- Short-term capitalism is no longer working with the focus now on purpose
- Transparency is key to restoring trust, through reporting and authentic communication
- Trust is the currency of ethics and when dealing with ethical matters, silence is not an option
In 1962, Milton Friedman famously wrote that 'There is one and only one social responsibility of business... to increase its profits.' If this was ever the case, it certainly isn't anymore.
Following hot on the tails of Chartered Accountants Accountant and New Zealand's (CA ANZ) latest thought leadership paper The Future of Trust, how to secure and maintain trust continues to be a fundamental question across a range of professions. Below is a snapshot of how it is being explored in the business arena.
Without transparency, there is no trust
At the KPMG, Group of 100, Wolters Kluwer Conference, Dominic Barton, the Chair of the International Integrated Reporting Council outlined four forces transforming the global landscape: changing global growth dynamics shifting from West to East and South; technology accelerating industry disruption; bifurcating demographics with rapid ageing and some parts very young; and searching for a new 'societal ideal'.
Against this transforming backdrop, the Edelman Trust Barometer recently found that, globally, trust in businesses and faith in business leaders are declining.
Barton said businesses need to have a higher purpose with a license to operate in society since 'the duty of the entrepreneur is to take care of the society in which they operate' (Adam Smith, The Theory of Moral Sentiments). Having purpose ensures businesses have a guide to navigate ethical decisions in 'grey areas', helps attract and retain talent and ensures sustainability and investment in future growth.
Both Assistant Treasurer Stuart Robert and Shadow Assistant Treasurer Andrew Leigh linked building trust in business with increased transparency through reporting and disclosure, with Stuart Robert reflecting that 'trust was hard won but easily lost'.
How to rebuild trust in corporate Australia
At the UN Global Compact Network Australia's first ever conference, former president of the Australian Human Rights Committee Gillian Triggs emphasised that business leaders have a serious responsibility to speak up and take an active role in public life – to be measured, bi-partisan and evidence-based.
CA ANZ Board member Ming Long echoed this sentiment by encouraging directors in particular to find their voice to speak up about important matters since too many conversations were currently 'G' rated and that it's time to start having the difficult conversations. In short, be authentic to serve the customers and employees of your organisation.
Author of the UN Guiding Principles for Human Rights, Professor John Ruggie, linked trust to 'being trustworthy' – in essence, doing what you promised. He said transparency is key to restoring trust and that the UN Guiding Principles helps businesses to restore rust in the human rights domain, commenting that whilst human rights laws are complex, human rights themselves are simple – treat people with dignity.
Ruggie noted that while increasing profits has morphed into the shareholder primacy doctrine and is dominating conventional thinking about the modern corporation, we are moving towards mainstreaming of Environmental, Social and Governance (ESG) investing – boosted by a wealth transfer to millennials over the next few decades. Surveys are showing that millennials are twice as likely to invest in companies that incorporate ESG practices.
Reflecting on the current dialogue around organisational culture and how it can be measured, here are four questions that leaders, managers and employees should ask themselves, courtesy of Chief Ethics Officer at L'Oreal Emmanuel Lulin:
- Do you feel free to speak up without fear?
- Do you feel pressure to compromise on ethics to achieve other business goals?
- Have you personally taken ethics into consideration at work in last 30 days?
- If you see something unethical happening, will you talk about it?
The ethics revolution
We are not just in a digital revolution, but also an ethics revolution. Lulin commented that as innovation now occurs at such a rapid pace, we can no longer evolve regulation fast enough. Ethics is becoming the new decision-making framework. Leaders need to make tough choices and everyone needs to speak up when dealing with ethical issues - silence is not an option.
He said that ethics is beyond the law. We should always be asking two questions: firstly the legal question – do I have the right to do it? And secondly, the ethical question - is it the right thing to do? He encouraged a focus on the positive side of ethics rather than the negative side of the law for example, focus on diversity rather than anti-discrimination or integrity instead of conflict of interest.
Trust can also be viewed as a currency of ethics as without the trust of clients, shareholders and employees, businesses would not exist for long. Lulin noted, however, that there were limited mechanisms to measure the integrity, culture and ability of organisations to generate and maintain trust.
There are many valuable takeaways from Lulin for businesses trying to grapple with the culture challenge, including his concluding statement: 'As leaders of tomorrow to be brave, be transparent, be bold but practice humility'.
The Future of Trust
CA ANZ report digs deeper into trust issues for businesses and professionals.Read more