Supplier Scorecards: Earning a Return on Reputation

My colleague James Robinson recently discussed how P&G and other companies have begun to require suppliers to complete a “sustainability scorecard.” James believes this trend could lead to heightened public awareness and “drive changes in demand and purchasing decisions.” 

APCO will soon be releasing results from a ground-breaking study among nearly 10,000 respondents that looks at the reputation of companies in the retail sector and measures the “return on reputation” equity that retailers can earn by addressing stakeholder expectations. Indeed, our survey shows that one of the key drivers of reputation for retailers is a driver we call “Supplier Responsibility,” which is defined as the extent to which consumers, community activists, policy-makers, and other important stakeholders see the retail industry (and individual companies) as meeting their expectations for “insisting that its suppliers use fair labor and environmental practices.” The supplier scorecards James discusses are one important way that companies can work to meet this expectation. 

More importantly, our research shows that meeting these expectations has a measurable, direct impact on business outcomes (including consumer spending, community activism, policy support, litigation support, employee engagement, and financial value). James’ hypothesis is confirmed by our research — heightened awareness of what companies are doing to insist that its suppliers uphold high labor and environmental standards will lead to a positive impact on the bottom line. The results from our study quantitatively demonstrate the link between reputation (in which supplier responsibility is a key defining component) and business outcomes. “Return on Reputation Indicator: State of the Retail Industry” is due out in mid-June.