Fear of populism has arrived in the boardroom, with the words inequality rumbling into the discourse of chairmen and directors.
The election of Donald Trump as US president and the UK vote to exit the European Union have shaken conventional political wisdom to its core. But what does it mean for business?
Not only are businesses trying to understand the impact of populism on their outlook, the more introspective want to know why the distrust of institutions has grown so extreme and whether they can counter it.
The Edelman Trust Barometer 2017 has drilled deeply into this phenomenon. The annual survey of 16,000 people across 28 countries found that trust in institutions has collapsed among the mass population in 20 of 28 countries. But it’s not just business – non-government organisations, media and government are diminishing in status in the public’s eye. Trust in media is at its lowest ebb, down 10 points to 32 per cent in Australia.
Business is oblivious
Steven Spurr, Edelman Australia chief executive says there’s a link between fear, distrust and the belief the system is broken. Business is partly to blame because it appears oblivious to the impact of globalisation and technology.
“Automation may mean innovation to business, but to the public it can translate to job losses and communities in decline, which exacerbates the disconnect,” he says.
Globalisation, he says, has become a byword for job losses, even though Australia has benefited hugely from being part of the global economy.
Peter Chen, senior lecturer in Australian politics, public policy and media at the University of Sydney, says if the trust deficit problem is cultural and structural, the “fix” is more complex.
“In the medium term my recommendation would be to get used to working in a low trust environment. They’re not that unusual, globally or historically.”
Further, he says, institutions need to ask if this notion of mistrust is ill-founded and as irrational as it’s often portrayed. “In many areas of society, the notion that the ‘system’ or social organisation may not be delivering for the wider community has a basis in fact.”
Another alarming insight from the Trust Barometer is the revelation that while Australian business may be trusted more than government, the general population no longer trusts business leaders, including the C-suite, company directors and boards.
The Trust Barometer survey showed that the credibility of CEOs as spokespeople dropped 13 percentage points to 26 per cent in the case of the general population, and fell nine points to 36 per cent among the informed public.
Accept the trade-offs
Spurr says the main feedback from the 2017 Trust Barometer is that too many businesses are focusing their communications and engagement on the informed public, and not enough on everyday Australians, who comprise 87 per cent of the population.
If businesses are to build trust, the community has very particular demands. Companies must show they treat employees well, pay tax and have ethical practices. In addition, they must avoid doing things that the mass population believes harm trust in the future, for example, profit-shifting to avoid tax, overpaying executives, offshoring jobs to cut costs, bribing government officials and overcharging for basics.
“More than three-quarters want to know you are a good citizen, that you are interested in the communities you impact, the customers that buy your products, that you stand for something more than the purely commercial and, most importantly, that you look after your employees,” says Spurr. “They want to assess whether you are one of the good ones. If they don’t see these things they assume that you aren’t – the default is now distrust.”
Dutton out of touch
Immigration Minister Peter Dutton’s attack on business leaders for taking positions on social issues run counter to community sentiment, says Spurr. “There’s a demand and expectation that businesses will play a role in discussing and supporting issues that affect society more broadly.”
Empowering employees as trusted ambassadors will be challenging, but it’s already happening.
“Australians trust individuals more than institutions, so make sure those who represent you aren’t one dimensional corporate spokespeople, but bring their personal experiences and expertise to the fore. Employees are already talking about their employers in social media and at the family barbecue. Treating employees well is the single-largest driver of trust in business in Australia, so getting this right and enabling employees to talk about it will be even more powerful.”
What can be done to generate trust
What can business do to restore trust? Three-quarters of the 1150 surveyed for the Trust Barometer in Australia believe that businesses can take specific actions that both increase profits and improve the economic and social conditions in the community where it operates.
Helen Steel, executive director of the Shared Value Project, says adopting a shared value approach to doing business can help.
Shared value identifies measurable economic value in addressing social and environmental problems.
"Mike Hirst of Bendigo Bank probably says it best," she says. "They can only be as prosperous as the communities in which they operate."
Hirst, the bank's chief executive, says Bendigo Bank was founded when a group of miners in 1858 formed a building society and drew lots to see whose house got built first. "We're commercially minded and mutually spirited," he says.
The creation of community banks in rural areas in 1998 showed how financial services could be profitable and serve customers.
Bendigo and Adelaide Bank (as it's now called) is a franchise model where a community company is formed. "They have the rights to run the distribution for us in that area and for doing that we share the revenue that's generated out of that branch 50-50," Hirst says.
"The community company pays the expenses of running the branch, we pay for all the computer systems and we take the risk on the credit, use our balance sheet for capital etc, split the profit that the community bank company makes – 80 per cent has to go into community benefit and 20 per cent goes back to shareholders. It's a true shared value model."
It's not surprising that the financial services sector has been trying to grapple with the trust deficit. At National Australia Bank this has led to a focus on shared value and sustainability in the industries and clients that it works with. In agribusiness lending, NAB elevated the concept of natural value, which tries to put a value on "ecosystem services" such as the provision of clean water.
"In the case of agriculture: how do I work with our farmers or our clients who are producers in the agricultural space to do my bit helping them drive greater sustainability for their own businesses?" says Cathryn Carver, acting chief customer officer.
"Our role in that ultimately is to put the data they get from being more efficient in managing their soil and water into the way we look at assessing their credit risk metrics."
For small business Nourished Life, the approach to building trust is multi-faceted. Each of the 4000 products it sells has been assessed for alignment with brand principles and must be certified as sustainably produced, says founder Irene Falcone.
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