MEASURING CORPORATE HALAL REPUTATION: THE ‘HALAL REPUTATION INDEX’ AND ‘LICENCE TO OPERATE’

 Due to a large, young and fast growing Muslim demographics in combination with a substantial and fast expanding global Islamic economy, Muslim markets in the Middle East and Asia are one of the leading consumer markets today. Doing business in Muslim markets means next to food and product safety also meeting halal requirements. A series of high profile halal crises in recent years with top brands have shaken public confidence in the ability of brand owners to assure the halal integrity of halal certified products. Through social media, a single halal issue can easily snowball into a major crisis for brands on a global scale. Companies need to understand that their brand and business can be at serious risk with a halal issue and crisis.

 

Complexities of halal markets

Muslim markets today are supplied by global supply networks, originating from different production locations with a different halal context, creating global integrated systems and a coupling of brands. There is the danger of correlation, where halal issues from outside your supply network could infect your brand through co-branding (two brands are partnering in retail or restaurants) and industry issues (an issue with one company might suggest a non-compliant industry practice). Today, Muslims are less prepared to tolerate risks (whether real or perceived). Muslims want a near zero-risk halal environment and actively boycott brands that seem to be in violation of some of the teaching of Islam.

 

Halal Reputation Management

A solid halal reputation can buffer organisations from negative stakeholder reactions during times of halal crisis. Organisations with strong corporate reputations may not always be insulated from a halal crisis when transparency and halal authenticity are not included in organisational responses. Currently procedures designed to mitigate and distribute supply chain and corporate reputation risks may sometimes increase corporate halal reputation risks. 

 

 ‘A corporate halal reputation is a collective representation of the firm’s past actions and halal performance, and the firm’s future ability to meet halal requirements.’ 

 

Halal reputation risk is the possibility or danger of losing one’s corporate halal reputation or social capital of a brand, in particular its trust, Islamic values and network. The loss of halal reputation affects the competitiveness, market share, financial performance, trust and loyalty of stakeholders, loyalty and availability of employees, media relations, and even the licence to operate.

 

Halal Reputation Index

Big brand owners often conduct surveys to understand the halal image of brand, which can provide some insights into the past consumer perception and sentiment. However, this is not the right measurement for measuring the corporate halal reputation and certainly not a key performance indicator for serving Muslim markets.

 

A ‘Halal Reputation Index’(HRI) is proposed, which acts as predictor for corporate halal reputation and sales in Muslim markets. Halal authenticity, trustworthiness of halal certification body, messages by company & supply chain partners, messages by external stakeholders are four drivers that determine the corporate halal reputation. Alignment between the corporate halal reputation drivers and halal market requirements will be critical for brands to earn and protect their licence to operate in Muslim markets. This alignment per market requires a constant monitoring of the so-called ‘Licence to Operate’ (LTO) rating for each market.

 

Our latest research shows that halal reputation management is different from conventional corporate reputation management. The ‘Halal Reputation Index’ is envisioned to be the new key performance indicator for both top management and halal committee (halal management team) operating in Muslim markets. In other words: What gets measured gets accomplished!

 

LBB International has developed an advanced algorithm to measure the ‘Halal Reputation Index’ (HRI) and ‘Licence to Operate’ (LTO) rating for companies. For more information visit www.lbbinternational.com.

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