03/04/2013 10:44 BST | Updated 02/06/2013 06:12 BST

Being Good Is Good for Business

The idea that large corporations should be ethical, green or work with communities has snowballed over the last decade or so, but recent months have shown how significant a failure of corporate reputation management can become.

Within most major corporate organisations there are large teams responsible for environmental impact, social responsibility and operational sustainability, and ensuring these categories of doing good are communicated to the outside world. Buried within this confusing nomenclature and PR bureaucracy, is the acceptance that making money just isn't enough anymore; that businesses play a wider role in society and must behave well and give something back.

The idea that large corporations should be ethical, green or work with communities has snowballed over the last decade or so, but recent months have shown how significant a failure of corporate reputation management can become.

A new report released by KPMG reveals how a climb in the UK's major banks' core profits to £35.1bn in 2012 has been hit by £20bn in fines, an accountancy adjustment and customer redress. Bill Michael, EMA Head of Financial Services at KPMG, said of the sectors' marred reputation: '2012 was a dire year. This is why it is so important for them [banks] to address cultural and ethical perceptions and issues. Restoring customer trust is critical.'

KPMG listed issues such as the Libor scandal, the mis-selling of derivatives products to smaller businesses, systems failures at a number of banks, and weaknesses in anti-money laundering controls as being instrumental in further weakening the reputations of the main UK banks.

(It's interesting that we see two diverge changes happening at the same time: all large organisations now accept the need to "do good" and yet we have seen increasingly frequent examples of them 'doing bad'.)

The brand image of the banking sector has had a direct impact on business performance. - not in customers leaving in disgust, there is too much inertia in the banking market for that - but when discontent with a company or business sector becomes strong enough and bad behaviour prompts enough ire, businesses and industries can be hit hard by actions driven by political and regulatory imperative, which is in turn 'the will of the citizens'.

Take the phone hacking scandal in the UK which caused the closure of a major brand The News of the World, in a matter of days, and the new press regulator set up in response to the Leveson inquiry which will have a long term impact on the limitations and operations of the media industry as a whole.

Being "good" can be central to the success or failure of a business and needs to be a boardroom issue. However, many large corporations still wrestle with how to be good and what being "good" actually is.

The problem for many organisations is that the opportunity to prove to consumers that they are good rather than bad is limited. The truth is most people's ideal relationship with say a bank or utility company is a minimal, low maintenance relationship of convenience. They simply want them to do their job well; supply electricity inexpensively and offer efficient customer service when needed, or look after their money with a good interest rate and a decent online interface.

As a result, the ethical behaviour of a business becomes far too easily confused with sales and marketing pushes, with banks and other companies left to communicate any positive initiatives by sign posting them with ignorable posters, leaflets or website pages, or through the sphere of PR and the media so that they are interpreted as another category of advertising or as merely a company following a trend.

It's also true that many corporate ethical initiatives have become so endlessly replicated that they have lost their meaning. This is particularly evident in the grocery retail sector where supermarkets have a twenty point check-list of responsible initiatives they need to show they're undertaking, such as providing bags for life, stocking fairtrade food, supporting British farmers and responsible fish sourcing, which are indistinguishable from their rivals'.

The only real way to change consumer perceptions about whether an organisation is good or bad is to provide them with first hand experiences over the long term. This requires a willingness to adopt more creative approaches to engaging with consumers that will deliver something memorable and believable. Winning recognition for being "good", is more about being creative than it is about the corporate decision to be ethical.

Companies need to avoid talking about sustainability, responsibility and good citizenship as if they are ring-fenced activities in their own specialist department, and holistically integrate these initiatives so they become part of a company's DNA.

Ultimately- being good doesn't drive sales and may not set you apart from your competitors, but the absence of good is a driver of rejection, and if a major disaster is big enough it can bring a company down. It may not matter tomorrow, but it will matter someday and could make the difference between demise and survival of a company when a scandal breaks.

But perhaps above all being good provides the majority of consumers with another reason to stay. In a digital world where choosing becomes ever easier, being good will continue to be a board level issue and creatively communicating ethical initiatives and linking good deeds to consumer behaviours will increasingly be a front and centre concern for companies.