Business & Government Must Work With NGOs to Regain Trust

By Suresh Kr Pramar

The financial meltdown has blown away the people’s trust in business worldwide. Trust in business has been the major casualty in the past year. Business scams in various parts of the world sent the people’s trust in business plummeting to almost floor level. On the other hand, trust in civil society organizations has increased substantially. In most countries, civil society is now one of the most trusted institutions.

Evidence for this is available in the Edelman Trust Barometer complied every year by the Edelman group for the leaders at Davos. The survey of some 4500 “opinion leaders” across 20 countries measures the credibility of institutions. The 2009 Barometer results reveal that a startling 62% said they trust companies less this year than last year. Only 31% trust banks. In media it is 28%. In contrast, trust in the NGO sector rose by 12% from last year to a high 54%.

India had its Satyam, and possibly a few more will come out in the near future. Worldwide, and more particularly in the United States of America, the situation has become worse. The downturn started with investors losing confidence in obscure securities from the U.S. mortgage market which then snowballed, pushing Wall Street banks to their knees and bringing the North Atlantic nation of Iceland to the brink of bankruptcy.

The Survey has found that the loss of trust in business was greater in developed economies. According to the Edelman Trust Barometer, “In the US and Japan, two of the world’s most important economies, more than 75% had lost faith in business. The biggest drop came in Ireland, where 83% of respondents said they had lost trust in business.  In the U.K, France, and Germany, trust in business was at a low level of 36%. The only EU countries where business made a notable gain in trust were the Netherlands and Sweden.

In contrast, trust in business in several emerging economies increased. In China, the “trust in business” score rose from 54% to 71%. In Brazil, trust in business climbed to 69% from 61% a year ago. Edelman Barometer says “People in emerging economies credit business with improved standards of living, which remain at historically high levels.” But this trust gain for business may now be at risk, as 56% of Chinese, and 49% of Indian opinion leaders say they have growing concerns about business. Respondents say being able to “trust a company” is one of the most important factors in determining a company’s reputation. I wonder if we did the study today in India how optimistic they would be after Satyam.

Says Edelman: “Our survey confirms that it’s going to be harder to rebuild our economies because no institution has captured the trust that business has lost — trust is not a zero-sum game. Business must recast its role in society and move beyond simply generating ROI to its shareholders. It must partner with government and other institutions to assume societal responsibilities.”

So what does this indicate? What are the lessons for government, business and politicians?  While companies are viewed as less trustworthy than a year ago, consumers demand that governments  play a greater role in business.  People polled said they wanted to see more partnership working between sectors to solve the economic crisis. The key message from this data is that governments and commerce need to work and build partnerships with the civil sector.

Mr Edelman says,

mutual social responsibility” must be key to recovery. “Companies that walk away from the big social issues or say that they can’t afford to be sustainable will be making a big mistake. Today, you’d better talk to employees, NGOs and your most activist consumers. There’s a new set of influences. Most of those polled called for business to work in partnership with government to solve the economic crisis and other issues ranging from climate change to access to affordable healthcare. Companies that walk away from big social issues or say they can’t afford to be sustainable are making a big mistake.

The increase in distrust and the demand for government bailout by business has strengthened the demand for government intervention as a regulator. By a 3:1 margin, respondents wanted government intervention to regulate industry or nationalize companies to restore public trust. In the major Western European economies of the UK, France, and Germany, three-quarters say that the government should step in to prevent future financial crises (73%, 75%, and 74%, respectively); in the United States, less than half (49%) say that the free market should be allowed to function independently.

There are two lessons from the trust data. Business needs governance reform and a serious and genuine commitment to corporate social responsibility. This may require legislation. Second, the government and business need to work through, and in genuine partnership with, the NGO sector.

Globally, the call for government intervention also extends to issues like energy costs, global warming, and access to affordable health care.  Respondents maintain, by at least a 2:1 margin, that the government has the primary responsibility for solving these issues. There is a strong demand for businesses to partner with governments and advocacy groups to address these problems.

“To regain trust and re-earn the mantle of authority, business needs to make substantive shifts in both policy and communications,” said Edelman. “This means forging partnerships, effecting real change in business practices from executive compensation to supply chain, and communicating all with transparency. Without this type of public engagement, which fuels trust, it will be difficult for business to help rebuild the financial system or earn the license to innovate, much less operate.”

The 2009 Edelman Trust Barometer has also revealed that:

• Trust in almost every type of news outlet and spokesperson has declined. Trust in business magazines and stock or industry analyst reports decreased from 57 percent to 44 percent and from 56 percent to 47 percent, respectively.
• Globally, only 29 percent trust information about a company from a CEO.
• Only 13 percent trust corporate or product advertising.

The 2009 Edelman Trust Barometer is the organization’s 10th annual trust and credibility survey. The survey, conducted in 20 countries, including India, consisted of 30-minute telephone interviews conducted from November 5 to December 14, 2008. The survey sampled 4,475 informed citizens in two age groups (25-34 and 35-64). All respondents met the following criteria: college-educated, household income in the top quartile for their age in their country, read or watch business/news media at least several times a week, and follow public policy issues in the news at least several times a week. ◊

Suresh Kr Pramar is the Editor of CRBiz.