Who is the Steward of your most valuable asset: your Brand?

In this blog, James Marland exhorts Procurement and Supply Chain Leaders to become Stewards of their company’s Brand.

What’s your company worth?

50 years ago a Balance Sheet consisted of plant, machinery, raw materials, Finished Goods and land. These are the tangible assets of any company.

However, there has been a big change. Within the last 25 years, intellectual capital has emerged as the leading asset class. Up from 17% in 1975 to 84% in 2015. The term “intellectual capital” refers generally to intangible assets — patents, trademarks and copyrights. Also, as more companies are outsourcing their manufacturing, those old smokestack assets are now also intangibles: such as supply chain, logistics acumen, designs, blueprints and licences.

But there’s more, brand value is also an important component of Intangible Asset Market Value (IAMV). Comparing the 39 companies appearing on both the S&P 500 and the Interbrand list suggests brand value may represent as high as one quarter of the total market cap of a prominently branded company.

So who is the Steward of the Brand?

Business is Under Increasing Scrutiny

Everywhere you look, business is under scrutiny. Whether for environmental practices, labor conditions, tax, or paying suppliers on time, individual citizens increasingly are expecting companies to behave in a socially responsible manner.

This is not a fad. A pivot. Something that will blow over. It’s a generational change.

This issue is no longer just for idealists or activists. For example, globally there are 46 million people worldwide who are modern-day slaves and about 150 million child workers. Any company doing business needs to make sure that its supply chain is not tainted by this cruel practice, and here in the UK, it is not just a good idea: it is now the law.

Purpose-focused business

Eliminating forced labor from your supply chain is just one example that can protect your brand.

Increasingly leaders are look to protect their brand by looking at the external perception of the company by investors, partners, communities, and public entities. This is loosely called being purpose-focused and can cover social, environmental, and sustainability practices.

Being purpose-focused is essential to engaging customers and employees and being perceived as relevant, admired, and innovative. All business leaders need to be focused on these topics. Or look at it this way: Can you afford the reputational risk of a photo on social media of a child working at one of your suppliers?

39% of consumers are likely not to buy a company’s products or services if they believe they are not “responsible”. 25% will actively advise friends and family to avoid the company.

Doing good is good for business

There’s a wide perception that these programs cost money and drive down margins. Wrong. Research suggests that companies that execute these types of programs can significantly outperform their rivals over a 10-year period.

I have two teenage daughters, and I can already see different spending patterns in the brands they choose. Research shows that Sustainability and social impact drives 73% of millennial and gen-z spending. Who wouldn’t want a piece of that?

It doesn’t have to be a trade-off, you can show a positive financial benefit from many of these programs.

Procurement and Supply Chain: The Stewards of the Brand

Lets face it, most of the risks to a brand are likely to not be because of employees, but in the depths of an increasingly complex and global supply chain.

The procurement department used to be a backwater, but it is increasingly being brought in to help protect the brand, run proactive supplier audits, and drive suppliers to support an ethical agenda.

The compounding fact is that your supplier’s supplier needs to be risk-assessed. With many companies having 10,000 suppliers, you see that even getting to the second order means millions of potential assessments — but it turns out that business networks are the way to solve this. By joining a network , you can not only start to address the issue of “multi-tier,” but also select new suppliers that are aligned with your social goals.

Modern-day procurement leaders are starting to use the phenomenal buying power of their organizations to address some of these big social challenges. At the upcoming Carlyle Global Partner Summit event in Monaco, Tifenn Dano Kwan, SAP Ariba CMO will share the worldwide movement building around social procurement.

Can you, or your brand, afford to sit this one out?