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Posted at 9:20 AM ET, 01/29/2011

Reflections from Davos: Rebuilding Trust

By Peter Lacy

As sit and write this from the final day of the World Economic Forum 2011, it is clear that a 'cautious optimism' seems to be the closing economic and political outlook.

Perhaps cause for less optimism is the dilemma of how to rebuild trust with citizens, consumers and stakeholders in a post-crisis world, for both government and business leaders.

There has been much talk of managing scarcity and price volatility in natural resources, such as food, energy and water. But perhaps the scarcest commodity of all that needs managing is trust itself.

But unfortunately, for everything I've heard from leaders here at Davos about the importance of building trust - and reinforced by the Edelman Trust Survey 2011 released just before Davos kicked off - I have a concern ... and quite a serious one.

Is there less success than meets the eye in leaders understanding the extent of mistrust in their organizations, and do they have a clear view of how to shift to a new era of actively managing it and delivering on stakeholder issues and concerns?

Why do I say this? Well, partly from the discussions I've had and some of the panels, partly from my own experience, and partly from a recent research paper that we published, based on a survey and interviews with 766 chief executives across the globe in more than 100 countries and 25 industries with the United Nations Global Compact, it seems they have an unrealistic view about levels of trust in their industries and companies.

Take a look at some sectors. Eighty-three percent of CEOs in health and life sciences believe their industry is trusted by the public and other stakeholders. The figure is 73 percent in Consumer Goods and Services and 74 percent in Energy. However, our own consumer analysis shows that less than half of consumers had their expectations frequently or always met and, in energy, only a fifth trust energy companies to address energy challenges. Other studies such as Edelman tell a similar story.

North American CEOs seem most out of kilter with stakeholders. 87 percent say their company is trusted by the public and stakeholders vs. 67 percent for their industries as a whole, a 20 percent difference.

Why does this apparent lack of understanding matter? Many experts argue that high levels of trust give businesses a license to operate. If that were the extent of it, companies could limit their ambitions to solid compliance, reliable products and services, and responsible manufacturing. However, trust can also provide a license to grow and innovate. By investing in communities, transforming the working environment, or engaging with consumers in advanced ways, trust can open doors to new markets and generate new revenue streams. Trust is about more than mitigating risk. It has the potential to create commercial opportunities at the same time as meeting stakeholder concerns.

This particularly matters in a multi-polar world where China, Brazil, India, Russia and others are coming to the fore. Take the issue of sustainability. Our survey revealed that CEOs in emerging markets, perhaps counterintuitively, are even more driven by trust, brand and reputation to act on sustainability than are CEOs in mature markets. This factor was identified by more than three quarters of CEOs in Asia and Africa, but by only 69 percent in North America. And when asked what corporate attribute they think will benefit from greater efforts in building stakeholder trust, emerging markets leaders were confident their reputation would improve. Leaders in Europe and North America were less convinced.

This helps to explain why CEOs in fast-growth economies appear keener to consider trust-building initiatives than those elsewhere. That's a message CEOs in mature economies need to consider as they try to break into new markets.

So what should CEOs and business leaders do? Our analysis and experience show that high performers have a strong and granular understanding of what really drives trust for stakeholders. They embed building trust and delivering for those stakeholders into strategies at the core of their business and with responsibility spread managerially right across the enterprise.

The leading examples recognize that managing trust starts with good customer relationships but extends to all stakeholders. They know it goes beyond PR to verifiable and tangible actions that make a genuine difference to society and the environment (not in CSR programs, but in core business). High-performing companies measure performance and trust factors across their entire business and supply chain with the same rigor as the financial department measures commercial performance.

And one of the markers of a high performing company is one that trusts its employees to play their part. They accept that trust must be a part of everyone's role, that employees should be given permission to make their own decisions in the interests of all stakeholders.

If CEOs leave Davos committed to these principles, not only will they be better placed to manage risks to their reputation, but to turn the scarce commodity of trust into a basis for delivering on stakeholder concerns and the growth and innovation - so much needed to deliver on the cautious optimism that seems to be returning.

Peter Lacy is managing director of Accenture Sustainability Services for Europe, the Middle East, Africa and Latin America and a WEF Young Global Leader 2010.

By Peter Lacy  | January 29, 2011; 9:20 AM ET
Categories:  Peter Lacy  
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Comments

The Chinese Government gets result by managing its economy; therefore gets the highest trust ranking of 88%. The U.S. Government may not even deserve the 40% rating because it has done little if nothing to combat China’s innovative way of skinning the United States!

Mark Twain is credited with an early use of the cliché "more than one way to skin a cat" in A Connecticut Yankee in King Arthur’s Court, as follows: “she was wise, subtle, and knew more than one way to skin a cat, that is, more than one way to get what she wanted”. Thefreedictionary.com defines beggar-thy-neighbor as: an international trade policy of competitive devaluations and increased protective barriers that one country institutes to gain at the expense of its trading partners. Under the guise of fostering ‘indigenous innovation’, the Chinese government has creatively used a non-conventional, subtle version of beggar-thy-neighbor. Its version doesn’t entail the competitive devaluation of its own currency, which would enhance China’s exports and inhibit its trading partners’ exports to China. China’s version perpetrates an over-valuation of the currencies of one or more of its trading partners. This negatively affects all the trade of the pegged trading partner(s), not just trade with China. During the recent period China pegged its currency to the U.S. Dollar, its version of beggar-thy-neighbor was 8 times as damaging to the U.S. economy as what the media refers to as “China keeping it currency undervalued”.

In November 2003, Warren Buffett in his Fortune, Squanderville versus Thriftville article recommended that America adopt a balanced trade model. The fact that advice advocating balance and sustainability, from a sage the caliber of Warren Buffett, could be virtually ignored for over seven years is unfathomable. Until action is taken on Buffett’s or a similar balanced trade model, America will continue to squander time, treasure and talent in pursuit of an illusionary recovery.

Posted by: HJCampbell | February 1, 2011 8:08 PM | Report abuse

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