With Apologies to Naomi Klein, This Changes Everything
by David Rutherford
The latest Edelman Trust Barometer, the PR firm’s annual global survey on trust and credibility, is out. It reveals that there’s yet more fuel on the fire in terms of the public’s demand for corporate purpose. Two key findings stand out:
- Business is the only institution seen as both competent and ethical. Both government and media were perceived as being both unethical and incompetent. Interestingly, NGOs were seen as being ethical but incompetent.
- There’s greater urgency to address foundational issues. The need to address social issues saw double-digit growth, compared to the year prior. More on this below.
The pandemic strengthened trust in business
When businesses looked out for all stakeholders in the early days of the pandemic, people noticed. Business did the right thing, and public perception of business crossed the threshold from unethical to ethical – without losing trust in its competency to get stuff done.
But there’s a catch. Now that the genie’s out of the bottle, society is coming to business with a new agenda — our agenda. The Trust Barometer shows people have a markedly increased urgency to solve a rash of problems. This includes everything from improving healthcare and addressing climate change to closing the economic divide and eliminating systemic racism.
They’re looking primarily to business to get this done, because no other institution leads in competency and ethics. What an opportunity! With apologies to Naomi Klein, this changes everything.
The opportunities are endless
The pandemic pressed companies into demonstrating ways they can go beyond simply manufacturing a product or delivering a service. Now that consumers have seen what companies can do for them and for everyone, the possibilities are endless.
So, too, are the demands. The truly great companies will jump all over this; many have already, and some did even before the pandemic. But investors don’t want to just support the great companies. Research from behavioural finance consultancy Oxford Risk shows that some investors prefer to invest in ESG laggards — companies slower or thus far resistant to addressing Environmental, Social or Governance risks — and then actively work to make them better.
The potential to do great things is what’s driving consumers to buy a company’s products and invest in its stock. It’s what author Umair Haque describes as the potential to deliver “next generation returns,” and this latest Edelman Trust Barometer really hammers home that point.
From balance sheet to value sheet
It was Haque who first conceived of a different balance sheet; a concept fully blown out in a new white paper from the World Economic Forum. The paper explores the shift of business norms that stakeholder activism pursues, accelerated by the pandemic, and the imperative to move from words to actions. Put simply, it looks at the shift from balance sheet to value sheet. “There is a clear step change in ambition as to what is achievable by all parties — governments, non-governmental organizations, the investor community, business and society.”
It’s this “clear step change in ambition” that we’re talking about. And that ambition from society, which includes investors, is to make change against a dizzying range of risks – risks the World Economic Forum has nicely laid out for all of us and which today look more diverse than ever.
“Among the highest likelihood risks of the next ten years are extreme weather, climate action failure and human-led environmental damage; as well as digital power concentration, digital inequality and cybersecurity failure. Among the highest impact risks of the next decade, infectious diseases are in the top spot, followed by climate action failure and other environmental risks; as well as weapons of mass destruction, livelihood crises, debt crises and IT infrastructure breakdown.”
We have a lot more going on than a climate crisis, and you can understand why people are so interested in looking for new ways to address these risks, including reimagining the role of companies. The companies that successfully reinvent their purpose in response to this demand should do better over the long term. In a post-pandemic world, companies existing simply to make money won’t cut it from the perspective of consumers and investors. They want companies to do things differently in a way that leads to more.