It's been a bruising time for business reputation over the last few years, but as I write this post amidst business leaders gathering in Davos for the World Economic Forum's annual get-together, corporate performance seems to be improving and businesses appear to be entering the next economic cycle with a far greater commitment to managing stakeholder concerns and delivering sustainable growth.
That may go some way to explain the stable or rising trust in business in most countries except the U.S., as reported here by the Edelman Trust Barometer.
However, our own research and client experience indicates that global CEOs appear to misunderstand levels of trust in their companies and industries, and need to think much more systematically and strategically about building, or rebuilding, trust.
While Edelman polls "informed" consumers, Accenture has been speaking with 766 CEOs across the globe in more than 100 countries and 25 industries about trust and sustainability as part of our survey with the United Nations Global Compact.
Our main finding is that CEOs identify trust and reputation as the key driver of their action on sustainability. Seventy-two percent say that trust, brand and reputation have driven them to take action on sustainability. That's well ahead of the 44 percent who were driven by the potential for revenue growth or a reduction in costs. Only 42 percent were driven by personal motivation. Interestingly, the economic crisis has had a major impact, with 83 percent of CEOs saying that the downturn has elevated the role of sustainability in building trust.
Perhaps counterintuitively for some, we found that CEOs in emerging markets are most driven by trust, brand and reputation to act on sustainability. This factor was identified by more than three-quarters of CEOs in Asia and Africa, but by only 69 percent in North America. And the picture is similar when asking them what corporate attribute they think will benefit from greater efforts in sustainability. Emerging markets were confident their reputation would improve. Leaders in Europe and North America were less convinced. No surprises then that Edelman reported rising trust in Brazil and falling trust in the U.S.
Businesses do now recognize that high levels of trust give them a license to operate. But they should also accept that trust also gives them a license to grow and innovate, and this explains why CEOs in fast growth economies appear keener to consider sustainability initiatives than those in other markets. Foreign investors in high growth markets should take note of the link between sustainability, trust and revenue growth.
It is particularly worrying that, for all the commitment to trust and reputation, CEOs still misunderstand the levels and nature of trust. Many seem trapped by something akin to a "trust delusion" that gives them false comfort. Our survey shows that business leaders overestimate levels of trust in their company. Take Health and Life Sciences. Eighty-three percent of CEOs believe their industry is trusted by the public and other stakeholders. The figure is 73 percent in Consumer Goods and Services and 74 percent in Energy.
Our own separate analysis of consumers show that less than half had their expectations frequently or always met and our energy specific research last year showed that only a fifth of consumers trust energy companies to take actions to address energy challenges. Similar studies of consumers and stakeholders around the world, all point to far lower levels of trust in business across industries.
Where is the apparent misunderstanding amongst CEOs greatest? North America, it seems, where 87 percent of CEOs say their company is trusted by the public and stakeholders, versus 67 percent for their industry, a 20 percent difference. Latin American CEOs held the reverse view, with CEOs believing their sectors to be more trusted than their own company by a difference of 18 percent.
This overestimation traps business leaders in a trust delusion that will prevent them from understanding what drives trust and how to address it. It's clear that sustainability and trust go hand in hand.
So, from our research, what should companies do? From observing high performers, it is clear that many CEOs need to improve their understanding of what really drives trust for stakeholders and embed building trust and delivering for those stakeholders into strategies at the core of their business. This is not about PR. In fact, traditional PR approaches exacerbate the erosion of trust. It is about delivering for stakeholders and society, tangibly and verifiably, as part of the essence of the business.
It comes down to four key steps that we elaborate on in our report on managing trust:
- Go beyond consumers and proactively manage trust with all stakeholders, suppliers and partners. Remember that this is a multi-media, multi-polar and multi-stakeholder world.
- Go beyond communications and integrate trust strategies across their business, whether in R&D, sales or back office functions.
- Put in place processes to measure their efforts and the outputs, tracking delivery for stakeholders as well as levels of trust as rigorously as finance or HR track their performance.
- Embed trust in company culture. All employees going about their job must be given the permission to made trade-offs between the interests of the company, society and the environment.
Trust is quantifiable. Its impacts on business performance are measurable. And its link with sustainability performance is clear. It is also founded on delivering both business value and for stakeholders. If CEOs takes these steps, not only will they begin to regain the trust that gives them a more valuable license to operate, but also a license to grow and enter new markets.
Handshake - CC license by toddhigginsdesigns (Flickr)