In a Digital Age, The Power of Reputation Encourages a New Ethical Business Model

By  Tara Gould

Guest Writer for Wake Up World

“The currency of the new collaborative economy is trust” – says  Rachel Botsman,  author of “What’s Mine Is Yours: How Collaborative Consumption Is Changing The World We Live In”

Botsman describes the way that companies whose services are based around sharing, such as eBay and Craigslist and Airbnb, are reliant on good reputation and what is often referred to as ‘Reputation Capital’   to succeed. Collaborative consumption is a digital-age model of doing business where shared access, community and reputation are replacing advertising, credit and individual ownership. Where people commit to transactions and exchanges based on mutual trust and a good score, rating or reputation.

Trip Advisor has the leverage to have a real impact on a restaurant or hotel’s popularity, and hospitality management now take it pretty seriously. Bad feedback on eBay will put off a large number of potential buyers/bidders, and a lack of recommendations on Airbnb means prospective tourist skip onto the next place to stay.

Innovation and Technology

The new technologies, social and digital networks, coupled with a growing culture of ‘conscious’ consumption and sustainable living is making reputation a powerful commodity for  all  business sectors.

Echoing the ideas of Botsman,  Robert Moran  describes how we live in a world of immediate ‘rating’ and ‘liking’ or disliking, at the click of a mouse. This new, digital age could, in the long term dramatically shift power into the hands of the consumer, creating a real time evaluation process which will be democratic and transparent. Moran has coined the phrase ‘rateocracy’ to describe this revolution:

“Rateocracy can be viewed as a tectonic power shift toward technology-empowered stakeholders, but it can just as easily be viewed as the construction of a digital village in which a business’s reputation returns to the immediacy of small-town life”

A Shrinking World

Indeed, reputation capital is not a new phenomenon, it was the natural way of doing business for hundreds of years, where exchange of service, word of mouth and trust motored local economies.

Global trading made supply chains much more complex, more challenging to audit, and more opaque. But new technologies have shrunk a global world. The speed at which information now travels means that global corporations who may have become complacent, protected by a shroud of anonymity are now increasingly being brought to trial. Previously hidden activity, or abuses on the other side of the world come easily to our attention and sully a company’s reputation long term.   A serious blow to reputation, can result in a direct financial hit.

Transparency and Coming Clean

In an attempt to claw back trust, Tesco have recently published full page adverts in the form of an apology in a number of national papers in response to the horse meat scandal. This is testimony to how seriously companies take their reputation and how they might be perceived by consumers. The way in which the text is set out on the page is revealing, like a poem or apologia to a loved one, alluding to genuine, deep sentiments and earnest concern, with a promise to be better in future. If this public confession is in reality more about winning back consumer trust than heart felt concern, especially given Tesco’s track record for corporate social responsibility, it’s certainly clever marketing. In this instance, an open declaration of culpability is best policy.

In a  recent article on Guardian Sustainable Business  sustainability expert Thomas Kolster argues that if a fashion for green is making businesses compete for branding positions in the sustainability stakes, this can only be a win win situation for the rest of us, and cites Coca Cola’s and Pepsi’s recent attempts to ‘out-green’ each other as an example:

“Sustainability communication is moving from green marketing varnish to the bank vault as investors value companies’ ability to deal with the biggest business challenge of the 21st century: sustainability”

The recent acknowledgement from Coca Cola that their high sugar drinks are adding to problems of obesity is radical, and smart, he says and suggests that:

“… by finally facing its own demons Coca-Cola can focus on building real trust with consumers. It’s always better to stand up to the challenge and face your real enemies (especially those within) instead of sticking your head in the sand like the proverbial ostrich. In the long run, people will respect you and ultimately support you for it…. Then your worst enemies could just end up being your best friend.”

The Chicken or the Egg… and Does It Really Matter?

This increasing necessity and pressure for transparency might herald a new ethically centred business model, and initiate stringent auditing processes where previously reluctant businesses are driven by fear of further damage to reputation.   In the end, if corporate social responsibility improves and businesses move towards more sustainable and consumer-centred ways of working, does it matter whether the motivation is born of ethical values or corporate ones?

Updated September 2014

Previous articles by Tara:

• Old Habits Die Hard, Especially Where Sustainability is Concerned
• UK Solar Community Housing: A Gentle But Effective Mutiny
• Dirty Digging: The Unsavoury Truth Behind the Gold on Your Jeweller’s Shelves
• Old Car vs. Green Car? The Art of Repair is the Sustainable Way Forward

About the author:

Tara Gould is a freelance writer who covers environmental issues, politics, sustainable living and clean energy. She is passionate about spreading the word on ‘conscious’ business, and low impact, sustainable ways of running and powering societies, which are crucial for the health of people and planet. She also blogs at  ethical-business.eu  and  ethicalweddings.com

Please note:  this article was first posted on  ethical-business.eu.