This post was originally published on purpose.edelman.com.
Crisis in Leadership
There is a crisis of confidence in leaders of business and government across the globe. And when you look at Asia Pacific’s two largest markets, China and India, there is real cause for concern.
According to this year’s 2013 Edelman Trust Barometer, there is a significant trust gap between institutions and their leaders – trust in government in China is a full 47 points higher than it is for government officials. This massive gap makes sense when taking into consideration recent high profile government scandals, such as the removal of Bo Xilai from the highest ranks of government following the exposure of personal corruption. At the same time, however, trust in business in China is 35 points higher than trust in business leaders, which suggests that the crisis in leadership in China extends beyond government.
In India, the gaps between government and business with their respective leaders (35 point gap in government and 34 point gap in business) are similarly wide. Around the Asia Pacific (APAC) region, the story is much the same.
New Stakeholder Expectations
So what does this trust gap have to do with Corporate Social Responsibility (CSR) & Sustainability? Well, actually quite a bit.
Global economic instability, persistent misdeeds by visible leaders and growing social and environmental problems have altered the expectations that APAC stakeholders have for business and its leaders. Gone are the days of blindly trusting business as a reward for delivering consistent financial returns to investors. Today, stakeholders expect business to run a profitably at a minimum. To build long term trust, business must now also treat employees well, listen to customers, ensure ethical business practices, protect the environment and invest in communities up and down its value chain.
Put another way, today’s trust in APAC business is not only dependent upon “what” a company does (operational), but also “how” it does it (societal).
The State of CSR & Sustainability in Asia Pacific
CSR & Sustainability – if done correctly – is the “how” of building trust in Asia Pacific.
Yet despite significant growth in CSR & Sustainability investments in this region over the past few years, most companies are not reaping the trust lift that the practice has the potential to deliver.
So how do you build trust through CSR & Sustainability?
Five Ingredients for Building Trust in APAC through CSR & Sustainability
Based on the most recent Edelman Trust Barometer findings, along with our own experiences and recent events over the past year, here are five elements that must be addressed if CSR & Sustainability is to help a business build trust. While the principles apply globally, there are some nuances to consider in the APAC region:
The first step is to ensure that CSR & Sustainability has a clear purpose in the context of the company’s business objectives. This sounds obvious, but many companies do not take the time to determine exactly where they stand on the CSR & Sustainability spectrum. This is important because there will inevitably be instances in which economic incentives come up against CSR & Sustainability commitments. While the business may state and believe that it must operate “responsibly,” the description is too vague to provide clear direction to functional teams at a practical level.
Senior management must first determine and agree on why they are investing in CSR & Sustainability. How will it support business objectives? Is it designed to manage risk, improve operational efficiency or strengthen stakeholder relations? What are the expected outcomes? Once this position is determined, setting a strategy with clearly defined targets across functions will help to ensure that activities are included in core operations and decisions can be made when tradeoffs are encountered.
Listening to customers, employees, and other stakeholders and taking into consideration these outside views is a fundamental attribute of building trust in APAC. In the context of CSR & Sustainability, this means understanding which societal issues are relevant and to what degree the business is expected to address them. The term often used in CSR & Sustainability circles to describe this is “materiality.” Business is not expected to address every societal issue.
Let’s look at an example of a large electronics company operating in the region.
If the extent of this company’s CSR & Sustainability work is an annual charitable donation to a local cause that does not relate to its business, and one or two regional employee volunteering days, the potential benefit to the business is limited. Stakeholders would much rather know how this same electronics company addresses labour issues in its supply chain in China or how specific environmental impacts of its product are being improved along its value chain.
Stakeholder engagement is the foundation of any CSR & Sustainability practice. However, simply understanding societal impact is not enough. As in the case of the electronics company, stakeholders expect to see and hear about how the company is addressing those issues through policy, partnerships, programmes, operational changes and reporting.
Yet integrating CSR & Sustainability into the operations of the business is very difficult. It requires significant internal engagement with employees across functions, levels and geographies.
Here is a simple example. If a large coffee company runs coffee bean farmer training in Indonesia and has a page dedicated to describe the issue on its website, is the barista serving coffee to a customer in Kuala Lumpur able to answer questions about it? If the answer is yes, then CSR & Sustainability is integrated.
In APAC, business has a tendency to shy away from communicating about its social and environmental performance. There are a couple of reasons for this. One reason is that business in this region has not traditionally been expected to communicate about these issues. Financial disclosure was enough. Some companies, therefore, resist this new communications expectation.
Another reason is corporate culture. Culture that has been nurtured for decades around “being humble” when it comes to social contributions has created internal communications barriers that impede business from informing stakeholders of this now critical performance area. This is particularly distinct in the APAC region. Maintaining corporate culture is important, of course, but the tension between communications expectations and culture must be addressed if trust is to be established.
Business is not expected to address the issues alone.
According to this year’s Edelman Trust Barometer, globally, four out of five markets with the highest trust in NGOs are in APAC (China, Malaysia, Hong Kong, Singapore). Partnering with NGOs in this region, therefore, brings credibility to CSR & Sustainability investments, particularly if the NGO partner becomes an advocate for the company. To derive the most value from NGO partnerships, business should learn from the NGO’s expertise to improve specific societal impacts of their business. Finding mutual ground at the outset of the partnership is key.
Today’s crisis in leadership presents an opportunity for business to fill the expectation gap, particularly on how institutions address social issues. Effective CSR & Sustainability plays a big role in “how” companies in APAC meet those expectations and build trust.
Image by Erwin Soo.