By Professor Ian Thomson, Professor of Accounting and Sustainability and Director of the Lloyds Banking Group Centre for Responsible Business
Trust means different things to different people in different situations. Positive attributes associated with trust within organisations includes integrity, respect, responsibility, selflessness, equity, fairness, accountability, openness, honesty, competence and reliability. Trust confers many advantages to individuals and institutions considered worthy of our trust. It is a key value driver and a business asset, but seldom recorded on balance sheets or company KPIs.
Researchers in Birmingham Business School and Lloyds Banking Group Centre for Responsible Business have investigated and continue to research trust in business in its many manifestations. This short blog summarises some of these findings and work-in-progress.
Trust does not naturally occur, nor can it be bought, it’s given voluntarily and cannot be imposed on others or taken for granted. In addition, it is temporary and fragile, subject to continual review with each new engagement or transaction, it can take years to earn, needs investments of time and resources to maintain yet can be destroyed in seconds.
A lack of trust costs businesses; loss of sales, exclusion from markets, shunning by ‘trusted’ suppliers, inability to raise capital, excessive marketing and PR costs, dealing with extra regulatory scrutiny, legal actions (even if you win) and time spent recovering your trust status. It also impacts negatively on goodwill and other intangible assets and the ease of doing business can become more complex and expensive. Given the complexity of contemporary business relationships it is unlikely that any business can be universally trusted.
The list of activities that damage trust is enormous, it includes but is not limited to:
- Poor service delivery
- Proven cases of corporate deceit
- Perceived lack of transparency
- Human rights abuse (anywhere in the value chain)
- Involvement in modern slavery
- Environmental damage
- Unsafe products
- False marketing claims
- Problematic sales methods
- Non-payment of debts
- Criminal acts by individual employees
- Regulatory non-compliance
- Deviation from industry norms
- Rumours of wrong-doing
- Poor health and safety
- Catastrophic accidents
- Partnering with untrustworthy organisations.
Businesses operate in a global fish bowl where it must be assumed that nothing will remain undiscovered or secret. The growth in social media, citizen journalism and citizen accountability means that individuals / institutions are no longer reliant on corporate disclosures. The ability of anyone with a smartphone to independently fact-check corporate disclosures, then instantly mobilise the global twitterati or civic society groups, means that trust-threatening stories spread faster and further than ever. Inconsistency in corporate messaging or non-disclosure of problematic events can escalate from a small, resolvable issue into a reputation-threatening crisis. Any superficial attempts at trust remediation can fall foul of tripadvisor-like external scrutiny from groups who feel betrayed.
How many businesses place losing trust on their risk registers? Businesses need to actively manage trust, internally and externally. Business need to consider the value creating potential of their current trust status, organisations should undertake regular trust ‘audits’, exploring potential risks to their current status and identifying financial consequences from losing the trust of stakeholders. These audits can draw on responsible business frameworks, for example the UN Sustainable Development Goals. Understanding the dynamics and consequences of gaining and losing trust is critical to businesses hoping to inspire trust.