What is it about?
A firm's reputation wanes when the firm increases its use of symbolic actions to signal environmental commitment. This type of action is associated with opportunistic behaviors and consequently could be associated with information asymmetry between firms and stakeholders. This makes symbolic actions counterproductive from the perspective of the industry peers. Corporations should signal their solemnity about environmental protection via substantive actions which are often costly and rich in terms of information. Such costly and detailed signals tend to facilitate the favorable judgment by peers.
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Why is it important?
Our view is that the reality of corporate environmentalism is opaque for external stakeholders and renders the impact of environmental actions difficult to verify, as evidenced by accounts of misconducts and misleading behaviors by apparently legitimate companies. For example, Volkswagen was rated as one of the most reliable companies in Europe before it admitted a massive fraud on emission levels of its vehicles. Therefore, when evaluating a firm's reputation, industry peers tend to look beyond the symbolic façade to reward reliable signals of commitment.
Perspectives
We are happy that more and more environmental factors become critical in the decisions at all levels: customers, businesses, partners, investors, etc. While writing this paper we also discovered more and more examples of firms doing symbolic communication that make them look legitimate for the general public. This was very disturbing. We hope that showing the negative effect of such actions induces companies to think twice and consider their reputation alongside their legitimacy.
Hamid Mazloomi
ESC Rennes School of Business
Read the Original
This page is a summary of: Understanding the impact of symbolic and substantive environmental actions on organizational reputation, Industrial Marketing Management, January 2021, Elsevier,
DOI: 10.1016/j.indmarman.2020.05.006.
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