We’re losing trust in business. How can we get it back?
Business is “on the brink of distrust”, declared Edelman’s Barometer earlier this year. It is both telling and alarming that trust in all four institutions – government, media, business and NGOs – has deteriorated in 2017 from 2016. This trend reversal is significant given that we’ve witnessed a major rebound of trust following the financial crisis of 2008 and saw the index climb to post-recession highs – until now.
It is clear that the expectations of business are changing as rapidly as the world around us. “Corporations must find a way to lead” was the consensus view that emerged from Edelman’s poll. Seventy-five percent of respondents agreed that “a company can take specific actions that both increase profit and improve the economic and social conditions in the community where it operates.”
A contemporary CEO cannot afford to ignore this sentiment. The epoch of corporate social responsibility (CSR) as a cost of doing business has passed; the era of “doing well by doing good” is upon us. Balancing the profit motive with the creation of societal value is about to become a precondition for the long-term success of any corporation, sector, scale or geographic reach notwithstanding.
As business leaders ponder ways to implement and put into operation this imperative, here are a few ideas to consider:
Firstly, beyond the shareholder value , beyond the mission and the vision, a successful business today needs to develop a genuine narrative; one that congruently articulates the value for society this business creates, defines what the leadership philosophy is and what the company stands for. If the reality is that most businesses stand for something other than their balance sheets, creating societal value over and above serving their customers, and also the case that most corporate boards and CEOs ponder the question of responsive and responsible leadership every day, then it is truly regrettable that very few are able to bring it all together in a compelling narrative.
Tesla’s narrative isn’t about making cars: it is about “accelerating the world’s transition to sustainable energy”. Unilever – a major consumer goods company – stands for sustainable development. Those examples come to mind because those narratives truly resonate. The commitment of leadership at the top level of these businesses is readily apparent, continuously articulated and backed with real resources. It all comes down to the coherence of rhetoric and action, where societal value is placed at the core of an operating model.
Secondly, the narrative must be complemented by proactive and continuous engagement of the business with its core constituents. Each company should be able to identify the top 100 stakeholders beyond its vendors, suppliers, distributors or other commercial partners. According to a recent study by McKinsey : “When asked about the most influential stakeholders, executives expect government entities and regulators — as well as customers — will have the greatest effect on their company’s value.”
Given the great diversity of stakeholders’ interests, be they governments, advocacy groups, industry associations, think tanks or community organizations, a bespoke strategy for engaging with each group is required. To communicate its narrative, a corporation must take every opportunity to regularly check in with its constituents, to be present in relevant conversations and to join and actively participate in germane initiatives.
More importantly though, engagement with stakeholders must be about listening and not just telling. Contentious relationships are often a consequence of trust deficit, which on its part results from a lack of interaction and scarcity of opportunity for genuine exchange of ideas. Open dialogue could and frequently does lead to the discovery of convergent interests and can make genuine partnership between a corporation and a stakeholder not just possible, but desirable if not inevitable.
Thirdly, action is required to back it all up. If an effective narrative is focused and easily comprehensible and an effective engagement with stakeholders is continuous and consistent, an effective action is one that substantiates the narrative and builds on engagement.
Delivering on the narrative is not about a drain on resources. It shouldn’t be a cost centre in the same way that CSR shouldn’t be an afterthought or tick-the-box exercise. When Google announced that it will be powered fully by renewables or when Apple pledged to make its iPhones from recycled materials , this wasn’t charity. Those moves make long-term business sense, especially when one accounts for intangible benefits, such as brand value, employee morale, strength of corporate culture and congruence of leadership vision.
Building on these three principles, every company should be able to find space for action in the interest of creating societal as well as business value.
All indicators point to the dawn of a new era – one where a mission-driven corporation will be the rule rather than the exception. Doing well by doing good isn’t off limits to some and a natural course for others, it is a matter of choice. It’s a matter of responsible leadership and of profound and distinctly attainable vision. As corporations work to rebuild trust, proactive steps can and should be taken to develop a narrative, engage with stakeholders and find opportunities for truly collaborative public-private partnership.
SOURCE: World Economic Forum