Linda Locke Principal

Traceability: The Key to Food Manufacturing Reputation

18 Sept 2013

Our ultimate business goal is to be trusted

Risk is predictable, if…. •  You know your stakeholders •  You understand what drives their

perceptions •  You are aware of their values •  You listen to them

Act With

integrity

A strong reputation can enable a company to succeed

v

Provided by Trust Across America

Based on: Financial stability Accounting conservatism Corporate integrity Transparency Sustainability

Reputation advantage

Reputare Consulting LLC Chart: Yahoo! Finance

Apple Stock Price vs. DJIA: 2007-2012

Reputation penalty

BP Stock Price vs. DJIA: 2007-2012

Chart: Yahoo! Finance

Reputation

•  Customers •  Suppliers •  Investors •  Advocacy groups •  Regulators •  Policymakers •  General public

Reputation = judgments and perceptions of stakeholders

Why reputation matters

•  The intangibles can comprise more than 60% of a company’s value

•  Public perception impacts profitability, book value, sales •  Strong reputation can result in strong stock price growth •  Investors use reputation in purchase decisions •  Companies with a strong reputation can:

•  Charge premium prices •  Hire the best candidates •  Attract the best business partners

•  A strong reputation can be a competitive differentiator

For the food industry: operations = reputation

•  Industry focuses on both quantity and quality –  Consumers want food that is safe, fresh, nutritious

•  Supply chain integrity is not just about operations, but about reputation –  Consumers reject products seen as harming the environment,

workers, and communities

•  Companies that experience supply chain disruptions saw shareholder value drop; recovery can be lengthy

•  Traceability is key; Consumers want to know the origin of food products, including location and life history

•  Rapid response in a crisis is essential to protect reputation

The dimensions of reputation

How do you

make me feel?

Adapted from Reputation Institute

Supply chain integrity delivers reputation risk resiliency

•  Two sides of risk resiliency: ­  Preventing conditions of risk

­  Managing consequences of events

Source – Carnegie Mellon Software Engineering Institute

Risk = Hazard + Outrage

The causes of outrage

“Do I put up with this?”

Awareness Choice

Detectability

Pressure Groups Nature

Scientific View

Dread Media

Equity

Have I noticed pressure groups focusing on it?

Was there a problem? Did you let me know about it?

Did I choose to take the risk or was it imposed on me?

Is the risk natural or man-made?

Do I fear this risk?

Can I touch/see it? Is it quantifiable/ Containable?

What does the risk do for me? Is anyone bearing the risk who doesn’t benefit from it?

Do experts understand it? Do they agree/disagree about it?

Have I read about it/seen it in the news?

Three phases of outrage

Sloth

Greed

Pride

Wrath

Envy

Sloth

Lust

Young

Elderly

Human error

Media-attractive

Abuse of Power

Lack of Responsiveness

Impoverished

Many organizations are not prepared to manage reputation risk

Reputation literacy not on risk agenda

Risk literacy not on reputation agenda

Reputation competency requires the right tools and perspective

Data-driven insight

24 x 7 monitoring

Outside-in perspective

Willingness to engage, act

Enterprise-wide understanding

Protecting revenue

and reputation

Monitor how you are seen

Source: evolve24

Consider the role of emotion in stakeholder reaction

Source: evolve24

Know how you compare to your competitors

Source: evolve24

Traceability and transparency can help sustain the business

•  Traceability enables recalls to be targeted to the origin instead of the entire industry… –  Think spinach, peanuts and pistachios

•  Full backward and forward traceability provides authenticity to claims of: –  sustainability, –  halal, kosher, allergens –  safety –  organic origin –  Fair Trade

Supply chain integrity requires traceability

•  Consumers expect manufacturers to be knowledgeable and forthcoming about the origin of food products, including location and life history

•  In a crisis many stakeholders will hold the manufacturer, distributor, and grocer responsible for the entire supply chain

•  A robust traceability program can enable rapid identification and containment of the issue –  Protects the industry –  Calms fears of consumers –  Mitigates amplification by the media

Linda Locke Principal Linda.Locke@ReputareConsulting.com Twitter: Reputationista 314-435-3428

Thank you. Corporate reputation consulting Reputation Strategy Reputation Risk Identification Measurement Internal Alignment External Engagement Crisis Management and Communications Strategic, Executive Communications