities such as reliability and accountability.¹⁰^,¹² Irrespective of the company’s reputation, the disclosure of actual corporate performance should be a standard practice for all companies, whereas disclosure of goals can be regarded as a voluntary approach.

Disclosure of actual corporate performance and results – This aspect of disclosure involves communicating actual achieved results and is a fundamental part of “[t]ell[ing] your company’s story consistently”.¹⁸⁸ First of all, it is a crucial complement if a company has announced its defined goals, reinforcing the principle of “practice what you preach”.¹⁸⁹ Stakeholders do not simply seek promises; in addition, they require reliable information that reflects a company’s commitment to CSR and shows actual results.¹⁸⁰^,¹⁹⁰ Secondly, regardless of whether the targets have been communicated in advance, companies and their reputation benefit from demonstrating their achievements and practices with regard to CSR concerns.¹⁴^,¹⁶^,¹⁹ The appropriate disclosure of actual sustainable results enables a company to distinguish itself from competitors by clearly communicating its commitment to responsible behaviour.¹⁸⁰ By reflecting the company’s actual behaviour, it serves as a critical benchmark of its genuine commitment to sustainability, thus assuming greater significance than goal disclosure. Consequently, demonstrating qualitative disclosure over time has the potential to enhance transparency and cultivate trustworthiness, ultimately contributing to the establishment of a favourable (environmental) reputation.¹⁵³

In line with the principles of signalling theory, it is imperative to send the right signals. Effective disclosure must be designed to appeal to the defined target group and address topics that are relevant to them in the correct manner.¹³⁹ In essence, all external communications should aim to represent attributes such as reliability, trustworthiness, responsibility, honesty and benevolence. These attributes ultimately lead to a favourable perception of the company. In order to establish those attributes, a company may use a number of different approaches.

In the first place, a company should genuinely strive to act environmentally responsible, ideally driven by intrinsic motivation. From a moral and ethical perspective, this should be self-evident, yet practical evidence demonstrates that companies repeatedly attempt to get away with greenwashing or greenlighting (highlighting small sustainable achievements to distract from larger harmful practices). Both have been exposed as practices that often backfire and, when exposed publicly, result in huge reputational damage.¹⁵³ One of the best known examples of this is the VW emissions scandal. While other automotive companies are featured in the 2024 RepTrak report (Mercedes-Benz ranked 2nd, Rolls-Royce 7th, Toyota 42nd, and Volvo 51st), Volkswagen did not make it into the top 100.¹⁹¹ Although a number of factors contributed to this result, the company still remains associated with the emissions scandal, emphasising the enduring impact on Volkswagen’s reputation.

To avoid such developments, companies need to disclose CSR information in a transparent, truthful and comprehensive manner.¹²^,¹⁷⁴ The quality of transparency enhances the credibility of the information disclosed, ultimately strengthening the company’s reputation and trustworthiness.¹⁰^,¹²^,¹⁵³^,¹⁸⁸ Comprehensive disclosure means showing the good as well as the bad in terms of sustainability. Research demonstrates that this practice helps to prevent greenlighting and improves transparency as well as reputation.²³ For practical understanding, this point can be illustrated with a best practice example of a sustainability setback at Lego and their excellent handling of the situation. Realising that Lego would not be able to meet its 2030 sustainability target, the company did not remain silent. Instead, they proactively communicated this setback, providing a detailed explanation of the failure.¹¹ Being honest served Lego to reinforce stakeholder trust, to prevent reputational damage and to underscore the importance of transparency.¹¹ Transparent communication, in the context of failure, can be regarded as an indication of the intrinsic motivation for sustainable practices.¹⁰ This is a significant finding, given that companies tend to refrain from boasting about failure. In addition, Legos positive example indicates that actions that demonstrate a company’s proactive commitment and caring are what ultimately influences a positive reputation, credibility, trustworthiness, and legitimacy, while reactive engagement is perceived as intrinsic and financially motivated.¹² Forbes (2024) advises companies to “[e]nsure that any actions […] take[n] are perceived as genuine efforts to address stakeholder concerns, rather than self-serving maneuvers”.¹⁴¹ Lego’s open and honest policy lead to a consistently and strong reputation as indicated by the fact as a repeated 1stplace at RepTraks ranking.¹⁷⁷^,¹⁹¹ Showing that you care to communicate your journey transparently is more important than perfection. In the long term, this approach has a more positive effect on corporate (environmental) reputation than resorting to short-term strategies such as greenwashing or greenlighting.

Instruments to assure credibility – In the more desired case of a fulfilled goal, companies are also recommended to disclose and communicate relevant information. For positive results on CSR performance, companies should seek third-party verification and report their results using common standards to increase their quality and impact.¹⁷⁴^,¹⁹² The disclosure of some information and reports is already obligatory due to regulatory requirements.¹⁹⁰ Any additional disclosures undertaken by the company could serve to increase transparency and enhance the attributes of credibility, trustworthiness, and legitimacy. Using reporting standards, a company can ensure that the information it discloses is presented clearly and supported by appropriate evidence to demonstrate its validity, reliability, and accuracy.¹⁰^,¹² According to PwC (n.d.), the most commonly used standards are based on the CSRD (Corporate Sustainability Reporting Directive) policy.¹⁹³ Another source recommends reporting that is “aligned with standards such as GRI (Global Reporting Initiative) or SASB (Sustainability Accounting Standards Board)”.¹⁷⁴ A noticeable benefit of all reporting standards is their structured nature, which facilitates standardisation and so provides a framework for the comparability of companies.¹⁹⁴ It enables companies to demonstrate their progress by employing “specific metrics on energy use, carbon emissions, community support and board diversity”.¹⁷⁴ Strong performance in these areas can assist companies to gain a competitive advantage over their rivals, while providing stakeholders with a comprehensive assessment of their standing.² Reporting standards have the disadvantage of high complexity due to the need to measure and collect a large volume of diverse data.¹⁹³ Consequently, the disclosure of information, for instance in the form of a sustainability report, is a costly and time-consuming process that demands specific employee knowledge and often powerful IT systems.¹⁹³

Third-party verification has been shown to improve the quality of corporate disclosure and provides assurance. It can take the form of either requested or unsolicited media confirmation of reported information.¹^,¹⁹⁰ One form of third party verification, similar to using reporting standards, with adaptive advantages and disadvantages, is the validation of business operations through certification. Thereby a third party provides companies with a certificate, such as “B Corporation certification [for] overall environmental and social performance [or] Fair Trade certification [which] indicates producer support and fair pay”.¹⁷⁴ Another area where third party assurance is becoming increasingly common is in the context of reports. PwC (2024) states that “the scrutiny of what organisations report and the commitments they make has never been greater”.¹⁹⁵ So companies are actively seeking third-party verification to mitigate this risk. In addition to that, a growing number of companies are having their reports externally and independently verified.¹⁹⁰ The possession of both certificates and verified reports has been demonstrated to enhance the veracity of disclosed information, increase externally perceived transparency, and create value for the company.¹⁷⁴^,¹⁹⁵

Reaching a wider audience After publishing information about a company’s sustainable performance, the next step is often to find the right words and the right channel to reach the wide range of external stakeholders, especially the breadth of potential buyers. This is a crucial step, as disclosure, for example in the form of corporate sustainability reports, is often voluminous, detailed and so requires specific knowledge. For illustration purpose: Apple’s Environmental Progress Report (2023) extends to 113 pages, Nestlé’s Sustainability Report (2023) has 89 pages, and one of Siemens reports (2023) even comprises 158 pages.¹⁹⁶^,¹⁹⁷^,¹⁹⁸ In addition, most large companies produce not only one, but a number of reports, each with a different focus and content, and sometimes for different audiences, such as customers, governments or investors. The result is an enormous amount of data and information, much of which isn’t necessary for everyone. In fact, the majority of potential buyers are unlikely to read such a document, and many of them may struggle to understand it. This should lead companies to find the right words to simplify their reports as well as to find the appropriate channel to publish the compressed information to ensure that all stakeholders can understand the results. In practice, this means explaining and contextualising sustainability reports for the specific, identified target groupe.¹⁵³ Deloitte, for instance, explain that the manner in which they report and disclose is designed for their most important stakeholders.¹⁶² In the majority of cases, it is therefore advisable to use an understandable, clear and universal language. According to Forbes, the most effective media channels at present are the corporate website and social media platforms.¹⁸⁰ In addition, one of their studies revealed that more than half of consumers prefer to receive sustainability information through social media channels.¹⁸⁰ Consequently, companies are encouraged to work on their social media presence, with the ultimate aim of influencing corporate reputation. Nonetheless, despite the known risks of the media, it seem to be important, to strategically use it as a tool to reach a wider audience. This underlines the importance of seeing media not just as a challenge but as a critical component of reputation management.

3.3.4 Integrating a reputation management

Once this process has been completed, it is important to recognise that reputation management is an ongoing effort, rather than a one-time undertaking. As a result, it is essential to make these steps of corporate analysis, followed by the various steps of corporate (environmental) reputation strategy, an ongoing, never-ending process. This assertion is founded upon the premise that the maintenance of a reputation is an ongoing process which is not static and is influenced by several risks, thus requires consistent effort and engagement.⁵⁵^,¹⁵⁵

In light of the findings and the acknowledgement of reputation as one of the most valuable assets a company can possess, practical literature recommends the establishment of a reputation management system.¹^,³^,¹⁵⁵^,¹⁶⁴ One of their primary responsibilities should be the real time monitoring of data and stakeholders’ sentiment to identify shifts in preferences, perceptions of the company, and emerging risks ( 4.2).³^,¹⁵⁵ This can take the form of social media monitoring, where negative feedback “serv[es] as an early warning system that enables [quick] responses [whereas] positive feedback can be leveraged in promotional strategies”.³ The ability to detect changes – especially risks – at an early stage enables a company to quickly react to changing demands, thereby increasing business resilience.¹⁹⁹ By identifying changes, organisations can adjust their strategic objectives accordingly (o 4.3.1) or, in the case of emerging risks, gain valuable time to mitigate potential impacts.

Another significant function of reputation management is the oversight and direction of the entirety of corporate communication (e 4.3.3). This includes taking the necessary steps to protect the company’s (environmental) reputation and to externally mitigate potential issues or even scandals. It involves aligning communication with the measures mentioned in point 4.3.3 above, ensuring that it meets stakeholder expectations and sustainability requirements through the implementation of appropriate disclosure practices. Furthermore, reputation management is responsible for the continuous development of the CSR programme based on the insights and information gathered derived from real time data.¹⁹² Lastly, a key responsibility is to establish the communication strategy in a manner that fosters ongoing engagement with stakeholders.¹ In the current business environment, it is recommended that businesses employ social media as a tool to enhance their connections with customers and demonstrate corporate commitment to sustainability.¹⁴⁴ This can be achieved by engaging with potential buyers through the comments section or by sharing posts that align with the identified interests of the target group.¹⁴²^,¹⁴⁴

*Figure 4: Reputation and Environmental Reputation Management Cycle (own illustration)*

In summary, companies should engage in a continuous process of corporate analysis through ongoing monitoring, followed by the establishment of clear objectives and the active management of their (environmental) reputation through strategic communication. As a fundamental aspect, it is crucial to maintain a strong and stable internal foundation as the driving force of the entire process (s 4.3.2)

4 Conclusion

This bachelor’s thesis explored the relationship between reputation and sustainability in order to gain a deeper understanding of the topic and derive practical implications. Despite the absence of a universally accepted definition of reputation, an extensive body of literature has been identified, revealing numerous similarities, which formed the basis for the further analysis. Furthermore, a review of both practical and academic literature has identified sustainability as an increasingly influential driver, impacting corporate reputation. In this context, a specific form of reputation, namely the environmental reputation, can emerge either in a positive or negative way. The literature review revealed that an environmental reputation is built on a specific attribute, namely a company’s commitment and responsibility for sustainability, perceived by external stakeholders and represents a part of the general corporate reputation.¹⁸ In addition, it is influenced “by both behaviour and non-behaviour”, highlighting the necessity for companies to respond to the stakeholder demand for sustainability.¹⁷ As a result, not taking action on CSR issues is not a viable option for companies seeking to build a favourable reputation. Contrary to the finding of sustainability as an influence, both reputation and environmental reputation have been shown to influence corporate sustainability disclosure, highlighting their interdependency and the importance of maintaining reputations in a favourable manner.

In consideration of the proposed definition of reputation, which suggests that reputation is based on all available information about a company and is shaped depending on the way in which external stakeholders evaluate it, the practical implementation focused on identifying the most effective communication strategies. The findings suggest that a company’s reputation benefits most from a comprehensive, honest and transparent sustainability disclosure strategy, illustrated by the positive example of Lego.¹⁰^,¹²^,¹⁴¹ It was identified that in order to enhance reputation, companies must ensure to disclose sustainability efforts at all. Failure to do so can result in potential buyers remaining unaware of the responsibility that a company is trying to take, resulting in no reputational benefit and, at worst, negative consequences. Consequently, it is imperative for companies to establish a clear communication strategy to effectively communicate CSR goals, practices, and results, ensuring to reach the right stakeholders, with social media currently playing a crucial role in this process.¹² The development and maintenance of a robust communication strategy is important for companies, as it enables them to proactively influence the external perception of their sustainability efforts. Consequently, such strategies provide companies with the opportunity to mitigate potential risks and positively influence corporate (environmental) reputation.

Conversely, the information published by third party media lies beyond a company’s control, making it a significant reputational risk that needs to be mitigated. It has been found that a transparent and comprehensive corporate communications strategy is the most effective way to manage this risk, as it minimises the chances of third party exposing a company in a negative light. On the other hand, external media can also represent a significant opportunity when leveraged correctly, as it can enhance credibility, provide assurance and increase visibility.

In summary, as highlighted in the literature review, reputation is a valuable intangible asset representing a significant part of a corporate value.² Numerous advantageous outcomes have been identified, including enhanced financial performance, competitive advantage and long-term survival.³⁷^,¹⁰⁰ Reputation can be seen as a strategic tool and a form of corporate governance, not only to protect reputation and minimise risk, but also to better integrate new requirements such as stakeholder sustainability demands.¹⁹⁰

Various authors in different fields agree that thorough reputation management is an important investment in a company’s future and survival, and plays a crucial role in building and maintaining a positive environmental reputation.¹⁴⁵ To rebuild on the quote of Warren Buffett (1995) “”it takes twenty years to build a reputation and five minutes to ruin it”, companies must constantly adapt to shifting trends and demands, identify risks as they emerge, and take all necessary steps to protect their reputations.⁴⁷ The adoption of sustainable practices can be regarded as a strategic decision that demonstrates a commitment to environmental responsibility and fosters relationships with stakeholders. It has been demonstrated that, especially in times of crisis, such as the present climate crisis, demonstrating responsibility can be advantageous and positively impact corporate reputation.

Lastly, after continuously managing one’s reputation – identifying risks, setting measurable goals, demonstrating commitment and maintaining dialogue with key stakeholders -companies can use reputation rankings or NPS to assess their progress.¹ Identifying a strong and positive reputation is an indicator that the efforts made are having a positive effect and that the company is on the right track.

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