The AERU Value Chain Compass

Incentives

Reputation

Reputation was important for the case studies in three respects. First, each partner in the value chain had regard to maintaining its good reputation, both with other partners and with stakeholders more generally. Second, the good reputation of the value chain as a whole was valued, recognising that adverse publicity about one partner could diminish consumer confidence in the chain’s products. Third, there was general concern about maintaining a ‘social licence to operate’ by meeting community expectations for responsible behaviour.

Avoiding damage to reputation provides a key incentive for collaboration in a value chain. There may also be clauses in contracts covering duties to avoid reputational damage.

Questions for developing a value chain

• How does the value chain use reputation to select partners for the chain, and to incentivise collaboration to advance the mission of the value chain?

• How does the value chain build a good reputation among stakeholders, including having regard to the chain’s ‘social licence to operate’?

• What mechansims does the value chain have in place for responding to a threat to the chain’s good reputation?