“There is nothing permanent except change.”—Heraclitus, ancient Greek philosopher
As we look around the world today, change is one of the few constants. Russia’s invasion of Ukraine added global instability to a list of massive challenges—the Covid-19 pandemic, now entering its third year, supply chain disruptions and ongoing competitive issues stemming from China’s economic rise. All are sending ripples through the existing global framework.
Many governments and their citizens are questioning the ability of longstanding, international institutions to effectively address these problems, leading to an increase in nationalistic and protectionist policies and increasing focus on regional trading blocs with “like-minded” countries.
New alignments could bring significant changes to trade, investment, data, and labor flows based on geopolitical considerations rather than economics. The ramifications will not be clear for the foreseeable future. Global institutions unable to keep up with these changes, such as the World Trade Organization, face becoming irrelevant. Also, companies operating in global markets are coming under increasing pressure—sometimes in markets presenting contradictory pressures - to police their supply chains and operations on important societal issues—human rights, green companies, labor practices—but also for sourcing from “politically friendly” governments.
These tensions are clear based on new findings in the 2022 Edelman Trust Barometer Special Report: The Geopolitical Business. Trust across institutions has risen in the West (up 6 points for the U.S. and UK and 4 points for Germany). But trust inequality, between high- and low-income respondents reached an all-time high in the U.K. (34 points), Germany (28 points), France (23 points); in the U.S., the trust gap was not a record but still high at 23 points. Globally, trust in Government has risen three points since January, but, at 56 percent, is still in neutral, not trusted, territory.
Despite this lack of confidence in government’s ability to act, many of the world’s biggest challenges require global action and cooperation. Pandemics, climate change, biodiversity loss, poverty, global health, energy security, weapons proliferation, and food shortages, are some of the biggest threats to our national economic and social well-being; yet they are not confined by national borders.
Today’s shifting geopolitics present new opportunities—and risks—for Business. Globally, Business remains the only trusted institution (62 percent). Over the past two years, Business has proven its ability to deliver solutions to global problems. Pharmaceutical companies developed vaccines that offer significant protection and dramatically reduced risk of serious illness and death from Covid. The private sector in China, Europe and the U.S. is driving innovation and change in addressing the challenge of climate change. Global companies in sectors from agriculture to energy are leading the change to address growing scarcities.
This begs the question: Are expectations too high for Business to lead? As citizens’ trust in Business has grown, so have expectations that it should not only solve big, societal problems but act as a check and balance against certain policies, practices, and actions by governments. Nearly half of consumers (47 percent) bought or boycotted a brand based on its response (or lack thereof) to Russia’s invasion of Ukraine. Companies can see a potential boost in trust if they take action, (up to 31 points). Companies that do not take action can see a potential trust loss, with, at most, a 38-point trust loss. This new expectation of Business—on top of the other societal issues it is expected to lead in solving as well as its core commitment to profitability and responsibility to shareholders—puts multinational corporations in an especially tricky position as they may be called upon to navigate competing views of which actions by a foreign power warrant a response, and which do not.
Business also faces an inherent challenge: Companies do not govern, nor can they legislate. To truly be successful, Business must be part of the holistic infrastructure addressing the challenges facing our world, driving innovation, delivering results for shareholders, acting as good societal and global citizens for their customers and employees and, certainly, informing government policy and regulation. But long-term solutions—to geopolitics, climate change, poverty, and other highly complex societal issues—cannot be found without Government and international institutions as vital players.
There is hope. While the Trust Barometer findings are open to interpretation, it seems reasonable to conclude that the strong response to Russia’s Ukraine invasion by governments in the U.S., the UK, France and Germany has generated increased trust in those governments. These steps build confidence that governments are addressing the concerns of its citizens.
Building trust through action is an important lesson. In these ever-changing times, especially facing a global economic slowdown that may hamper Business’s ability to be an agent of change, governments must step up to meet the expectations of their citizens. Without action by governments, there is no trust in their ability to solve the most pressing issues of our times. Meanwhile, while we hold out hope for Government, Business will be called upon to act and respond, including to geopolitical shocks, for the foreseeable future.
Deborah Lehr is CEO, Edelman Global Advisory