In business we trust

Trust is at the core of our most meaningful relationships and crucial to a thriving society. It’s also the most valuable bond between businesses and stakeholders, until it is betrayed.

The 2023 General Social Survey, released by Stats NZ last week, revealed declining levels of trust in the police, courts, education and health systems, parliament and media since 2021 – the lowest levels of trust across all institutions since the survey started in 2014.

A mixture of evidence and judgements based on knowledge, instinct and experience, trust is a core part of how we function every day. Trust in business is also reliant on our belief in protective measures such as guarantees, regulation, conventions, recourse and good governance.

Consumer loyalty has typically been regarded as one of the most valuable intangible benefits of a trusted brand; it is what motivates a consumer to buy a product, to pay more for a product, and to reject competitors’ products outright.

We trust the local barista who makes our coffee, we trust the safety and reliability of our car and the work of the mechanic as we drive to work, we trust the data we provide will remain safe when making an online purchase. While we have to trust, we make active choices as to where we place our trust and who we do business with, work for, purchase from and invest in.

The Edelman Trust Barometer saw a seismic shift in trust in 2021, with business being the most trusted institution for the first time. In the 2023 report, business remained the only trusted institution globally (at 62 per cent) as well as the only institution that respondents considered both ethical and competent. With falling trust in public institutions, rising geopolitical tensions, and increasing economic and social pressures, business has a pivotal role to play in supporting a thriving society.

Deceptive marketing tactics such as greenwashing (misleading environmental claims) and social washing (misleading information about social practices such as ethical standards, human rights and employment practices) are eroding trust in business and threatening social license to operate.

“If it’s not Boeing, I’m not going!” once donned t-shirts and was part of the zeitgeist of the jet age. But Boeing’s very public fall from grace, has since been replaced with “If it’s Boeing, I’m not going!”. Built over many decades, trust in Boeing is gone and the company may never recover it – moreso because the behaviours that led to people’s deaths, cutting corners on safety, were done knowingly. But not knowing isn’t a defence and, ultimately, actions speak louder than words, so businesses need to walk the talk.

Earning trust starts from the top, and building trust needs to be done intentionally. It requires the board to create a culture that values and exhibits ethical behaviour, the foundation upon which trust is built, and seeks to understand the needs of its stakeholders. While recognising that stakeholders’ interests can conflict and compete, for example the maximisation of profits and calls for investment in decarbonisation, boards need to take a multi-stakeholder approach to building trust.

In the IoD’s 2023 Director Sentiment Survey, while brand and reputation discussions were key elements of risk oversight with 87.1 per cent of respondents saying it was regularly discussed by the board, less than half of respondents (48.8 per cent) stated their boards received comprehensive reporting about ethical matters and conduct incidents. Further, only 44.4 per cent said their boards had assessed ethics risks over the past 12 months.

Loss of trust can undermine reputation, stakeholder support and the ability to create value.

Considerations for directors:

• • Do you have a common understanding of what the desired organisational culture is?
  • What tools are being used to assess the board’s and organisation’s culture?
  • How are you intentionally building trust with your stakeholders?
  • What data are you using to understand the different stakeholders’ needs and expectations?
  • What metrics are being used to ensure that management are meeting those needs and expectations?
  • How is stakeholder trust being monitored and reported?
  • Do our remuneration schemes and incentives promote the right behaviours?