Hill+Knowlton Strategies

Brandz today launched their annual Brandz 100 list of the top global brands by brand value. Unsurprisingly Apple topped the table this year, but there were some interesting changes further down the table. This was especially true for the energy industry where BP’s brand value suffered significantly as a result of the GOM spill and dropped below Brazil’s energy giant, Petrobras (who in the interests of transparency, we should add are a client).

The full report has been published and although the energy & industrials team at Hill & Knowlton UK didn’t make the final cut in this year’s commentary it’s still an interesting read. The FT has committed a special report to it as well and more articles are to follow the openers in today’s FT.

Petrobras’ phenomenal rise in brand value has been replicated by other emerging market brands as the solutions to the energy challenges the world faces are being met by new emerging market giants. It will be interesting to see also how the majors respond and whether ExxonMobil and Shell can continue to capitalise as BP fights back.

We’re told by the authors that Petrobras’ increase is in part because they have strong momentum, they have very positive investor sentiment (following their record-breaking IPO) and the country brand of Brazil is strong (especially with the forthcoming World Cup and Olympics). It will also be interesting to see how this sentiment weathers inflation and the pressures of growth, but as pressures go it’s not a bad one to have to tackle.

H&K were fortunate enough to have the opportunity to host a very interesting event by the Confederation of British Industry (CBI)yesterday morning. The event was not only one of the first outings of new Director General, John Cridland, but also featured Secretary of State at the Department for Energy and Climate Change, Chris Huhne MP in one of his first outings since the launch earlier this week of his government’s Carbon Plan. The CBI used this event to share some insights about consumer attitudes toward ‘low carbon economy’ products and initiatives and from a communications perspective the conclusions gave some food for thought. First though some really useful stats from the CBI report entitled ‘Making the Consumer Case for Low Carbon’:

•  Three quarters of the UK’s greenhouse gas emissions are either directly or indirectly attributable to consumer actions (Sustainable Consumption Institute)
• Seven out of ten people feel a sense of responsibility to do something about climate change (Ipsos MORI, March 2010)
• 39% of respondents to Ipsos MORI said that ‘clear evidence of reduced running costs’ would change their purchasing attitudes toward more energy efficient products
• 83% of respondents either strong agreed or tended to agree with the statement that ‘companies have a responsibility to give consumers as much information as they can about the energy efficiency of the products they sell’.
• When asked about which sources of information they trust to provide reliable information about energy efficiency or climate change, 40% said Which? Magazine, 30% Government or Government agencies, 28% scientists, 16% action groups like Greenpeace, 16% manufacturers, 12% trade associations. 9% newspapers, 9% TV and 9% retailers/shops. There were striking differences between different age groups too.

So what was so interesting from a communications perspective? Well one of the overriding messages that Mr Cridland was sharing with the audience and his members was that they had a challenge to communicate better with consumers if they were to convince them that low carbon products were worth their consideration.

When the leadership of an organisation like the CBI starts to make statements like this it can feel like manna from heaven for a communications specialist, especially when they conclude by saying that this is about more than spin and offering worthy but premium priced alternatives, it is about creating compelling price points and standards that consumers can trust. I couldn’t agree more and so look forward to working with our clients to define compelling low-carbon propositions for consumers. With the launch of the government’s Carbon Plan, policy appears to at last be providing a relatively clear path for more investment by business in the low carbon economy. Let’s hope the joined up approach continues.

This week I attended a seminar regarding the Bribery Act, which featured a panel including Richard Alderman of the Serious Fraud Office, some lawyers and a corporate investigator. The room was filled with other lawyers and quite a few large corporates keen to know what the impact of this gold-plated British version of the  Foreign Corrupt Practice Act might be for their business and their clients. 

There has been a lot of speculation in the media about the impact of this legislation and perhaps some scaremongering, but for organisations in the oil, gas and mining sectors the risks are clear. These are industries that as a matter of routine work in far flung parts of the world that have very different standards of governance and transparency to what they are accustomed to in say the UK. Of course the act will only apply to organisations with interests in the UK, but given that London’s capital markets have been popular for a long time with natural resource companies, we can expect this to impact a significant portion of the industry.

There is an absolute defence available for firms that can demonstrate ‘adequate procedures’ and although what constitutes adequate has not yet been defined by the Ministry of Justice or the Serious Fraud Office, I suspect that many larger firms in the energy and mining sector will already have the ‘”gold standard” of procedures that Mr Alderman referenced frequently during the discussion. 

That said there are other reasons that the impact of the Bribery Act should be of concern to businesses. Perhaps most significantly because we are currently experiencing a boom in merger and acquisition activity. It is important to note that the act will not apply retrospectively, but the glut of deals that we have seen so far since the start of the year are unlikely to end anytime soon and one wonders if the organisations buying assets in the UK fully comprehend the liabilities for their other operations that they are acquiring with the asset as a result of the Act.

The other aspect worth bearing in mind for businesses as a whole, but the natural resource industries especially, is the use of agents and the extent of liability for joint venture operations. Joint ventures are a regular feature of the natural resource landscape and very often firms based in the UK will use them as a means to enter a market where foreign stakes are limited. I’m not sure what the extent of the risk of liability is for these corporate structures, but am going to ask the question at the next seminar I attend on this subject.

Of course it is also worth noting that the SFO has been handed a paltry sum of only £2m for enforcement and the likely cost of a trial, if it comes to it, will put the prosecution rate fairly low, but as any organisation prosecuted under FCPA will tell you, reputations are expensive things to lose and the SFO is not shy of pursuing trophy prosecutions, especially when Mr Alderman moves on and his successor is looking to make a name for him/herself.

This will be an interesting one to watch as the guidance is published and the Act comes into force.

I was reading an article yesterday from the FT in which the EEF Manufacturers Federation and RBS suggested that the future fortunes of the British economy rested in the hands of large manufacturers.

Unfortunately as the article went on to explain the examples of great British industry that are still British owned are few and far between and this is important as “the largest 1 per cent of manufacturers account for half of employment and two-thirds of turnover [of all manufacturers]“. Of course there are still a few bastions of British manufacturing such as good old Rolls Royce, BAE Systems etc and smaller, but well-known manufacturers like Dyson, but beyond those few examples most would find it difficult to identify other large British manufacturers. 

Of course many are now owned by overseas investors, which caused me to reflect and ask ‘does ownership matter?’ Well perhaps it does and perhaps this is one, admittedly small, way in which the value of the British brand of manufacturing has been eroded?

The British Kite mark used to be a symbol of high quality manufactured goods – the standard to which all aspired. Today, however, British manufactured goods do not hold the same cache as they once used to, with increased competition from overseas.

Recent research by H&K and PSB suggested that the country of origin of investors of sovereign wealth funds has a large bearing on the perceptions of their investment targets and regulatory audiences. I would suggest that the same holds true when it comes to the origins of manufactured goods. This is completely anecdotal and stereotypical, but I do believe that many Germany manufacturers still benefit from the halo effect of the German stereotype for efficiency and high precision engineering. Similarly the Japanese record in total quality management and their excellent electronic goods have withstood the recent reputational barrage following the Toyota recall issue.

So what do British manufactured goods stand for? I’m not sure I know the answer and would suggest that in part the UK’s rather liberal attitude to foreign ownership of businesses has to some extent dilluted any sense of common purpose. Perhaps therefore the profile of British manufacturing as a whole needs to be managed in a more planned and deliberate manner as a means to develop a saleable brand in export markets. I know that the UKTI officials are working hard to create these markets, I wonder though if they are all signing from the same song sheet?

The past week has seen two seemingly unconnected events spring to the headlines. On Monday, 25 people were killed in a West Virgina mine exposion (US). Just two days earlier, a Chinese coal carrier ran aground on the Great Barrier Reef. It’s still sitting there and so far has lost about three tonnes of oil into the sea.

I say “seemingly unconnected” because geographically the two events are about as far apart as you get. The respective industries are also unrelated.

However, according to the New York Times, the owner of the West Virginian mine escaped prosecution in 2007 despite a warning that it was showing a “potential pattern of violations”.

Similarly, the Courier Mail reports that as many as 10 ships a month use a network of small channels through the Great Barrier Reef as shortcuts to open ocean, in a bid to cut transit times and increase the profitability of voyages originating from mineral-rich Queensland.

However the same story also notes that the ship’s owner, the China Ocean Shipping (Group) Company or COSCO, has a recent history of maritime accidents.

There are two points to take out of these examples.

Firstly, that regulation exists for a reason. On the whole I think governments tend to want to minimise their footprint on a given industry because it costs a lot of money to play kindergarten cop – taxpayer money that could be spent on other things, like hospitals, schools or roads. However if industries want to play in the “self-regulated” sandbox, it’s beholden on those industries and their constituent companies to establish a strong framework within which to operate.

Secondly, the role of crisis communication has to shoulder a degree of blame in instances like these, whether that’s through public affairs channels or the daily news media. I see crisis communication as a tool that makes it possible for an organisation in a crisis to get back to doing business as usual as quickly as possible. I don’t believe there’s anything wrong with that, because intrinsically it means fixing the crisis itself.

Problems come up when people forget what they should be doing. By definition, public relations is a management function that’s concerned with building and maintaining mutually beneficial relationships between an organisation and its stakeholders (“the public”). At Hill & Knowlton we refer to it as Shaping Conversations, because as an external advisor that’s what we can do.

It’s not about press releases, parties and supporting the latest ad campaign. It is about maintaining an organisation’s right to operate in the eyes of the public. Too often, good crisis management helps organisations resolve serious problems, and then once the press office phones stop ringing everyone moves on.

That’s not good enough. Crisis managers should use the elevated adrenalin coursing through the Board’s collective system as motivation to change the way things are done. It requires an attitude shift – from constantly trying to look better, to constantly trying to be better. In established, highly-competitive industries such as shipping and mining this is often perceived as a costly albatross to carry.

This is the wrong view to have. People are more forgiving of companies that apologies when they make mistakes, make good when they cause harm, and improve their performance when something has gone completely awry. Serial offenders, on the other hand, raise public ire and draw heat from governments who are sensitive to voters’ demands for justice. That game can be far more costly.