Introducing the Concept of Halal Reputation Capital

Introduction

A robust halal reputation holds both intangible and tangible advantages in Muslim markets, resonating with stakeholders such as Muslim consumers, societies, employees, and shareholders. Building a strong halal reputation is essential for fostering positive sentiments toward the organisation and its brands at various levels, ensuring sustainability and market presence. Beyond the direct impact on sales, a solid halal reputation attracts top-tier talent and garners positive social media coverage. This corporate standing should be considered a vital component of market capitalisation, coining the term “halal reputation capital,” which proves to be invaluable for companies, ranging from millions for local enterprises to billions for multinational corporations. Surprisingly, most businesses operating in Muslim markets lack strategies to measure and fortify their halal reputation capital.

Why Halal Reputation Capital Matters

In the past decade, numerous local and international brands have faced challenges related to contamination, non-compliance, or perception issues in Muslim markets.

In the case of contamination, Muslim consumers face uncertainty about potential exposure to forbidden (haram) ingredients in purchased products, raising doubts about the product’s purity and the brand’s trustworthiness. Non-compliance issues may arise due to breakages in the halal supply chain or problems with halal certificates, casting doubt on the product’s halal status. Additionally, perception issues may emerge, such as a mismatch between a brand’s perceived image and Islamic values, leading to boycotts, especially during sensitive geopolitical situations like the Israel-Palestine conflict. These scenarios underscore the critical importance of establishing a comprehensive corporate halal value chain—a halal DNA—for companies operating in Muslim-majority countries. A robust halal reputation serves as a protective buffer for companies during halal incidents. 

What is Your Halal Reputation Capital?

Halal reputation capital represents the value of a company’s halal reputation assets, derived from its halal reputation, brand identity, and halal trust. Corporate reputation typically constitutes around 20% of a company’s market capitalisation, and this principle extends to corporate halal reputation when targeting Muslim markets.

Halal reputation is defined as a collective representation of the firm’s past actions, halal performance, and its future ability to meet halal requirements. Key drivers influencing the strength of a company’s halal reputation include halal authenticity, trustworthiness of the halal certification body, messaging by the company and supply chain partners, and external stakeholder communications. Among these, halal authenticity emerges as the most valuable asset. Companies can largely control three out of four drivers, placing them in command of their corporate halal reputation.

Halal trust is the Muslim consumer’s belief in the halal integrity of a product or service, aligning with their faith. This trust is crucial for Muslim consumers when making daily purchases and needs to be measured. Halal trust is an assessment of the Muslim consumer perception of a brand, the halal image of the brand. A consumer survey analysing perceptions of the halal logo, excellence, transparency, halal authenticity, and intention forms the basis of measuring halal trust. This assessment allows brands to benchmark their halal trust against competitors.

Building Your Halal Reputation Capital

To enhance halal reputation capital, companies should follow four crucial steps:

1. Develop Strategies to Protect Your Corporate Halal Reputation: Establish proactive strategies to safeguard your most valuable asset.
2. Implement Halal Risk Control and Reputation Measurement: Deploy halal risk control measures and measure halal reputation performance through indices and trust assessments. Effective halal reputation management is most potent when applied well in advance of potential threats.
3. Position Halal Reputation as a Competitive Advantage: Form cross-functional teams to systematically strengthen the corporate halal reputation, treating it as a competitive edge.
4. Elevate Halal Reputation at Management Level: Appoint a Chief Halal Reputation Officer to oversee and champion the company’s halal reputation efforts. This leadership role ensures that halal reputation is given due importance in decision-making processes.

About the Author

Dr. Marco Tieman is the CEO of LBB International, a supply chain strategy consultancy and research firm, advising companies and governments on halal production, clusters, supply chain management, and risk and reputation management. He is a Senior Fellow with IPMI International Business School in Indonesia, conducting research on halal procurement strategy, halal supply chain management, and halal risk and reputation management. He is the author of ‘Halal business management: a guide to achieving halal excellence’.

This article was published in HalalFocus on 15 January 2024