Companies align with purpose to prioritize reputation over profits as geopolitics disrupt businesses

• Covid-19 forced companies to redraw the strategy roadmap, strengthen balance sheets, stress-test processes and place fresh bets on technology over the last two years.
• In 2022, geopolitics forced companies to reassess options as supply chain disruptions and economic shifts led to increased prices of commodities and high inflation.
• As we move ahead, geopolitical fractures will enlarge and nationalistic sentiments will continue to grow across the world.

Business disruptions are escalating in a Volatile, Uncertain, Complex and Ambiguous (VUCA) world. It was Covid-19 which forced companies to redraw the strategy roadmap, strengthen balance sheets, stress-test processes and place fresh bets on technology over the last two years. In 2022, it was geopolitics that forced companies to reassess options as supply chain disruptions and economic shifts led to increased prices of commodities and high inflation.

The two disruptions in quick succession come at a time when businesses have already been coping with the impact of technology, its impact on consumer behaviour, the rise in competition from insurgents, and the resultant obsolescence.

As we move ahead, geopolitical fractures will enlarge and nationalistic sentiments will continue to grow across the world. It may not lead to another World War but countries across the world could take sides in some of those events. It will lead to redrawing trade blocks and also the emergence of new geographical frameworks of bilateral cooperation, based on mutual interest.

This presents huge challenges and risks for global companies, as they seek to balance interests with the countries they operate in, the countries where they are headquartered and the stakeholders they represent.

As trade blocks and new alliances are getting stitched at state levels, companies too are rethinking markets and partnerships from a strategic lens.

Since geopolitics could have potential ramifications on the lives and livelihoods of a large community, companies will now have the additional responsibility to look beyond just their stakeholders and overall, become the force of good.

The world has changed dramatically since the pandemic and companies have to align their efforts on the ground with their larger purpose, which needs to be values-driven. Any misalignment may potentially result in a hit on reputation.

Rise of reputation in managing businesses

Recent geopolitical issues mark a very different trend in how companies approach their business. While shareholder capitalism defined the approach of businesses earlier, it was stakeholder capitalism which firmly entrenched itself in 2022. It’s a development that breaks away from short-termism and aligns with long-term sustainable value creation that places significantly more emphasis on brand reputation.

It would be good to understand why. A consumer is now more informed and takes a decision on buying a product based on its core narrative and sustainability record. Similarly, an employee also chooses to work in a company that is aligned with his own image of what a responsible company should be doing. Given that employees are the biggest brand ambassadors of a company, CEOs will ignore that at their own peril. And, this consideration, extends to all stakeholders alike.

The result - reputation and communication as fundamental pillars of building resilience in disruptive times – will continue to take centre stage.

Building and communicating a value-driven brand narrative crucial during disruption

Outlining the company’s vision and ensuring it aligns with the way it does business on the ground is crucial. With geopolitics emerging as one of the biggest risks for global corporations, businesses have the responsibility of being more engaged with stakeholders on the ground and also build deeper relationships with governments. The goodwill it generates will thwart unexpected geopolitical developments in a VUCA world, which is potentially damaging.

The power of envisioning some of these issues is invaluable. It’s therefore important for companies to stress test the reputation risk plan on emerging issues. Global companies may also have to take a stand at times. Not just on social and sustainability issues - but around geopolitics – where lives and livelihoods are at stake. To build a resilient reputation it is now imperative for companies to have a clear value-driven narrative, which is effectively communicated to all its stakeholders.

Shubham Mukherjee is a Communication strategist and a Reputation architect.