Profitable and Unprofitable Reputations

It is 17 years since Gerald Ratner, the then Chief Executive of Ratners jewellers, managed to knock £500m off the valuation of the company by referring to their products as “total crap” in a speech to the Institute of Directors.  It escaped bankruptcy, and then escaped ongoing infamy by changing the company name to Signet.

Reputational risk is talked about a lot, but it is really just one impact or consequence that a risk might have when it occurs.

The annual Change the World List ranks companies that do something with a measurable social impact and for which they not only get a reputational bonus, but the thing they do also produces profits – making profits by doing good.

Inditex, based in a town in the north-west tip of Spain, is the world’s largest clothing retailer, with Zara its biggest brand.  They recognise that customers want to know that their clothes are made under safe working conditions and they have steadily shifted production to suppliers with strong safety records, from 80% in 2012, to 95% last year, well above industry averages.  Inditex conducts its own training on worker safety, with an emphasis on women – 85% of its factory staff – including how to recognise gender discrimination and how to defend their rights.

And in doing so, annual sales have grown by 7% each year of that period, reaching a record €12billion in sales for the first half of 2018.

Source:   Wikipedia, Fortune magazine, La Voz de Galicia


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