Watch the recap from the 2014 Edelman Trust Barometer presentation and discussion panel at the World Economic Forum in Davos.
The 2014 Edelman Trust Barometer shows the largest ever gap between trust in business and government since we began this study in 2001. This can be attributed to a continued destruction of trust in government that began in 2011, and a steady rise in belief in business since its nadir in 2008. In nearly half of the 27 nations we surveyed, there is a gap of more than 20 points. In a few nations, the divide is as much as 40 points. 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.
Business may interpret this as the moment to push for deregulation, as it did a decade ago. That would be a monumental error in judgment. Our research indicates a reputation hangover for business from the Great Recession of 2008. Events of the past 12 months, including a record fine of $13 billion for J.P. Morgan on the sale of troubled mortgage securities, the largest ever bankruptcy in Latin America with the failure of Eike Batista’s EBX deep-water oil drilling firm and food scandals involving antibiotics in the poultry in China, have renewed concerns about business’ ability to self-regulate.
The result is a continuing demand for government oversight; 84 percent of Chinese respondents believe there is too little regulation of its food industry, while by a five-to-one margin those in UK, Ireland and Spain want more regulation of financial services.
It has generally fallen to government leaders to establish the context for change, to mold public sentiment, then through legislative or regulatory process create the rules of the game. Former U.S. President Teddy Roosevelt said a government leader had a “bully pulpit” or an unparalleled platform to educate (note: “bully” in his day meant wonderful or superb).
But today, government lacks the long-term thinking and popular support to keep up with innovation that is cross-border, complex and requiring fundamental rethinking. For example, describing an inconclusive meeting in December between President Obama and CEOs of leading technology companies in the wake of the revelation of widespread global surveillance by the National Security Agency, the New York Times wrote, “Tech Leaders and Obama Find Shared Problem: Fading Public Trust.” Upcoming elections in key developing markets Brazil, India, Indonesia, South Africa and Turkey will freeze the policy process, even as popular discontent has found expression in the streets.
Now it is business’ turn to ascend the “bully pulpit” (or “soapbox” in UK parlance). Business has recovered trust from the crisis period because it is seen as having made demonstrable strides in transparency, supply chain and product quality. Our research shows clearly there now is an opportunity for business to make its case for change, as 79 percent believe business should be involved in formulating regulation in such industries as energy and food, while a majority feels government cannot go it alone. Eighty-four percent of respondents believe that business can pursue its self-interest while doing good work for society. This is, in fact, the license to lead, beyond the legal construct of license to operate, toward a new role of initiating change.
The question is how business can best take on this new, unfamiliar role in the public discourse. We recommend the CEO become the Chief Engagement Officer, taking responsibility for establishment of the context in which change will occur. Instead of the usual inside game played by business, which relies on lobbying regulators or elected officials, the CEO will take the case to the broader publics to make the macro case for forward progress, not just the micro case for a given product or new factory, as Jeff Immelt of GE has been doing in the energy field (disclosure: GE is a client of Edelman). There should be the usual strong economic rationale, but there must be thoughtful consideration given to arguments that address emotion and risk, as well as societal benefit. This is especially important in industries such as energy, technology and food, where there are important personal consequences to systemic failures such as spills or hacking of personal financial data. And the CEO must have the courage to hear what is being said in the debate and be willing to change accordingly.
This cannot rely solely on the CEO. An inclusive management model that embraces academics, employees, industry trade groups, technical experts and non-governmental organizations will enable the company to become a credible voice on issues. Our research shows a much greater degree of trust is afforded those with specific credentials or those with similar perspective (trust in the CEO is at 43 percent while an academic is 67 percent and “a person like yourself” is 62 percent). As noted in prior years, the new normal is consensus found between information conveyed top down from authoritative institutions, matched with the more personal, peer-to-peer horizontal flow of knowledge.
We suggest a three-step approach to the establishing context and realizing forward progress:
Participate: Seek input from a broad range of stakeholders. Partner with non-governmental organizations in the drafting of clearly articulated goals, which offer both a business case and a pro-society rationale. Conduct a listening tour of affected communities to address emotional concerns while creating personal relationships with local leaders. Engage employees, enlisting their involvement to ensure organizational alignment around goals and values.
Advocate: Offer a clearly articulated strategy that begins with the context of how a proposed change will improve lives of customers, as well as your bottom line. Go on tour, engaging in debate with critics, informing media of all stripes, from mainstream to social. Enable your partners, from NGOs to academics, by briefing them regularly. Foster a culture that supports employees speaking out, amplifying the engagement and creating mass movement.
Evaluate: Evolve behavior based on collective inputs. Have measurable outcomes, specific quantitative and qualitative targets. Report frequently on progress against metrics. Acknowledge where delivery is under expectation and have a path to improved performance. Amend your strategy and goals while remaining authentic.
This “bully pulpit” is largely unfamiliar ground for business leaders. But at the moment, innovation in industry is being stymied by justified public concerns, with government unable and business unwilling to step forward. We strongly urge business to take the chance to redefine value as being also about values, to connect with its stakeholders in a deeper manner by explaining the economic, societal and environmental context in which it seeks to operate. Trust will be conveyed to those companies and industries that recognize the need to move beyond transactional thinking toward better understanding of the tangible actions that will solve the issues we face.
Richard Edelman is president and CEO.