ABERJE Speech – A Roadmap For Brazil

Richard Edelman delivered a speech to ABERJE in Sao Paulo 

August 4, 2016

This group has one of the toughest jobs in Brazil’s boardrooms today. Selling products and building companies are never easy, but I can only begin to imagine the uphill battle Brazil’s top communicators and marketers face as the audience you target remains constantly overwhelmed by a persistent drum beat of bad news.

For Brazil, 2016 has been an incredibly challenging year – as the country’s reputation has plummeted to a dangerous low point. The economy has shrunk 5.4 percent. The world is questioning whether Rio is ready for the Olympics. The country that was leading BRIC growth has fallen fast.

Brazil’s president, Dilma Rousseff, was impeached, and now the very leader of the impeachment effort has himself been pushed to resignation of his leadership post under accusation of involvement with the ongoing Petrobras investigation.

And now Lula may head to trial.

Just five years ago Petrobras was #14 on Forbes’ list of the most valuable companies worldwide. Today it is #411 – and Uber has surpassed Petrobras in market value. Eike Batista has gone from one of the world’s most admired conglomerate builders to notoriety as the man who both made, and lost, billions.

Our Edelman Trust Barometer, an annual global survey that tracks the trust in major institutions held by both the informed public and general population, shows that the general population, across 27 countries, ranks its trust of Brazil-based companies among the lowest at 32 percent – ranking Brazil ahead of only India and Mexico. Compare that to at least 64 percent trust for German, Canadian and Swedish companies.

We’ve seen this before, in the United States from 2008 to 2009. Respected companies like Citibank, AIG, GM – all fell from grace. CEOs were fired, the government swooped in to bail them out, and a financial and housing crisis ensued that would play out for years to come. Nearly 25 percent of African Americans and Latinos lost their homes. It was a wake-up call that government had failed to set the right guidelines for business and that regulators failed to enforce the law. The entire business community should have paused, reassessed and pivoted – but it didn’t.

Bailouts and a so-called recovery only exacerbated the gap between the haves and have-nots. CEOs went into the bunker, keeping their heads down and waiting for the dust to settle. They focused exclusively on Wall Street, and proceeded to cut jobs, lower wages and outsource—all in the name of efficiency and strong balance sheets.

Eight years of this vicious cycle left the United States with a populist rebellion where the public channeled its frustration and yearning for leadership into the presidential candidacies of Bernie Sanders and Donald Trump, shocking the establishment of both parties.

No doubt: 2016 is Brazil’s equivalent to the 2008 financial crisis in the United States. But your story doesn’t need to turn out the same way as America’s did. Brazil can do better.

So what is it that you as CCOs and CMOs can do? Before we get into that, let’s take a deeper look into three simultaneous revolutions to better understand the opportunity before us:

First, the growing influence gap between government and business. You will not be surprised to learn that, according to the Trust Barometer, trust in government in Brazil, among both the informed public and the general population is startlingly low. Government is trusted by just 30 percent of the informed public and 21 percent of the general population. In fact, Brazil ranks second-to-last in government trust among the 27 countries we polled, against a global average of 42 percent, among the general population.

There is a record gap in trust in these two institutions. Brazil’s informed public cites a 75 percent trust level of business, a record gap, and the general population cites 64 percent.

Without trust in government, the public doesn’t just want—but expects—business to lead.

Second, distrust in institutions has resulted in a new dispersion of authority to individuals. The Trust Barometer also reveals that the classic pyramid of influence is flipped on its head, with influence now resting with the mass population even as power remains with the elites.

Populism is on the rise. The government leader and CEO are being supplanted by a “person like me” and employees as one of the most credible sources of information.

Third, media as we know it has imploded, as a result of the decline of advertising and the rise of the web. Media consumption habits of the general population have shifted. Eighty-two percent of Brazilians cite use of search and social several times a week, whereas just 46 percent regularly read the newspaper and just 40 percent regularly read magazines. For general population, globally, search and social are the dominant media.

The entire business model of paid media has collapsed. Advertising, which sold brands so effectively since World War II, now finds itself in a perfect storm. Between ad blocking, click fraud and the advent of mobile, one-third of the coveted millennial audience sees no ads at all.

Ad blocking technology is offered as a standard element on many mobile devices. Marketers are greatly concerned about the value of clicks on digital ads, with some estimates as high as 50 percent to 70 percent being fraudulent. Programmatic ad buying has driven down prices of digital advertising to pennies per CPM, and prestige brands are having a hard time getting a price premium. Attention spans continue to shrink.

Brands must recognize that the predominant axis of communications is now horizontal (peer-to-peer), not vertical (talk at).

So what can you do as companies and brands?

As corporations, you now face a new set of expectations—and that’s exciting. The public is looking to business to lead, rather than government. There is a new expectation of business: 80 percent believe it can make money AND improve society.

It’s no longer good enough to make money; you must also actively improve society. Further, you have an obligation to demonstrate high ethical standards and continuously prove you are not intertwined in an unseemly fashion with government leaders. And, finally, you need to be a good employer; treat people well and take ownership of your role in their lives and in the communities in which they live. It’s about engagement and integrity. Making your numbers is table stakes in today’s world.

This is not unique to Brazil, it is in fact a trend we see globally, but in Brazil this new expectation of you presents an opportunity to lead at a time when Brazil’s national brand is under fire on an international stage.

If Brazilian companies want to play in the global marketplace, you need to change your playbook. It’s not enough to change the conversation, you must own your responsibility to change the reality. That means installing boards of directors with international influence, with well-recognized experts who will bring best-in-class governance to the C-suite and beyond. It means you need to up your game to focus on engagement, transparency and integrity.

In my view, Brazil is at a crossroads. Will you continue to down-spiral or will you force a reconsideration? I believe you have the opportunity to be the BRIC country that breaks out.

The scandals have tested your democracy, and your systems have shown they can withstand the pressure. We are witnessing strong and independent judicial institutions and free press at work. Moreover, we see that Brazilian society is supporting the process, calling for transparency and ethical behaviors in both business and government.

These are all signs that Brazil can do better. And this is your moment.

We need to define a new Corporate Brazil and regain trust on a domestic and international stage.

Reclaiming the narrative and building that long-term customer relationship is not just about what you stand for as a business, it’s what your business can and should do to address larger societal issues.

Johnson & Johnson’s longtime chair, Robert Wood Johnson, wrote the company’s storied “Credo” in 1943, long before anyone coined the term corporate social responsibility. He understood that J&J’s stated values of taking responsibility for patients, doctors, employees, and communities and shareholders were intertwined. And that with this contract with society, trust would build and business success would come.

The future for business in Brazil is deeply tied to the regaining of trust. The public has seen magnates like Batista rise on the promise of Brazil’s future only to fall amid scandal.

But the public has also seen Brazilians take the global stage, leading some of the world’s most admired companies, like Carlos Alves de Brito at Anheuser-Busch InBev or Carlos Ghosn at Renault-Nissan. Ghosn earned the nickname “Mr. Fix-It” for his turnaround of Nissan and has been widely credited for a trans-cultural leadership style that challenged Japanese business norms while still honoring the automaker’s heritage. He did this by transparently announcing his plan, stressing a culture of meritocracy, opening up dialogue with stakeholders and taking accountability for the company’s success.

What lessons can we learn from the past to turn crisis into opportunity and seize this moment as a time for Brazilian businesses to lead?

Here’s a blueprint for how Brazil can own this moment for positive change, rather than follow in the U.S.’s footsteps:

  • Be a principles-based business that is committed to making business good for society at large.
  • Commit to governance and set a framework for transparent accountability. Appoint internationally-recognized board members and ensure your board has the authority to enact actionable change for transparent governance. What you are going to do to change the status quo? Then do it, measure it and ask the public for feedback on your progress. Like any relationship, that is how you prove yourself and build trust.
  • Collaborate with like-minded companies, regulators and civic groups. You can’t do this alone, but collective action can build an environment that will enable your success.
  • Talk to your employees, tell them what’s going on and let them go forward. Consumers want to hear from a “person like me” and no one is better equipped to carry that message than your own employees serving on the front lines of your business.
  • Your CEO cannot hide. Push your CEO to stand for something beyond the numbers—engagement and integrity—and tell the story thoroughly.
  • Recognize you need to be your own media company and push your story through owned, earned and social channels with a healthy dose of paid to ensure you reach the right audience.

In today’s environment, business has the biggest opportunity of any institution to map tangible change and lead. Think about how Samsung’s success paved the way for South Korea to rise. Natura, Suzano and Votorantim, Banco Itaú, Embraer… could these be the companies that can help pave the way for Brand Brazil?

No one is advocating for Brazil to leave its culture behind. Brazil is a unique animal—it is not the United States, nor should it be. I know and appreciate that chaos can give birth to creativity, but an underlying structure to instill confidence is necessary to get to the next stage in your development.

Ginga is a beautiful and enviable way to play futebol. It’s not a way to run a trusted business on the international stage. But Brazil can retain its vibrant culture and transcend the trust gap.

Five years from now, Brazilian corporations can be thought of as the best in corporate governance, the best in sustainability practices, the best in employee relations—the very best of what is possible in a country that can no longer hide behind the “developing country” label.

Brazil can win. But only by doing it the right way.