Without intervention, we will see a continued move from a crisis of institutional trust to a crisis of interpersonal trust.
Business must continue to lead and do so while navigating polarization.
You can do that by tackling issues like DEI, climate, and reskilling.
Work with, not against government to raise living standards, offer skill development opportunities, and foster secure communities.
2022 was supposed to have been the year when the world emerged from the pandemic, with a promised return to normal life and an economic boom. Instead, we got an unprecedented Russian invasion of Ukraine, spiraling commodity prices, greater global food insecurity, skyrocketing interest rates, continued climate shocks, strict Covid lockdowns in China and a retreat from globalization due to geopolitical risks. This triggered a cost-of-living crisis among the lower- and even the middle-class worldwide.
In the 2023 Edelman Trust Barometer, we see how these macro pressures manifest at an individual level in a set of fears ranging from inflation to nuclear war. These sit on top of pre-existing worries about job losses to automation and the impact of climate change. The consequence is a descent from distrust to acute polarization in society. Without intervention, we will see a continued move from a crisis of institutional trust to a crisis of interpersonal trust.
Force One—Economic Performance and Expectations of Future Income.
Fast-expanding economies such as India, Indonesia, Saudi Arabia, and Singapore sit within the top of the trust index. Slow-growth countries such as Argentina, Japan, South Africa, and Spain are near the bottom. We now see a major collapse of economic optimism, with nearly half of the countries surveyed showing a double-digit decline in a year. Not a single developed nation has over 36 percent of its people confident that their family will be better off in five years. Following the Fukushima nuclear disaster earlier in the decade and facing a consistently up-and-down economy, Japan's optimism that an individual will be better off financially in five years sat at just 15 percent in 2016 and has declined since.
Force Two—Institutional Imbalance.
When there is a large gap in trust between institutions, it creates a table with uneven legs. Government trust levels are far more variable than Business across markets and are particularly low in democracies. The Government-Business trust gap is especially wide in developing country democracies such as Brazil (24 points), Colombia (28 points), and South Africa (40 points), but also of concern in the UK and U.S. (both at 13 points). Business is the sole institution seen as competent and ethical; by contrast, Government is viewed as unethical and incompetent. Business is a stunning 53 points ahead of Government on perception of competence and 29 points ahead on ethics. For business, we have seen a 19-point increase on ethics over the past three years, potentially attributable to its impressive performance during the pandemic, its attention to ESG, and moral response to the war in Ukraine, with over 1,000 companies departing the Russian market.
Force Three—Mass-Class Divide.
Those in the top quartile of income have a profoundly more positive view of institutions than those in the bottom quartile, potentially leading to a loss of shared identity and national purpose. The divide became particularly pronounced in the U.S., U.K., and France in the middle of the last decade, potentially contributing to electoral upheaval. This problem has now metastasized, with a double-digit gap in three-quarters of all the countries we study. High-income earners' trust index has soared from 50 to 62 since 2012 while low-income earners have struggled, with trust up from 44 to 48. Among the most notable national developments of a mass-class divide in the past two years have been in China (from 4 to 19 points) and the UAE (from 10 to 19 points), while the U.S. (23-point gap) and Thailand (37-point gap) demonstrate the current largest divides. Citizens within the same country are living in vastly different realities.
Force Four—The Battle for Truth.
One of the legacies of the pandemic is the continuing loss of belief in Media and the rise of disinformation. We saw evidence of filter bubbles and distrust during the 2016 U.S. presidential campaign and Brexit referendum — the 2017 Trust Barometer found the following year that 53 percent of people did not regularly listen to people or organizations with whom they often disagree. Covid supercharged the disinformation crisis and badly crippled trust in all institutions. Media is the least trusted of the major four institutions (with Business, Government and NGOs). Trust in news sources has declined steadily since 2019 (traditional media from 66 percent to 58 percent, social media down from 44 percent to 39 percent). In democracies, an average of fewer than 40 percent of respondents believe the Media to be honest and fair. We’ve found in past Trust research that the most believable source of information is from “my employer,” like a company newsletter. Trust has become more local, with people in my community more trusted than CEOs.
The consequence of these interconnected forces, notably low trust in government, systemic unfairness, and lack of common values, is a descent from an acceptable level of societal debate to a critical level of polarization. In nearly one quarter of countries surveyed (Argentina, Colombia, United States, South Africa, Sweden, Spain) we observe both deep division and entrenched views. Globally, nearly two-thirds of respondents observe an unprecedented lack of civility and mutual respect in society. With polarization, ideology becomes identity: Overwhelming majorities, among those who feel strongly about an issue, refuse to live near or even lend a helping hand to people they disagree with. There is a tangible impact on the workplace, with only 20 percent of respondents saying they are willing to work alongside a person who strongly disagrees with their point of view. As divided views become entrenched, no institution is trusted; only 26 percent of people with a polarized mindset trust government, and only 35 percent trust media, leading to a cycle of dysfunction.
It is tempting to recommend more private-sector involvement in societal issues to quell polarization, given the high trust level of Business. There is expectation for this course of action from belief-driven consumers and activist employees. This is true of the general population as well; on average by a six-to-one margin, respondents want more involvement by Business on societal issues. CEOs are expected to take a public stand on key issues. Eighty-six percent also expect CEOs to play a role in strengthening our social fabric.
But heed this warning sign: Less than the majority in over half of the countries surveyed say that business can avoid being politicized when it addresses contentious societal issues. It is going to be a challenging year, with recession looming, job cuts already taking place and politicians emboldened to take a strident position against business on ESG or geopolitics. Business is on safe ground when it stays in areas of comparative advantage where it can make a tangible difference, including sustainability, DE&I (Diversity, Equity and Inclusion), wages/reskilling, and geopolitics.
Trust enables action and action builds trust. The precondition for trust is a system that works for all. That is our perennial task.
With that in mind, here’s a To Do list for business in 2023:
Get to a simple measure of ESG, so you can demonstrate your societal impact. At present there are a dizzying 180 different approaches. A simple and single standard, which is universally accepted, will be much easier to defend when challenged by political or vested interests. KPIs (key performance indicators) that show Business is indeed keeping its word on ESG goals while building support for innovation, would allow companies to calculate their progress and respond to financial institutions evaluating potential investments.
Make Diversity, Equity, and Inclusion a fundamental part of global business strategy. DE&I must live beyond our largest companies. Use the supply chain to insist on diversity at medium- and small businesses as has been done in sustainability. Defy the usual excuse of recession; keep pushing for more diverse boards of directors and top management teams and make religion an equal third leg along with race and gender.
Hold divisive forces accountable. Pull advertising money from media platforms that spread disinformation. Defend facts by showing the science behind innovation and publishing on your own platforms. Stop talking to media that push conspiracy theories. Stand up to politicians who may try to bully you.
Work with and not against Government. That goes especially for policies that raise living standards, offer opportunities for continuing education/reskilling, and improve public safety. That also means partnership with Government on a broader set of issues including privacy and security, geopolitics, plus proper supervision of new markets such as crypto.
We are living through a period of huge systemic change in a multi-polar world, with divisive forces fanning economic grievance. Left untended, the consequence will be further polarization, slowing economic growth, deeper discrimination and an inherent inability to solve problems. Business needs to play a leading role, restoring economic optimism by creating jobs. This will give Government time to recover its footing while the social fabric is mended from the rifts caused by the pandemic.
On Tuesday at Davos, I spoke on a panel titled "Disrupting Distrust." Two clarifications of my comments. First, on NGOs, I meant to stress that pressure is being applied to NGOs from multiple avenues — political, societal and financial. Second, when discussing media platforms, I outlined that businesses should pull advertising money from platforms that spread disinformation. Many platforms are taking substantive and important steps to tackle the problem of disinformation and misinformation. Our advice to clients continues to be that clients should work with media platforms that align with their values.
Richard Edelman is CEO.
*This article was originally published on January 15, 2023 and was updated on January 19, 2023.
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