By Viv O’Connor-Jemmett

Corporates are currently facing unprecedented levels of pressure from consumers and shareholders to demonstrate good character and moral correctness in multiple areas, including the way they treat employees, business practices, social conscience, company culture and their environmental impact. In response, many corporates seek to demonstrate such virtue with bold public statements, or virtue signalling – whether by making claims about their own good practices or criticising those belonging to others who are deemed to be less than perfect.

However, virtue signalling can be a dangerous exercise, as several high-profile corporates have recently discovered. The pressures of the Covid-19 pandemic and the rise of ESG have led many corporates to overpromise and underdeliver, or to claim values that they then fail to live up to. Such double standards are quickly uncovered, particularly online, and recent critical media campaigns have targeted corporates and their boards – exposing their shortfalls.

How virtue signalling contributed to a reputational storm for BrewDog

The latest firm to join a growing list of corporate casualties is BrewDog, a craft brewery led by co-founder and CEO James Watt. Founded in 2007, BrewDog invested heavily in advertising campaigns and PR stunts aiming to present a friendly crowdfunded brand that was challenging the culture of global brewing companies. Its manifesto, published on its website, makes claims of a supportive and non-hierarchical culture: “We are not a business that operates from the top down. Our crew are the driving force. We are in this together.” James Watt used LinkedIn to publish a story of BrewDog’s humble roots and its focus on maintaining a small-firm mentality on the very morning that 61 former employees published an open letter online accusing the company’s founders of an aggressive culture that excuses sexism and misogyny, and promotes an environment of fear. Since publication, the number of signatories has risen to over 200.

Unsurprisingly, BrewDog’s reputation was damaged overnight. A deluge of national and international news articles called into question whether the company had lived up to the standards and values it proclaimed. The media frenzy criticised the reputation gap between the small-firm mentality claimed by James Watt and the central accusation levelled by his disgruntled ex-employees: “Growth, at all costs, has always been perceived as the number one focus for the company”. Despite accepting responsibility and launching an internal review, Watt has struggled to communicate the immediate and impactful changes being made to address the issues – leaving the media narrative of BrewDog’s failures able to damage the firm’s reputation in the longer term.

The case of Boohoo: how virtue signalling led to woes for the fashion company

Fast fashion company Boohoo faced similar media criticism after backing a campaign against the treatment and death of George Floyd in Minneapolis. Boohoo proudly announced on Instagram, “we are louder together”, claiming: “We see you, we hear you and we, throughout all of this and beyond will stand with you”. But just weeks later, Boohoo became the centre of its own media storm. A report published by the Sunday Times alleged that workers in a Leicester factory supplying clothes to Boohoo were paid just £3.50 per hour (way below the minimum wage), worked in dangerous conditions, and received little or no PPE to protect them from coronavirus, with the factory operating illegally during the national lockdown.

The backlash following the report was swift, and Boohoo became the target of a #boycottboohoo campaign that saw social media influencers abandon the brand, Next and Asos drop Boohoo goods, and the company’s share price fall 33% in just two days. In a proactive move, Boohoo’s senior management announced an independent review headed up by Alison Levitt QC – who was to make her findings public in the interest of transparency. Unbeknown to them, Levitt’s final report was to document a series of grave issues relating to the company’s operations, including the existence of an ‘in-house compliance team’ that comprised just one individual who was tasked with spot-checking the standards of several hundred suppliers and subcontractors.   

What can companies do to avoid the virtue signalling trap?

As the media continues its targeting of executive and business performance and values, virtue signalling often serves only to generate reputational crises, rather than protect against them. In a time of increasing demands from consumers and shareholders for businesses to declare genuine commitments that achieve meaningful change, those who are underperforming against their own purported values will undoubtedly become victims of any attempt to benefit from hollow statements.

It is vital for business leaders to ensure they are certain that any values and practices they proclaim are being upheld at all levels of the business. In some cases, leaders may be allowing virtue signalling to take place, not realising that the very virtues their company is extolling are not being upheld in the day-to-day running of their business or its workplace culture. Leaders must keep their ear to the ground, ensuring they stay informed about operational matters and cultural issues at all levels as their company grows. A robust, coherent and transparent ESG strategy is increasingly vital to ensure that there are no shortfalls to be exposed. And any public claims by the company should be backed up with evidence and examples showing how they are living up to their intentions.

Companies are coming under increasing pressure to state their positions on social and political issues, but they must do so with care and integrity, ensuring they can adhere to the values they promote and support causes with a clean conscience. And in many cases, it is better for businesses to focus on doing the right thing rather than on talking about it. Those who engage in good practices and incubate a positive working culture are often better advised to steer clear of virtue signalling, and the backlash it can generate, altogether.