M:I Products

MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

Read future M:I posts via RSS RSS

Unilever: Seeking success through sustainability

C. HUYGENS - Wednesday, November 17, 2010
On Monday, 15 November, Unilever (NYSE:UL) unveiled a business model overhaul that was 12 months in the planning. The core strategy is sustainability.

Here is how the Guardian describes it:

The initiative will cover not just Unilever's greenhouse gas emissions, waste and water use – but the impact caused by its suppliers and consumers, from agricultural growers to the packaging and waste water produced by consumers of Unilever brands. The Anglo-Dutch group also intends to improve the nutritional quality of its food products – with cuts in salt, saturated fats, sugar and calories – and link more than 500,000 smallholder farmers and small scale distributors in developing countries to its supply chain.

Looking at the reputation metrics, there is no indication that the market has been anticipating a major announcement of a strategic shift designed to increase enterprise value along with corporate reputation. Over the trailing twelve months, the Steel City Re Corporate Reputation Index rank has slipped progressively from the 58th percentile to the 34th percentile relative to the 25 peers in the Food: Major/Diversified sector. (The top ranked firms are currently HJ Heinz (NYSE:HNZ); Kellog Co. (NYSE:K) and TreeHouse Foods (NYSE:THS)). During this period, the company's return on equity has underperformed the median of its peer group by 2.75%. As of 11 November, the exponentially weighted moving average volatility of its Index ranking has dropped to 7.6%, but the Index velocity and vector are overall negative at -3% and -6% respectively.

The sector as a whole as shown a decrease in its median reputation ranking as well as a progressive decrease in the variance within the group. Last, the entire sector is heavily leveraged with the median intangible asset value fraction in excess of 100%. Unilver's intangible asset fraction of 118% is marginally greater than the median of 114%.

We'll be following Unilever to see how its sustainability strategy pans out.

Apple: What stakeholders want

Nir Kossovsky - Wednesday, March 10, 2010
Stakeholders own a company’s reputation, and their behaviors are outward expressions of their true feelings.

The behaviors that are relevant to this Society are those that create enterprise value. Among them are acceptance of higher price points, extension of superior credit and labor terms, lower operating friction, higher earnings multiples, and lower credit costs. For readers of this blog or the recently published book, Mission: Intangible, this is old news.

More to the point, in Mission: Intangible, we noted that mutual funds comprising companies with reputations for advancing social values tended to underperform their benchmarks. Among the six major intangible assets that underpin reputation (ethics, innovation, quality, safety, sustainability and security), only excellence in sustainability seemed not to correlate with superior economic performance.

So from time to time, we revisit the issue of the value of green. The triggers for our current revisit are three:

First, a blog note from a friend of the Society, author, and marketing consultant Jon Baskin in which he noted that shareholders at Apple (NASDAQ:AAPL)  recently defeated a new corporate social responsibility initiative.

Second, is the growing movement to create a third class of corporate structure – the “beneficial corporation.” Vermont currently leads this movement with legislation that would allow companies to both (a) return gains to investors and (b) provide social good for the community. The law would give “for profit” companies legal cover to pursue societal goals that may yield less profit. The Vermont initiative is driven by the remorse of socially-conscious shareholders who supported Ben & Jerry’s acceptance of Unilever NV’s (NYSE:UN) buyout offer under threat of litigation from financially-motivated shareholders.

Third is an advertisement of comparative derision that caught our eye in the Wall Street Journal. In the ad run by Oracle (NASDAQ:ORCL), they contrast the following under the headline of “IQ Test”: (their) Sun SPARC computer that run 7x faster versus IBM’s (NYSE:IBM) fastest computer that consumes 6x energy. They ask the consumer tongue in cheek to choose: Faster Computers or Smarter Planets.

We believe that the question of being green or being profitable is a false choice. At the same time, it is self evident that the transfer of corporate profits into social benefits both within and outside the company will at some point reduce cash flows available to shareholders. We will continue to observe and share what we see.

Heads Up - Date Change

The Mission: Intangible Monthly Briefing for April 2010 will be held one week later than usual in deference to those who celebrate Good Friday. On 9 April 2010 at 12h00 EDT, the second Friday of the month, we will host a conversation featuring incoming Integrity and Corporate Responsibility Committee Chairman Paul Liebman from Dell  (NASDAQ:DELL) and IA Value Signaling Committee Chairman Jon Low from Predictiv. The title for the one hour moderated discussion is: Ethics - A valuable intangible asset? Mary Adams from Intellectual Capital Advisors hosts.

As always, registration for this popular series is complimentary and slides will be available for download in advance of the event. To register now, click here.

Join Us

If the above intrigues you or challenges you to learn more, look no further. The Intangible Asset Finance Society wants to be your business resource. Join us and be part of an organization that provides a wealth of educational materials, including a new book, to further your executive career, and exciting monthly conferences such as the upcoming one on ethics mentioned above.

Recent Comments