This is not an altruistic endeavour. Companies who record higher levels of trust are employers of choice, they enjoy stronger partnerships with Government, they are more attractive to investors and they show increased levels of customer preference. Embracing a model of competent and ethical behaviour delivers pay back to business. The ultimate dividend, however, will be a more cohesive healthier society equipped to deal with the unprecedented global challenges we face today.
As Ireland shortly commemorates 100 years of independence, Anglo-Irish relations, which have defined our history, will not be the only deeply complex issue that will shape our long-term direction of travel.
Our society will be challenged by Brexit and, potentially in the near future, by efforts to weaken the United Kingdom with increasing pressure for Scottish independence and a local drum beat for a border poll.
But there is more complexity to consider.
The climate crisis, inequality, racism, the pandemic, a raging infodemic and the fourth industrial revolution will influence the way we work, live and relate to one another.
In a globalised world, Ireland cannot unilaterally arrive at solutions to these issues nor can they be implemented unless people have faith in the institutions that we rely on to deliver change.
Right now, that faith is low. Global trust, the oil which keeps society moving, has been eroded weakening the credibility of the critical institutions of business, media, Government and NGOs. These institutions also have a trust deficit in Ireland, based on the latest findings of the 2020 Edelman Trust Barometer.
If trust is to be restored and if we are to deal with the issues facing us, the playbook which has sustained these global institutions since the second world war requires a new edition.
Business is a case in point.
The expectation of business has historically been to turn a profit. It is required for investment, innovation and to reward risk. Now, the measurement of business impact is not only financial, but rests on how it effects the health of society. This determines levels of trust in business and the expectation is clear. Almost 6 in 10 respondents to the Trust Barometer believe that CEOs should hold themselves accountable to the public and not just to the board of directors or shareholders. 9 in 10 believe that CEOs should speak out on challenges such as the pandemic impact, job automation, societal and local community issues.
The principle of noblesse oblige applies to corporations more so than any institution. The unique status they hold, and their financial firepower now requires them to act, not just talk, in the interests of society. Glossy CSR reports and values statements do not cut it.
The findings of this year’s Trust Barometer shows the practical actions that can be taken. The greatest opportunity for business to build trust is by tackling the infodemic which is raging internationally. Its spread across borders arises from a lack of trust in traditional media, participation in information echo chambers, the lack of credibility of spokespeople, a reluctance to engage with multiple news sources, and a rush to share information without verifying it.
This presents a threat to the global economy and liberal democracies, which has been laid bare in recent times by the pronounced divisions in the US. Business can show leadership. The most believable source of information is employer communications – higher than government communications or traditional media reports. Business is now expected to act as a lead guardian of information quality, ensuring that only reliable, trustworthy information is being shared and consumed.
The obligations on business do not end there and it is looked to for leadership on sustainability, systemic racism and on the implications of the current industrial revolution on workers. Over 50% worry that the pandemic will accelerate the rate at which companies replace people with AI and robots placing an expectation on business to provide upskilling opportunities.
These are complex new ethical realities for business which go well beyond the traditional requirement of competency which has centered on financial and operational excellence.
Take the situation that currently faces US corporations. They are sitting on $2.5 trillion which was borrowed on bond markets in 2020. To put this in context they raised more in the early months of 2020 than the entirety of 2019. Many required the funding to survive the pandemic but equally many will not have to call in this protection.
The decisions on what to do with these funds will most likely revolve around capital spending, buy backs, acquisitions or whether to hold funds. This has implications for society. A binge of acquisitions of smaller companies under financial duress erodes the innovation, creativity and jobs which these companies can provide. Some might say this is the market working, others will say it’s a distortion providing an unnecessary leg up to corporate debt issuers.
Either way, the Trust Barometer lays bare the expectation on business to act sustainably by focusing on long-term thinking over short-term profits. Separate research by Edelman of 600 institutional investors in six countries representing firms that collectively manage over $20 trillion in assets makes clear investor expectations. They are applying a premium valuation to companies that excel in environmental, social impact and governance (ESG) initiatives. As we recover from the crisis, investors expect both their firms and the companies they invest in to intensify focus on ESG.
The challenge to conventional thinking around trust in business is also being expressed by both consumers and employees with activism on the rise. Employees say they are far more likely to speak up than a year ago with over 50% prepared to voice their objections and engage in workplace protests if they strongly disagree with a company action or policy. Nearly 7 in 10 agree that consumers have the power to force corporations to change, and more than 6 in 10 believe the same is true for employees. Consumers and employees want a seat at the table with the opportunity to influence decisions that are made in a company. There is an expectation that business will be open to this reality.
Meeting the challenges from climate to racism, the pandemic, and the infodemic requires behavioural change across society. Business can be an enabler of this change but to do so it must be trusted.
The expectation, evident in the Trust Barometer, is that business will operate to a new ethical standard and accompany its traditional responsibility of financial and operational performance with actions that improve the well-being of people and society. Trust in business will be founded on meeting that expectation.
This is not an altruistic endeavour. Companies who record higher levels of trust are employers of choice, they enjoy stronger partnerships with Government, they are more attractive to investors and they show increased levels of customer preference. Embracing a model of competent and ethical behaviour delivers payback to business. The ultimate dividend, however, will be a more cohesive healthier society equipped to deal with the unprecedented global challenges we face today.
Joe Carmody is managing director of Edelman, one of the partners to this year’s DMX Dublin. On the day, Feargal Purcell, head of public affairs Edelman will moderate a panel of speakers that will discuss “society at the crossroads” which will look at the role businesses will play in the future. Panelists include Aine Kerr, Kinzen, Ciara Kelly, broadcaster, and Peter Vandermeersch, publisher, INM.