Friday - February 18, 2022 | News+Articles
Trust and the responsibility for business
Edelman recently released its much anticipated 2022 Edelman Trust Barometer report. It’s full of key takeaways for business leaders, starting with the t word.
Edelman said that trust “is the ultimate currency in the relationship that all institutions — companies and brands, governments, NGOs and media — build with their stakeholders”.
“Trust defines an organization’s license to operate, lead and succeed. Trust is the foundation that allows an organization to take responsible risk, and, if it makes mistakes, to rebound from them.
For a business, especially, lasting trust is the strongest insurance against competitive disruption, the antidote to consumer indifference, and the best path to continued growth. Without trust, credibility is lost and reputation can be threatened.”
People trust business
For the fourth year in a row, business is the most trusted institution. The COVID-19 pandemic has exacerbated the poor perception of government and media and they are currently seen as the most divisive. If you watch the news or scroll through social media, that should come as no surprise. You’re not sure what to believe anymore. On the flip side, the year 2021 has likely bolstered business’ reputation with its commitments — such as social justice — and actions, such as vaccine production.
Business as societal leader
The report shows that business, along with NGOs, are seen as the most capable to lead society to tackle the challenges of our time. Government and media? Again, not so much. This is especially important where 85% worry about job loss, 75% with climate change, 71% with cybersecurity, 65% with losing freedoms as a citizen, and 57% with experiencing prejudice or racism. With challenges come opportunities. Business can stand to do more.
In the cycle of distrust government and media divide while business and NGOs are pressured to take on societal problems beyond their abilities. So, while businesses are seen as leaders, they cannot do everything, just step up to match the trust given to them.
Losing faith in capitalism
With business’ leadership in mind, maybe we should reimagine and transform our systems. More than half surveyed say they believe capitalism, as it exists today, is doing more harm than good. Consistent with that sentiment, around six in 10 put a premium on values in business; 58% buy or advocate for brands, 60% choose a place to work, or 64% invest based on their beliefs and values. Nine in 10 institutional investors subject environmental, social and governance (ESG) factors to the same scrutiny as operational and financial considerations.Could stakeholder capitalism be the answer? Larry Fink’s brand of capitalism? The Davos Manifesto proposes the universal purpose of the company will need a shift from purely benefiting shareholders to all stakeholders. The shared value concept and integrated thinking principles are also noteworthy in this discussion.
What can business leaders do next?
To paraphrase Spider-Man (all versions, pick your favourite), “With great power comes great responsibility.” Trust works here, too. Business leaders empowered with the trust of their stakeholders have the responsibility, the duty to act in good faith and ensure that it will have a net positive impact on all that it affects.
Business leaders — in this case, CEOs — are expected to be the face of change, to do more engagement on societal issues. They are seen as stabilizers and effective changemakers, and they should inform policies (read: NOT politics) needed to drive change.
However, they should proceed with caution, because even when business as an institution is trusted in itself, CEOs can be seen as distrustful or liars. To be cautious is to be educated, to be trained, and to be prepared. You solve distrust by fortifying credibility through building competencies and capability. Show you can be trusted by knowing the issues to act on them appropriately and transparently with consideration for all.
At Competent Boards, our programs are designed precisely to meet this educational challenge.
Elvin Madamba is the ESG Research Lead for Competent Boards. Follow him on LinkedIn.BACK TO NEWS & VIEWS