Halal reputation management: an afterthought to halal certification?

According to the latest State of the Global Islamic Economy Report 2022, the halal market is expected to be valued an estimated US$2.8 trillion by 2025 at a 4-year Cumulative Annual Growth Rate (CAGR) of 7.5%.Next to the more mature halal food market, the halal market today has expanded far beyond food into modest fashion, media & recreation, travel, pharmaceuticals & healthcare, cosmetics, logistics, and more.

The right halal certificate gives companies optimal market access to these fast-growing halal markets. As a result, many companies in Muslim (majority) and non-Muslim countries have embraced halal certification of their products and services. What few companies realise, however, is that once companies are halal certified, losing your halal certificate is a problem and in fact a major corporate reputation risk for companies operating in Muslim markets.

There are numerous examples of big companies that (temporarily) lost their halal certificate, and experienced major losses in sales (millions of USD) and corporate reputation.

A halal certificate can be withdrawn by halal authorities for various reasons. First of all, because of non-compliance of the company’s halal operations that is discovered during an audit by the halal certification body. Second, the halal requirements for certification can change, because of the introduction of a new halal standard or a new fatwa (religious ruling) that can declare certain materials, products or processes non-halal. In case a company is involved in a halal issue or crisis, the halal certification body can temporarily suspend the halal certificate until it has closed its investigation on the matter. Finally, other Muslim countries can change their policy regarding what halal certificates are accepted by their country and change regulation on what halal logos are allowed to be shown on products at retail level.

Hence, for halal certified companies it is essential to protect your sales and corporate reputation in your key Muslim markets. The only way to realise this, is to actually measure and track both your corporate halal reputation and compliance per key Muslim market. For this there are two important key performance indicators to measure and track: the halal reputation index and licence to operate rating.

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. Corporate halal reputation is vulnerable due to the way companies are organised and needs a robust measurement. The Halal Reputation Index (HRI) is a quantification of the halal reputation of an organisation based on an assessment of a number of factors, which drive and predict the corporate halal reputation of a company and sales. The HRI is based on an algorithm using four halal reputation drivers: halal authenticity; trustworthiness of halal certification body; messages by company and supply chain partners; and messages by external stakeholders. The HRI is measured through an internal audit and external assessment. This intelligence can be complemented by the benchmarking of corporate halal reputation with competitors.

Companies serving Muslim markets need to earn their licence to operate. Key drivers for the licence to operate (LTO) is the ability to anticipate halal market requirements, address them through a solid halal authenticity, a trustworthy halal certification body, the right messages by the company and supply chain partners, and positive messages by external stakeholders. Changes in halal requirements, such as a new halal regulation, halal standard, fatwa, or a revised list of which halal certification bodies are recognised can immediately change your LTO rating. Monitoring your LTO rating is a critical measurement for your key Muslim markets. LTO is measured by assessing the emerging halal market requirements of your market(s) and relating this to your HRI drivers. The systematic scanning of the halal market requirements is important for brand owners in order to identify gaps between the (emerging) market requirements and brand practices, and pro-actively addressing them in order to ensure sustainable high sales of brands operating in Muslim markets.

Despite realising the importance of corporate halal reputation, many organisations still continue to neglect corporate halal reputation risks and fail to track their halal reputation performance. The dynamics of the halal industry today and the emerging industry requirements, however, will make measuring the corporate halal reputation and licence to operate rating a critical success factor for doing business in Muslim markets.

Halal reputation is a journey, starting with regarding halal reputation management as a problem to be addressed urgently, viewing halal reputation as an asset, considering halal reputation as a competitive advantage that can increase sales, and representing halal reputation management in the boardroom. Setting halal reputation objectives by top management, related to the halal reputation journey, is an essential ingredient for halal reputation excellence.

This article was published at HalalFocus on 21 June 2022.