Corporations gain trust, governments lose it

23:49, Jul 10 2014

The annual Global Trust Barometer published by US-based public relations firm Edelman presents one of the best running tallies of who's up and who's down in the reputation stakes across 27 countries.

In its 2014 edition, published earlier this year, Edelman uncovered an unexpected reversal in fortunes for corporate reputations, which had been on the slide in recent years. On a global basis, corporations became slightly more trusted than they had been, while governments - previously in the ascendant - lost ground.

In nearly half the countries surveyed, trust in governments was running 20 points behind trust in businesses, and some cases the gap is as large as 40 points.

Overall, this is the largest gap between government and business observed since Edelman began publishing the barometer in 2001 and, with an eye no doubt to gaining some new clients, the firm says "this is a profound evolution in the landscape of trust from 2009, where business had to partner with government to regain trust, to today, where business must lead the debate for change".

Neither, however, comes close to the solid level of trust accorded to non-government organisations, while the gap between trust levels of informed elites and the general public also continues to widen.

While New Zealand is not part of the survey, the trends described ring plenty of bells here.


Particularly interesting is the observation that while companies as a generic group may be improving their trust ratings, trust in business leaders is nowhere near as strong.

"Only one in four general public respondents trust business leaders to correct issues and even fewer - one in five - to tell the truth and make ethical and moral decisions," the trust survey found. They were also far more likely to trust a subject expert, academic, NGO, or a like-minded person over the word of a chief executive.

Yet on the flipside, Edelman found a very high level of expectation from both their "informed" public and their general public samples that businesses not only should be appropriately regulated to do the right thing, but that businesses have a legitimate role to play in making the rules.

In other words, while only about half of those surveyed trust businesses, they are indicating not just a willingness to allow business to behave well, but an expectation that they should, with 84 per cent believing businesses "can pursue its self-interest while doing good work for society".

"This is, in fact, the licence to lead, beyond the legal construct of licence to operate, toward a new role of initiating change," writes the firm's president and chief executive, Richard Edelman.

In New Zealand, licence to operate is a well-understood concept among large businesses, especially those engaged either in real world activity with environmental impacts - electricity, oil and gas, farming, fishing - and new industries that reach deep into our lives - especially those holding databases full of private information.

If the recent past is a guide, licence to operate has tended to be seen by many corporates as a hygiene factor, something that must be done and which, when things turn recessionary, may find themselves starved of funding and C-suite support.

How much less, for example, do we hear nowadays about sustainability reports and green initiatives? While some companies have adopted them wholeheartedly, that's often more a reflection of a single champion in a leadership position, often in a smaller company.

Several large listed companies, which dabbled in sustainability reporting, have quietly either dropped or scaled back the effort.

However, licence to lead implies something quite different.

Take, for example, Fonterra's infant formula botulism scare last year. There's no doubt it had a major impact on Chinese consumer sentiment. The Edelman barometer singles out the fact that 84 per cent of the Chinese respondents to its poll didn't trust existing food safety standards.

Despite a shaky start, and with a lot of help from government ministers who burnt up political capital in their relationships with Chinese counterparts, Fonterra managed to stay in the China market and is emerging as one of the much reduced range of infant formula makers that will be allowed to continue operating in the Chinese market.

It has restored its licence to operate in that market. But if it wants to continue a journey to restore its previous levels of high trust among Chinese consumers, Fonterra needs to get into the thick of policy-making in both China and here, in New Zealand.

That would demonstrate use of the "licence to lead". Many other sectors in New Zealand could benefit from a similar focus - the electricity sector moving to stamp out disconnection for debt, rather than allowing it to quietly creep back up, or the forestry sector taking full responsibility for worker safety in a deadly industry - are two that spring to mind.

However, not many companies are equipped with the vision or courage to make this leap. Those that do are likely to gain competitive advantage that will be very difficult to replicate.