Ipsos Corporate Reputation

The Spread of Techlash

How can businesses respond to the reputational challenges of technological change – including privacy, data leaks, advertising practices, and AI
and automation?

Technological backlash doesn’t just affect tech companies; a majority of Reputation Council members across all sectors say that tech issues, particularly around the use of personal data, have become more important to them.
There are three key areas that communicators need to watch out for to protect companies’ reputations: data security, new international regulations and standards, and fake news.
Techlash is no different to the reputational challenges that many other sectors have faced in the past, and traditional communications techniques – understanding different stakeholder perceptions, message testing, horizon scanning, and crisis preparedness – are key to tackling the threat.

If you’re not worried about the impact of techlash on your company, perhaps you should be.

Techlash was defined by the Financial Times as ‘the growing public animosity towards large Silicon Valley platform technology companies and their Chinese equivalents’ when it chose the term as one of the defining words of 2018.

But technology issues are increasingly shaping the reputations of businesses in every sector.

Our own Ipsos research shows that these concerns are key issues for stakeholders, particularly around data privacy, where lack of understanding means groups as diverse as media, consumers and government make assumptions about how their data is being used and misused by companies in practices that aren’t explained.

WHICH, IF ANY, OF THE FOLLOWING ISSUES DO YOU THINK HAVE BECOME MORE IMPORTANT SINCE TECHLASH STARTED?

Council members have plenty of advice for preparing for these issues, but Ipsos says: keep ahead of what stakeholders know (or think they know) about your company.

In 2018, tech companies came under scrutiny again – this time, not because Apple was claimed to be funnelling profits through Dublin, or Samsung phones were exploding, but for reasons much more closely tied to their core business: data use and misuse by tech firms and third parties, ‘fake news’, and the threat of hackers.

of Council members expect data and privacy issues to affect their own companies.

But these issues don’t just affect tech companies any more. Three quarters of Council members say that transparency around data collection and usage has become more important to them since techlash started, and more than half are concerned about ‘fake news’.

The vast majority (86%) of Council members expect these issues to affect their own companies – and those who don’t either don’t require personal data for their business model or are confident that they have prepared enough already to avoid being affected.

There are three particular areas that Council members mentioned when we asked why they expected techlash to affect them.

All companies are data companies now

There are few companies in the world which don’t collect data as part of doing business, whether that’s consumer, supplier or client information. As one Council member put it, “companies will become just as much data companies as they are health companies.” The smart dashboard in your car means that companies like Nissan or General Motors hold much more data on customers than even 20 years ago. Supermarkets can email you when your favourite brand of toilet paper is back in stock.

The more data is collected, the more stakeholders want to know what exactly the company is doing with the data. In the era of smartphones, many of the data connections are transparent but baffling – why does your new gaming app need access to your Facebook data? For some companies, data security is nothing new.

Council members in the banking sector claim that they are ahead of the curve, having had stringent data protection mechanisms in place since before the World Wide Web. Being early adopters has paid off: Ipsos Global Trends data from 2016 shows that more people trust banks with their data than any other type of business. For other companies, it will mean a change in how they think about themselves.

No matter where you work, working in corporate communications means you may soon face questions about what data your company collects and how it is shared and used.

"The big challenge is that the digital world is based on data, while our company is not used to dealing with data. We need to develop competencies and expertise in data management and privacy. Developing new competencies is always a big challenge."
"We will have to review and follow the legislation on private data that has just arrived in Europe. It is necessary to discipline the company, establish rules and criteria to respect these laws. So the impact on the company is difficult, but it does not endanger the life of the company, we just have to adapt the organisation."
Europe regulates the world

2018 was the year that the European Union’s General Data Protection Regulation (GDPR) took force – and you could hardly avoid it. Certainly, our Council members around the world felt its force. Communicators working in Europe mention the steps their companies took to become compliant – but in our interconnected world, what happens in Europe has ramifications much further afield. Some Council members from outside the EU say that they have taken GDPR as their starting point, both for dealing with European stakeholders (a legal requirement) and for assumptions about how data protection standards might be rolled out across the world in the future.

We know from our wider research that the general public in the UK are more clued up on GDPR than you might expect.

Its adoption has not yet started to make an impact on how much the public trust the organisations and industry sectors that use our data most frequently and on the largest scale. But communications leaders should expect a more knowledgeable public to ask more questions in the future.

Fake News

The word of the year from 2017 shows no signs of going away in 2019. Communicators must still watch out for the implications of fake news scandals. They can happen in public places (the new town halls of Facebook and Twitter) or in private groups (encrypted services like WhatsApp), and each location requires a radically different response from communicators.

"Nowadays, on social networks, people often build their own fictional world, pretending to do wonderful things that they do not actually do. Conversely, [we have] real incredible stories to tell and, paradoxically, find it difficult to prove that such stories are true."

Council members talk about two of the main threats from fake news.

Lies about their companies can spread like wildfire, and corporate rebuttals don’t have the same virality as the initial stories. One Council member states:

"Power is actually in everyone’s hands. Today a fake news [story], if well crafted, does not have to be made by a large vehicle, and it has a greater destructive potential than anything else."
"You have to understand how you can use this digital world in a healthier way by letting people know that your [communications] are not fake news, they are not untruths. When I run a campaign, I have to have a certain credibility."

All companies have good stories they want to tell, but some Council members fear that the pervading atmosphere of distrust means the public won’t believe them.

We have to remember that cultural context is a force at play here. Massive closed groups, through which false stories can spread, are much more prevalent in developing markets than in developed economies. And Ipsos research in 27 countries shows that the crisis of trust in traditional media sources is more overblown than we might think: it is a problem in established markets, true, but developing markets report an increase in trust in professional media outlets. Whatever your target audience, it’s important to find out where they get their news, and what credibility they put in individual publications – including your company communications.

"Our company must think and operate as if observers were always present, and perfection must be the goal: if consumers observed what we do, they would say that it is perfect. Nobody is perfect, but we strive for continuous improvement."
"At some point people will understand and say: okay, it’s not just in social networks, it’s how companies are using my data, and this will affect other sectors."

Final thoughts

Despite the different forms that technological backlash can take, Council members advise four key ways to keep on top of the story.

The fundamentals of communications haven’t changed. Be clear and transparent, and communicate openly and honestly. Much of the tech-related suspicion facing corporates at the moment stems from a lack of understanding among the public – something that doesn’t just affect technology companies, but all companies which use personal data.

Get ahead of the story. Council members perceive that many tech companies are playing catch up, reacting to stories as they explode, rather than defusing them before they begin. For all companies, regular horizon scanning can help you keep track of issues as they start to emerge. Many of our research programmes among senior publics take this long-term approach, helping our clients understand where they might be in five years’ time as well as what needs to be fixed right now.

Be more joined up. Members observe that changes and uncertainty in the policy or public environment don’t affect any company in isolation. Over the years that we’ve been conducting reputation research for some of the biggest companies in the world, we’ve seen that, rightly or wrongly, sector reputations often rise and fall as one. Even audiences that you hope know better, like senior legislators, often get confused about whether a story they heard involved company A or company B. It’s important to know what issues ‘belong’ to a sector and what ‘belong’ to individual companies from the external perspective. There are areas in all sectors where a united approach can make a bigger difference than individual efforts, even for some of the largest companies in the world.

This is part of growing up. Many Council members are sanguine about the challenges that the tech sector is facing at the moment because they’ve been through it themselves. They view it as a sign of a maturing sector. Perceptions of the tech sector will settle, but it is important for businesses to communicate their viewpoint so that this settlement doesn’t happen without their involvement and isn’t to their detriment.

Methodology: 154 interviews conducted with Reputation Council members between 25th June and 12th November 2018.

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It’s the environment, stupid!

ENVIRONMENTAL CONCERNS ARE NO LONGER JUST PRESSING ETHICAL ISSUES, BUT QUESTIONS OF FINANCIAL PRUDENCE. OVER HALF OF BRITISH CONSUMERS FEEL WE ARE EXPERIENCING A CLIMATE CRISIS, AND OVER ONE THIRD SAY THEY WOULD SWITCH OR BOYCOTT A FINANCIAL ORGANISATION IF ITS INVESTMENTS HAVE A DETRIMENTAL ENVIRONMENTAL IMPACT. DESPITE BIG CONCERNS AROUND COVID-19, THE ENVIRONMENT REMAINS A PRIORITY FOR THE PUBLIC, AND BUSINESSES WILL BE EXPECTED TO CONTINUE THE TRANSITION TO A SUSTAINABLE ECONOMY IN THE POST-CRISIS PERIOD.

Whilst it doesn’t roll off the tongue with as much zest, James Carville’s ‘the economy, stupid’ slogan is aptly modified for Larry Fink’s announcement earlier this year that BlackRock would base future investments with environmental sustainability as a central goal… ‘It’s the environment, stupid!’. If anyone could ‘wake up’ the market to the tipping point which has now been reached around the environment, it is the Chief Executive of the world’s largest asset management firm. “Awareness is rapidly changing” wrote Mr Fink in the company’s annual letter, “and I believe we are on the edge of a fundamental reshaping of finance”. This has been compounded more recently, with the announcement that the UK’s biggest pension fund, the government-backed National Employment Savings Trust (Nest), will begin divesting from fossil fuels, and BlackRock “launching a selection of ESG multi-asset ETFs, to provide investors with a cost-efficient, transparent and sustainable way to invest”.

Data from Ipsos’s 2020 Sustainable Business Monitor survey amongst the British public echoes these sentiments. With a majority of the public now feeling we are dealing with a climate crisis, it appears that cash may no longer be king in investments. Only 21% now claim to care more about financial returns on investments than on whether the financial provider is ethical in how it invests money. This is compared to 28% of the public who prioritise ethics over financial returns and 26% who feel they should be given equal footing. Even allowing for the possibility that consumers may not be quite so ethical when faced with this trade-off in reality, it is clear that there has been a change in the drivers of investment decision making.

The growing imperative for investors to prioritise companies with a good sustainability track record is brought into sharper focus when looking more closely at the attitudes of millennials. Findings from the Ipsos Sustainable Business Monitor show that 54% of 18-34 year olds would be concerned about investments in Oil and Gas, compared to 47% for the UK public overall. This isn’t limited to the UK either; sustainable investing interest among US millennial investors jumped from 84% in 2015 to 95% in 2019, according to Morgan Stanley’s Institute for Sustainable Investing.

So, what does this all mean? Unsurprisingly, that Fink is right.

Over one third of those asked said that investment in projects or companies that have a detrimental environmental impact would lead them to ‘switch from’, ‘stop using’, or ‘boycott’ a financial organisation. Indeed, sustainable investing is ranked alongside executive remuneration – an issue that has a long track record of being a strong driver of negative opinion for the finance sector.

This sentiment is further reflected at a global level when looking at Ipsos data from the recent Earth Day 2020 report, highlighting that even when set against the crisis situation that COVID-19 has presented, concerns around the environment remain steadfast. Over 7 in 10 people around the world agree that climate change is as serious as the pandemic, whilst 65% agree that in the economic recovery from COVID-19, it’s important that government actions prioritise climate change.

Recognising the growing commercial opportunity facing the sector, and the long-term risk of investing in environmentally unfriendly industries, Fink notes that “as a fiduciary, our responsibility is to help clients navigate this transition [the reallocation of capital]. Our investment conviction is that sustainability and climate-integrated portfolios can provide better risk-adjusted returns to investors”.

But where does this leave industries which have been traditionally harmful to the environment, such as the oil and gas industry, for a long time the bedrock of investment portfolios and still an essential service despite growing environmental concern?

In light of BlackRock’s position, The Economist wrote: “[t]o cynics, all the climate-friendly noises amount to little in practice, since few people are ready to make carbon-cutting sacrifices that would force oil firms’ hands. But noises are sometimes followed by action. Should they be this time, the 2020s may be do-or-die for the oil industry”.

It isn’t a case of ‘adapt tomorrow or die’ for fossil fuel companies however, and Fink makes this clear, forecasting “the energy transition will still take decades”. Citing fairness and justice, “we cannot leave behind parts of society, or entire countries in developing markets, as we pursue the path to a low-carbon world”. The demand for energy will continue whilst technology works to bring cost-effective replacements to conventional fuel sources, but it is incumbent on the sector to aggressively pursue cleaner energy; not only from an ethical perspective, but also in order to remain an attractive investment. The same is also true for a number of other sectors which have for a long time been harmful to the environment, and must adapt with the new way of sustainable investing.

Companies from within the fossil fuel and investment sectors which are leading the transition to a more sustainable future are on the right path, reinforced by public support. This should not be derailed. Communicators in these sectors therefore have the opportunity to maintain messaging around this transition, but with fairness in mind, should also remain sensitive to the societies whose energy programs are not as developed as some of the leading world economies. The transition to sustainable investing will need a collective effort – innovation from industry, reallocation of risk, government support and sustained societal scrutiny, but in adopting Fink’s position, it should be worthwhile effort for investors, producers, and consumers, from both an environmental and a financial perspective.

Contact: Alex Russell - Email | LinkedIn

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