Trust in business creates a risk exposure
Businesses and NGOs feel pressured to take on societal problems beyond their abilities because of distrust in governments and media, according to the Edelman 2022 Trust Barometer.
This report, an online survey in its 22nd year, reflects the views of more than 36,000 people in 28 countries. The findings reveal a level of trust in businesses (61%) than exceeds trust in government (52%) and media (50%). Governments are not seen as able to tackle societal problems. Only 42% say they can get results, while 65% believe businesses can execute plans and strategies successfully.
The report sums up the findings: “Government and media feed a cycle of division and disinformation for votes and clicks. NGOs and businesses feel pressured to take on societal problems beyond their abilities.”
These expectations on business and other organisations are a risk management issue, says Airmic’s ESG ambassador and board member, Glenn Ellis. He points out that business behaviour in relation to ESG matters can have an impact with customers, employees and stakeholders.
Glenn, who has wide experience with D&O liability as a risk manager and in the insurance industry, says that if such trust in a business is lost, then it can result in reputational and even financial damage to the company. Responses to the survey for the Trust Barometer illustrate why:
- 58% say they buy or promote brands based on their values and beliefs
- 60% say they choose a place to work according to its values and beliefs
- 88% of institutional investors say they subject ESG to the same analysis as operational and financial performance
Glenn says: “Every year when companies renew their D&O policies, the directors have to make a declaration of matters that might give rise to a D&O claim. Loss of trust as a result of ESG issues that affect the success and sustainability of a company could become the subject of a D&O action.”
A desire, according to the survey, for visibility by CEOs when discussing public policy with external stakeholders or work their company has done to benefit society highlights this exposure for directors and officers, Glenn suggests. “Risk managers are ideally placed to support, and in some cases lead, the identification, evaluation and mitigation of ESG exposures.”
According to the Trust Barometer, when it comes to societal issues, climate change is the subject where there is the greatest demand for more action by business. Few feel that business is over-stepping its role here.
CEOs are widely expected to be a force for change. More than 80% of survey respondents say they should be personally visible when discussing public policy and what their business has done for society. Approximately three-quarters of respondents want CEOs to inform and shape discussions about jobs and the economy, technology and automation, and wage inequality. Two-thirds want CEOs to make their voices heard on ESG issues, such as climate change, and prejudice and discrimination.
The most trusted business sectors are technology, education, healthcare and manufacturing. The least trusted are fashion, financial services and social media. Trust in financial services has, however, improved in the last ten years. Social media is the only sector currently mistrusted by more than half the respondents.