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Our Insights 2 Feb 2011

Fortune Favours the Trusted

By Kyra Maya Philips

The recent public action against businesses that have been accused of tax avoidance in the UK such as Vodafone, Arcadia Group and HSBC highlights the fragile nature of public trust in business. These corporates have faced the wrath of protest movements that have on more than one occasion forced shops to close. As these organisations have learnt at great cost, corporate reputation is an asset that can be eroded very rapidly. Public trust – a vital component of corporate reputation – is tangible, and has the potential to have a dramatic impact on public decision making and the attitudes of would-be customers.

Last week, I attended the presentation of the 11th annual Edelman Trust Barometer, a survey which tracks trust in four major institutions – Government, Business, Media and non-governmental organisations (NGOs). The Barometer samples 5,075 informed members of the public in two age groups (25-34 and 35-64) across 23 countries. The respondents all meet the following criteria: college-educated; household income in top quartile for their age in their country; read or watch business/news media at least several times a week; and follow public policy issues in the news at least several times a week.

This year’s survey carried some interesting results; globally, we were told, trust in business was found to be “markedly resilient,” up to percentage points from last year. At first glance, this sounds impressive, considering the myriad corporate crises and continued financial unrest that were features of 2010.

Upon closer inspection, however, it is clear that a fundamental shift is occurring. Yes, trust in business has stabilised globally, but this stabilisation has not been geographically uniform. Trust in business has been rising in the emerging markets, with Brazil and India both experiencing sharp increases. By contrast, trust in business fell in a number of the major developed markets, including the US (down from 54% to 46%) and the UK (down from 49% to 44%).

One could accord this shift in the centre of gravity to the effects of the global financial crisis (the blame for which has generally fallen on the developed world) and the associated corporate scandals that have left the public in developed markets very sceptical of prevailing business practices. Wikileaks and the “increasingly jumbled media landscape” (as the Barometer calls it) have undoubtedly contributed to this escalating lack of trust, magnifying the spotlight on businesses that have been seen to behave in an unethical or irresponsible manner.

In this context, the Edelman Trust Barometer concludes that trust is no longer a given: “It is conditional and it must be earned, premised on what a company does and how it communicates it. This means new expectations for governments, corporations and leaders – as well as a new architecture for building trust.”

The Barometer’s results emphasise that the old business model of vigorous brand protection, close control of information and an exclusive focus on shareholder profit maximization no longer holds ground. The bar of expectation has been raised and the public will only trust in businesses that have earned their faith. This rising tide of social expectations is highlighted in the fact that 89% of the survey’s respondents in the UK expressed a high expectation for the business world to act in the interests of society, even if that means sacrificing shareholder value.

This changing landscape creates fertile ground for the advancement of the sustainable development agenda. There is a clear opportunity for businesses throughout the developed world to regain some of the public trust that has been lost through a genuine embrace of the tenets of sustainability. My fervent hope is that the business world recognises this opportunity, seeing the value of public trust and attempting to either safe-guard it or regain it through more socially responsible behaviour. This hope is based on the fine examples of companies like Unilever, an organisation that has faced bad press in the past (think Greenpeace’s palm oil campaign) and has since become exemplary in its quest to integrate sustainability across its business operations (Unilever’s Sustainable Living Plan), thereby rebuilding public trust and enhancing their corporate reputation.

Interestingly, the Barometer shows a strong rise in trust of NGOs – global trust in these institutions rose by 4 percentage points. Public trust creates credibility, and credibility equals increased influence for these organisations. This increased influence means that the ever increasing number of sustainability-focused NGOs have an growing ability to persuade businesses to act in a more socially responsible fashion.

The Barometer’s results in relation to trust in governments also carry interesting implications for the sustainability agenda. 82% of respondents in the UK and 61% of those in the US expressed a desire for governments to regulate corporates’ activities to ensure that they are behaving in a responsible manner. Public expectation creates political pressure, and this political pressure can be expected to lead to government action and regulatory change, compelling companies to operate in a more sustainable manner. The National Commission report on the BP Deepwater Horizon oil spill is a prime example.

Together, the trends brought to light by the Edelman Trust Barometer can positively affect the future of the sustainability movement. The survey highlights the fragility of public trust in business, and underlines the fact that this trust is now, more than ever, conditional. I am optimistic that businesses throughout the developed world will one day recognise the value and conditionality of public trust, and will attempt to earn and maintain it through embracing a genuinely sustainable business model.

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