Sustainability Challenges: Reputational Risks

September 28 2023

In 2023, the world faces economic, geopolitical, social and environmental crises against the backdrop of ongoing physical and mental health challenges among the general population. In the latest in a series of articles in which we turn to experts about the critical issues facing the sports industry this year and beyond, we look at reputational risks.

Sustainability Challenges: Reputational Risks

In the ultra-competitive sports industry, brand reputation is of critical importance. 

However, as Native American comedian Will Rogers once said: “It takes a lifetime to build a good reputation, but you can lose it in a minute.”

Reputational damage can occur for a variety of reasons in sport – from an unintended data leak and shoddy fan experience to a sportsperson doing something inexplicable on or off the pitch. But it has the potential to be devastating for a sports organisation, league, club or athlete. 

“The key reputational risks facing sports organisations are mostly around integrity,” Jonny Gray, Senior Managing Director of Sport at the Ankura consultancy, tells Global Sustainable Sport. “These can be either integrity in the competition, such as match-fixing, doping and sexual abuse, or integrity in the business of sport, such as election manipulation, kick-back schemes, misuse of development funds and other forms of misuse of power… The impact can be significant, including the withdrawal of sponsorship and a loss of public trust in the sport and/or its administrators.”

Indeed, in instances where there has been reputational damage, commercial partners are usually the first to go as they strive to avoid association with a tarnished brand. This often has real consequences on the financial bottom line.

For example, Hockey Canada revealed that it had lost C$23.5m in sponsorship income last year due to a sexual assault scandal.

A decade earlier, after finally admitting to doping after years of speculation, Lance Armstrong lost eight sponsors in a single day.

Responding to a crisis

For the commercial partners, such swift action makes perfect sense. Research from the Rennes School of Business found that sponsors that act quickly in the wake of a doping scandal by severing ties with the guilty party can actually emerge from the episode with their overall reputations enhanced.

However, the response is crucial for all parties that are associated with a potentially damaging incident or event.

“There is a principle in PR crisis communications that it is never the crisis that kills you, it is your response to it,” David Alexander, Founder and Managing Director of Calacus, a sports PR agency that specialises in crisis communications, tells Global Sustainable Sport.

“There is a simple formula when facing a crisis. Acknowledge what has happened, express regret or sympathy for those affected, understand why they are aggrieved in the first place, and make a commitment to address your processes to ensure that it does not happen again in future.

“It is rarely the crisis that damages a reputation, but the way it is handled. Be strong, humble and determined to fix the problem and remain transparent, telling your stakeholders of your plans and progress along the way.”

Gray agrees that speedy action is essential in crisis management. However, he argues, many sports organisations do not prepare adequately for such scenarios.

“When sports face a crisis, they need to act decisively and with clarity of purpose,” he says. “Most people understand that things happen, but they will not forgive inaction, obfuscation and/or cover ups. Sporting organisations need to train and practice how they will handle risks prominent in their risk register. Very few actually do this in practice…

“The culture in sport needs to change. Sport needs to invest in protecting its reputation by promoting and enforcing high standards of integrity in competition and its business practices. Sadly, most sports tend to only do this after they have had a crisis and at great cost.”

"We are in an era where consumers want their sports teams or associations to stand for something positive and do good in the world." David Alexander, Founder and Managing Director of Calacus

Leading from the top

From a good governance perspective, top officials and executives within any organisation should take a leading role in setting the right example to build and safeguard reputations. However, in organisations that have evolved through a changing world for generations, this may not come naturally.

“Sports organisations, by their very nature, can struggle with progress and often have established and conservative governance executives who cannot keep up with the pace of change,” Alexander says.

“We are in an era where consumers want their sports teams or associations to stand for something positive and do good in the world, and marrying that up with the challenges of attracting suitable sponsors who may not share precisely the same value set can be difficult.”

Some reputational headwinds are unexpected and inevitable in sport. However, sometimes sports organisations take proactive strategic decisions that have clear reputational risks from the outset.

“Money talks, as well, and the increasing influence and impact of wealth from the Middle East is also creating challenges,” Alexander adds.

“We have, for instance, rainbow armbands, laces and other symbols of support for the LGBTQ+ community in various sports, despite the fact that in many countries, particularly in the Middle East, homosexuality is illegal, as just one example.

“How sports can continue to engage and align with such a wide range of diverse communities when some cultures shut them down is a challenge that they have not yet solved.”

Alexander also makes the point that “some traditional sports are struggling to retain or attract younger audiences, for instance, and if they align themselves with repressive regimes, that may deter fans from engaging as they otherwise would.”

Risk versus reward

The broader challenge is that sport is an industry in which balancing risk versus potential reward is an everyday calculation that is factored into business models, from signing players to awarding hosting rights.

Alexander warns: “If you put profits over people, particularly when the risks of going down a certain route or aligning with specific sponsors, investors or hosts is concerned, it’s a long journey to win them back.”

With this in mind, a thorough risk assessment of any strategic choices is essential, he adds.

“Having core values and ensuring that every partner and stakeholder aligns to those values, ideally as engaging and supportive of every demographic as possible, is fundamental,” Alexander says.

“There have been incidences where football clubs, for instance, have signed players who have been accused of sexual misconduct, and whether they are guilty or not, their presence alienates huge swathes of their community, from female staff and teams to families who pay to watch them and sponsors who want to create positive vibes.”

A commitment to making a positive change in advance of a collaboration being struck is also important.

“This community activity should not be profit-making, nor should it be done with any thought for the bottom line,” Alexander explains.

“Supporting those most in need, using profits or expertise to empower those in disadvantaged communities or situations has a huge impact on loyalty but it should be a benefit, not a focus. You have to do the right thing because it is the right thing, not because it makes you look good, essentially.”

“Sadly, there are just too many examples of sport poorly managing crises and not doing the ‘right thing’." Jonny Gray, Senior Managing Director of Sport at the Ankura

Ready for the unexpected

However, organisations should always be braced for the unexpected, as reputational crises can emerge out of nowhere. The Royal Spanish Football Federation (RFEF) found itself in the firing line recently when its President, Luis Rubiales, kissed Spanish national team footballer Jenni Hermoso without her consent during the FIFA Women’s World Cup trophy ceremony. 

Rubiales was relatively defiant – and was initially backed by the RFEF – before FIFA’s suspension of the federation chief, and the threat of a boycott from Spanish footballers, ultimately led to his downfall. 

“The impression remains that the RFEF were pushed into a corner, rather than realising their mistakes and taking positive and affirmative action,” Alexander says.

“The situation has now shone a light on sexism and patriarchy within Spanish society, exposing deeper-rooted issues that the success of the World Cup champions and the influence of their victory may well help to address.”

However, the best examples of good practice are those where organisations do the right thing in the first instance – and where they identify the issues before they become a crisis and prevent the resulting media storm.

“The Football Association in England has been dragged into concerns about players getting dementia from heading the old, heavy leather footballs,” Alexander says. “While they have supported research into the long-term causes, a recent initiative saw some of their women players compete against Australia with missing numbers on the backs of their shirts to highlight the perils of dementia.

“The campaign is done in collaboration with the Alzheimer’s Society, helping to raise funds as well as awareness for the charity and encouraging players to talk about how they have been affected by dementia within their friends and family circles. Rather than avoiding the issue of dementia, both within the game and beyond, the FA have faced the issue and addressed it consistently, for which they should be applauded.”

Jonny Gray, Senior Managing Director of Sport at the Ankura

Jonny Gray, Senior Managing Director of Sport at the Ankura

Investing in reputation

Gray also praises efforts in tennis to enhance the reputation of the sport in the wake of BuzzFeed’s ‘Tennis Racket’ match-fixing revelations back in 2016.

“The international governing bodies immediately commissioned an independent and public review of the sport which led to the establishment of the world’s first legally independent integrity agency regulating and safeguarding the integrity of a major work sport, the International Tennis Integrity Agency (ITIA),” Gray says. “This has been an expensive undertaking by the sport but that expenditure is viewed as an investment in the future value and reputation of the sport, not a cost to be avoided.

“Sadly, there are just too many examples of sport poorly managing crises and not doing the ‘right thing’. Sport finds this hardest when its own leadership is the issue, as we saw recently with the Spanish Football Federation and Canada Hockey.”

Reputations in sport, as in the broader business space, have to be earned through extensive efforts to build loyalty that commonly take years. In the unforgiving world of sport, though, missteps can be brutal for the reputation of even the most well-curated and established brand. 

 

Find out more here about Ankura and Calacus.

Images: Bjarte Hetland/CC BY 3.0/Markus Spiske on Unsplash/Cristian Tarzi on Unsplash

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