The role of sustainability in building a strong country’s reputation – value creating strategy for country brand managers
By Natalia Arenzana and Fernando Prado, Managing Partners, Reputation Lab
The importance of sustainability practices and policies in business are no longer questioned. Companies that are perceived as ethical and responsible are more admired and respected by their stakeholders. This leads to positive attitudes towards them, such as giving them the benefit of the doubt in a crisis, being willing to invest, apply for a job, or buy their products. These correlations have been thoroughly tested and quantified in corporate reputation analysis models used by companies (such as our own RepCore® model) and adopted by some of the most reputed companies in the world.
If sustainability is critical to a company's reputation, the question is whether it is equally critical to a country's reputation. If we believe that companies have a responsibility to protect the environment or address social inequalities in the communities where they operate, then it follows that countries and their governments have an even greater responsibility to do so.
To analyse this issue, Reputation Lab analytics team applied its 2023 data from its RepCore® Nations study. See "About RepCore® Nations" at the end of this article for a description of the methodology.
Fig 1. The RepCore® Nations: a tool for country reputation management.
The study analysed the reputations of the 60 countries with the highest GDP figures, based on more than 47,000 individual interviews in 34 countries among the general public. Country Reputation scores discussed in this article are calculated based on the perceptions expressed by the inhabitants of the seven most highly industrialised (G7) countries.
ESG: a crucial factor in reputation management
Figure 2 reveals overall country reputation ranking from the RepCore® Nations study. Among the G7 population, Switzerland, Sweden, Canada, and Norway are the most highly regarded countries, while Russia is ranked last since the invasion of Ukraine.
Fig 2. The reputation of the 60 countries with the highest GDP (GDP60) in G7
A key finding of RepCore® Nations 2023 study is that ESG criteria and the United Nations 2030 Agenda are now crucial factors in shaping a country's reputation. The global public's growing awareness of sustainability has raised expectations for all countries. This is reflected in the increasing importance of sustainability-related attributes in shaping a country's reputation. In 2023, when assessing a country's reputation, residents of G7 countries prioritised three expectations: 'Fight against climate change', 'Protection of the environment', and 'Respect for human rights'. These attributes displaced other variables, such as quality of life or level of development, which were traditionally seen as more relevant. For example, only a year earlier the most important attribute was 'Leisure and cultural activities'.
At all levels, governments’ motivation for managing a country's reputation is based on value creation that is reflected in economic variables such as the number of foreign tourist arrivals, export figures and foreign direct investment. Reputation Lab analysed its country reputation indicators in combination with historical data on tourist arrivals and direct foreign investment revealed a significant economic impact.
More specifically, an increase of one-point in a country's reputation indicator predicted, on average across all countries measured, a 4.6% increase in the economic value of foreign tourism arrivals and a 1.7% increase in the amount of direct foreign investment captured. Furthermore, a country's reputation directly impacts its credibility and influence within international institutions, also known as 'soft power'.
Fig 3. The Reputation Economy
In light of the significant economic impact that a country's reputation can have and the increasing importance of ESG criteria in shaping those reputations, promoting sustainability policies can be seen as an economic strategy to unlock a country’s reputation value.
To expand on this point, a country's reputation is public perceptions, whether positive or negative, may not necessarily align with the country's actual reality; this also applies to the reputations of companies. Figure 4 graphically represents this concept.
Fig 4. How to manage a reputation
For each attribute that affects a company's or a country's reputation, there may be a reality that could differ from public perception. Reputation Management involves identifying these gaps between reality and perception. When reality is better than perception, there is an opportunity for communication to inform stakeholder of the positive reality of the company or country. If perception is better than reality, there is a reputation risk; in such cases, management initiatives are necessary to improve the reality before it becomes known to the public, which could result in a loss of reputation.
In the application of RepCore® Nations data analysis to country reputation management, we discuss the gap analysis between perception and reality in the two ESG variables that have the greatest influence for a country to be admired: "Fight against climate change" and "Respect for human rights".
Variable 1: Fight against climate change
Having shown that fighting climate change is nowadays crucial for improving a country's global reputation, our analysis compared each country's perception of this attribute with its reality. We used the emission of greenhouse gases into the atmosphere in terms of tones of CO2 equivalent per capita to isolate the effect of the size of each nation, as an indicator of reality.
The findings have been enlightening as the international public is not well-informed about which countries have higher or lower levels of greenhouse gas emissions into the atmosphere. In certain countries, such as Sweden or Switzerland, the positive perception aligns with the positive reality; while, in other countries, such as Saudi Arabia, Russia or Qatar, the negative reality aligns perfectly with the negative perception.
The most intriguing finding of this analysis is that certain countries have a negative reality but a positive perception, such as Australia and Canada; this presents a significant reputational risk if this negative reality were to become public knowledge. On the contrary, some countries such as Morocco, Peru or Chile have a much better reality than their international perception suggests; this presents an opportunity for positive reputation building through effective communication.
Fig.5.- Fight against climate change: Low public knowledge leads to a poor match between perception and reality.
Variable 2: Respect for Human Rights
In search for a "reality" figure to compare with RepCore® Nations study perception indicator on respect for human rights, the team turned to the V-Dem Institute at the University of Gothenburg (Sweden), which has developed an index based on the assessments of a large number of international experts rating countries in this area.
In contrast to the fight against climate change, the general public's views on respect for human rights strongly align with reality, as demonstrated by the high correlation between the two variables. Generally, countries that are highly rated by the public scored well in reality; while those that received poor ratings in the RepCore® Nations survey performed poorly in the University of Gothenburg's reality analysis.
Fig.6.- Respect for human rights: high correlation between perception and reality
Qatar is a good example of the implications that changes in perceptions on key attributes can have on that nation's reputation. When we compare our RepCore® Nations results from 2022 and 2023 for the 60 countries with the highest GDPs, we can see that Qatar shows the largest drop.
Although Qatar's success as host of the 2022 FIFA World Cup should have had a positive impact on its country brand, the denunciations by international NGOs of the fatal exploitation of foreign workers (more than 6,500 died during the construction of the infrastructure for this major tournament), which received a great deal of publicity, ended up having the opposite effect. The huge decline observed in Qatar's perception score in the attribute "Respect for human rights", along with others such as "Ethics and transparency", translated into a sharp decline in the country's overall reputation indicator.
Fig.7.- Largest changes in reputation between 2022-2023 among the 60GDP countries
There are two exceptions where reality and perception do not align. The first is Ukraine, where perception is more positive than reality due to the international empathy gained after the Russian invasion. Conversely, Colombia shows the opposite, with reality outstripping perception, probably because international public opinion remains influenced by stereotypes stemming from Colombia's violent past.
In conclusion to our analysis, we can state that just like the reputation of companies, the reputation of nations can and should be managed. The messaging of ethics and sustainability have grown in importance for international public opinion, and country brand managers should take this into account. To this end, it is necessary for country brand managers:
- To understand what the expectations of international stakeholders are and how a country is perceived regarding those expectations.
- To identify communication opportunities and reputational risks that specific initiatives can be developed as part of a coordinated plan to strengthen the country brand.
For more information: contacto@corporatereputationlab.com
Join this free webinar on May 22nd at 4.30pm GMT to discover key drivers of perceptions of your nation brand and learnings from the 2024 RepCore® Nations study.
About RepCore® Nations
RepCore® Nations is an objective measurement system of the reputation of countries providing actionable results for management. This tool enables the assessment of the level of admiration, respect, and trust that each nation receives from international public opinion; and it explains how these perceptions are generated through 22 rational attributes related to a range of economics, social, political and cultural aspects. These attributes are grouped into five dimensions of what drives a country’s reputation, namely: Institutional Quality, Quality of Life, Level of Development, Human Factor, and Ethics & Responsibility.
RepCore® Nations not only provides performance scores for each of those variables for every country based on international public opinion, but also allows for the prioritisation of these variables with international public expectations. This enables the analysis of each country's strengths and weaknesses that is critical for decision-making and managing a country's intangible assets – its reputation.
