However, with trust in business having come under intense scrutiny from society, the media and industry itself, the past year has seen the development of a deeper understanding of the underlying issues around trust and their root causes. As a result, the definition of trust and its impact on the corporate world are being fundamentally reframed.
This redefinition is taking place against a background in which society as a whole is more mistrusting than ever before, and the perception of measures being taken to bring about change is sceptical at best. This widespread scepticism raises inherent challenges, and points to a shift in the way companies monitor and assess the impacts of their actions – both tangible and intangible – on a more cynical audience.
So, following the initial decline in trust, what is driving this further shift? To a degree, trust in business is recovering from the low point reached during and immediately after the financial crisis. However, a significant ‘trust deficit’ persists due to the differing perspectives held by business and society on trust: while business has focused more on process and operations, society places more emphasis on behavioural measures.
The question remains as to what can be done to reduce this trust deficit and narrow the gap between business and society. In PwC’s view, business needs to refocus its efforts on the behavioural elements that create or destroy trust. But, critically, this change must consolidate the progress already made in processes, controls and reporting – not detract from it.
This is not a straightforward task. While the degree and balance of trust in the system – between society, business and government – is still shifting, it’s clear that the loss of trust has been neither a straight-line decline, nor evenly spread.
Since the financial crisis, a blend of intensifying regulation and increased business investment has led initially to a rise, and now a levelling-off, of trust in businesses. Interestingly, the opposite is true for governments, with trust in state institutions having been in global decline since 2011, and now at historic lows.
According to the 2014 Edelman Trust Barometer, this combination of trends has opened up the largest ever trust gap between business and government since the annual barometer launched in 2001. However, business cannot afford to be complacent. Low levels of trust in the system create issues for us all – and rebuilding that trust, as well as closing the deficit, is something to which we must all aspire.
To restore trust, business needs to address both behaviours and delivery. The case for investing in behavioural elements is harder to define and justify than the more tangible economic gains from investment in products, assets and efficiency. To justify investments in behavioural elements, the benefits need to be defined in terms of the dangers of not investing; the risks that become all too clear when a crisis strikes.
Subscribing to the broad trust agenda means doing more to engage with, and contribute to, society. This includes taking more of a leadership role. As trust in government continues to decline, business can step up to bridge this gap. These steps don’t need to be self-serving. Perhaps surprisingly, a further finding of the Edelman Trust Barometer is that 84% of respondents believe businesses do good for society while also pursuing their own interests.
What do we need to do to earn back the trust that has been lost? I would point to a number of key actions.
Most important, both industry as a whole and individual businesses must engage at a more personal level with a greater breadth and depth of stakeholders. And they must do this on issues and risks that society deems relevant when it comes to exhibiting integrity and cultivating a credible voice in the market. These issues could involve taking responsibility for impacts along the entire supply chain, the transparency of decision-making metrics, or other areas that society regards as being linked with specific activities and outputs.
Businesses must also communicate their strategy with clarity, honesty and simplicity, and be explicit about the resulting impacts both on society and on their own bottom line. This requires recognition of the constraints and trade-offs to be navigated, and an acceptance that winners and losers will emerge. It also demands an acknowledgement that this is a journey towards trust, and measures and outcomes will not be perfect at any one point in time. What matters is communicating openly across all the criteria reflecting the business’s contribution to wealth, both societal and financial.
It would be helpful for businesses to provide forward- looking perspectives that facilitate planning and provide transparency for the market. This doesn’t mean predicting the future – but it does mean understanding and describing the business’s likely impacts in their widest sense.
But we can’t just set out our vision for addressing the trust deficit and rebuilding trust in business and then stand aside for others to make it happen. So what is PwC’s own role in rebuilding trust? As part of the business community – and part of the collective system – we need to participate in the behaviours outlined above. We also have a duty to take action in areas where we can make the greatest or most relevant contribution.
One area where we can play a broad role is in rebuilding trust in the system, not only between society and business but also between society and government. Activities to achieve this range from leveraging our established role in the capital markets in providing assurance over financial and non- financial performance, to helping influence change in the system with a view to increasing overall trust and confidence. One example is the way we report our audit conclusions, which is changing to become more discursive and insightful, helping users better understand the information they are using to make critical business decisions.
The need to rebuild trust also has wider implications. At one end of the spectrum, we play our part by validating metrics and numbers across a broad range of companies operating in all sectors and in all four corners of the world. Some of these organisations are involved in addressing significant societal issues, and we work alongside these organisations to provide assurance over the financial information used. Examples include the Programa Bolsa Floresta, a project in a part of the Amazon that aims to structure the economy around activities that do not contribute to deforestation.
We not only assess and verify the information used internally by management and employees, but also give our insights so that they can have full confidence in the data available to them when making decisions. This applies equally to material that is accessible externally, which is paramount to building trust among the complex landscape of stakeholders impacted by those decisions.
As businesses expand their footprint in society, leading to greater complexity of decisions and a more diverse range of risks, we work with them to give a broader perspective on the impact of their activities by providing wider-ranging, more relevant, reliable and timely information to inform their choices.
In terms of supporting companies in building confidence in some of the operational aspects of running the business, we provide assurance over systems and processes to protect against, for example, cyber risks.
Our role in building trust across industries has never been more crucial, or more long term. We recognise that repairing the damage will take many years. Today’s unquenchable thirst for information on a real-time basis with ever more accessible data creates challenges, but – more importantly – it also opens up the opportunity to address the gaps and provide knowledge and insights to begin to reduce the trust deficit.
In the UK, we are working with the funds market, including fund administrators, trustees and trade bodies, to provide assurance over fund data using our intelligent data auditing software, ‘Halo’. The financial markets are under scrutiny from society as a whole, and will remain so. By working together, we can strengthen belief in the industry and begin to underpin the stability of the markets in the eyes of the public.
This opportunity is exemplified by our work with the Libor panel in the UK. The public lost even more faith in the banking system with the much-publicised Libor scandal. Our help in shaping the processes and controls needed in the systems for the banking industry ensured the sector could respond to regulatory demands and provide assurance around other benchmarks, helping to re-establish the integrity of the published Libor rate.
But we, of course, work beyond any single sector or geography. China has named food safety as one of the country’s top three priorities, with a clear need to repair the damage caused to public trust by recent scandals. Working with AsureQuality, we are assessing the operational processes in China’s food industry against those in New Zealand, not only to identify gaps, but also to create plans for improvements. When we support government and industry to work together, the benefits are unquestionable and make a real difference to solving the issues that matter to society.
Whatever the scale of the need for building trust, or the size of the contribution made by participants in ‘the system’, all of us need to acknowledge that we have a part to play. This might be a business’s need to address its behaviours or understand the views and requirements of its increasingly diverse range of stakeholders; or it might be advisers such as PwC understanding how to best support industries, governments and business in building trust.
But for all of us, this is a challenge that we must continue to address in every way we can. By working more collaboratively with less self-interest, and engaging directly with society, we can begin to restore trust across the whole system – for the good of all.
In essence, there is a void to be filled to address the behaviour changes society demands of us collectively going forward. PwC has a vital role to play in rebalancing trust between business, governments and the wider community. But the world is more connected than ever, and organisations of every type are being forced to be more transparent, accountable and responsible than ever before. These challenges may change shape or shift direction over time, but either way, they’re here to stay.
The complexity of the financial and information systems that bear collective responsibility for rebuilding and sustaining public trust cannot be underestimated – and we are committed to leading the way where we can. But, more importantly, we are determined that we will always be part of the discussion, helping to inspire a movement of trust that creates lasting confidence in business and beyond.