Business and Markets

Trust in Business and the Role of ESG: A Conversation with Richard Edelman

April 25, 2022  • Business and Society Program

This post is the first of a series of interviews with thought leaders to explore issues on the frontier of the complex domain of ESG.

In 28 countries across the world, distrust in government and media is high, according to the 2022 Edelman Trust Barometer published this January.  To many of us, this isn’t surprising.

But what is surprising is that the Barometer’s findings frame trust in business as comparatively high. And people want more leadership from business, not less. Do business leaders have the skills—and the will—to tackle the social—now even geo-political—issues that continue to emerge as business challenges? What can we expect to see from the growth in worker voice and activism?

To answer these questions, the Aspen Institute Business & Society Program’s Executive Director Judy Samuelson sat down with Edelman CEO Richard Edelman to ask him about what he sees as the key takeaways from the 2022 Trust Barometer.

Judy Samuelson: Richard, thanks for joining me today. I want to start with a comment from you that I called out in my own blog on the release of the 2022 Trust Barometer. You said: “Business must walk a tightrope. For now, business must accept the burden of filling the void left by government, but it should be poised to pivot to a more level playing field.” Can you expand on the phrase “more level playing field”—what that looks like?

Richard Edelman: 70% of people believe business leaders should help inform and shape policy debates around subjects specifically related to business such as jobs, automation, and wages. But the majority also want CEOs to weigh in on societal challenges—climate change, immigration and even the education and healthcare systems. The only topic society does not want CEOs to engage in is elections—and who the next leader of the country should be.

Our research shows that society wants business leaders to communicate quality information but leave the decision-making up to individuals.

JS: You invokeJohn Maynard Keynes to argue “business must be that stabilizing force, the institution delivering tangible action on wages, climate change, re-skilling and diversity.” What is driving the change that is expected from business?  

Edelman: Ultimately, it’s the lack of trust in government to get things done. This year, our Trust Barometer showed a continuing decline of trust in the Government and Media across 27 markets. Along with that distrust comes the belief that these two institutions are divisive, purposefully using divisions in society for gain. Business and NGOs are seen as uniters, and while trust in NGOs increased, business is still the only trusted institution. Most of society doesn’t believe government is competent enough to take initiative and successfully achieve results to move society forward.  

JS: The growing interest in “ESG” (Environmental, Social and Governance) metrics is about demands of investors, but public shareholders are all over the map—they want more and better social and environmental outcomes from business, without needing to sacrifice their own return. Can they have it both ways?  

Edelman: Stakeholders include the masses—consumers, employees, investors, etc.—but the common denominator is they all want business to engage in finding solutions to societal issues. Business must step up and be the stabilizing force society is asking for right now, and according to our research doing that won’t negatively affect business outcomes. According to our 2021 Institutional Investors Trust Barometer Special Report, investors (88%) are scrutinizing ESG as much as operational and financial factors. When 78% of investors believe companies have a duty to take a public stand on issues and 72% don’t trust companies to achieve their stated sustainability goals, ESG and DEI commitments, the risk lies primarily in doing too little—not too much.   

JS: Edelman has an important focus on the employee experience—and the culture of firms. Employees want executives to make and deliver on real commitments to drive societal change—and seem willing to use social media and their own shares of stock to call out disconnects between social commitments and actions. What does your research say about what’s ahead?   

Edelman: “My Employer” (77%) is the most trusted institution and seen as the most credible source of information.  This is incredibly significant as it reinforces that trust is local.  65% of employees believe communications from their employer after seeing it just once or twice, while all other news sources—search engines, traditional and owned media, and social media—are distrusted.

Based on our research, the desire for businesses to talk-the-talk and walk-the-walk won’t slow down. CEOs are expected to be the face of change but, right now, (52%) believe business and its leaders aren’t doing enough. They’re asking for more business engagement across almost every major societal issue.

Further, all stakeholders—consumers, employees, and even retail investors—hold business accountable for taking a stand on issues that align with their values and beliefs. These trends point toward the continuation of employees asking, and expecting, more of their employers when it comes to speaking out on societal issues and influencing policy.   

JS: Are employees as effective as investors at raising the bar when it comes to climate, diversity, and other touchstones of corporate responsibility?  

Edelman: Absolutely. In fact, the pyramid of authority has flipped—employees are essential partners in the future of business and ranked as the most important stakeholder to a company’s long-term success according to our May 2021 Trust Barometer Spring Update. The pandemic shifted values—a higher wage is no longer enough of an incentive to work harder. Our 2021 Belief-Driven Employee research showed a shift in power from employers to employees, as 50% say they can get a company to change anything about itself, and 76% say they will take action to produce or motivate urgently necessary changes within an organization.  

Aside from current employees, future employees also continue to raise the bar for companies as 76% say they have higher expectations for a prospective employer than they did three years ago, and six in ten people choose their employers based on beliefs—stating they are more interested in working for an organization that prides itself on social responsibility vs. its marketplace success. To continue growing, while retaining your current talent pool, businesses must act on the needs and beliefs of their employees, and society. There’s a new employee-employer compact that requires business to share the power and take a stand.  

JS: At a time of low trust, what is your advice to clients about how business should engage with governmentwith regulators and policy makers?  

Edelman: The role of business as a societal leader is here to stay, but business was not built to fill the void of government. While we continue to see a greater expectation of business to lead, as trust in government spirals, business must partner with government and all institutions to deliver on societal expectations.

Business must start shaping conversations about issues but resist becoming politically overbearing. CEOs must work collaboratively with policy makers and lead initiatives that break the vicious cycle of distrust, bridging the gap that we see to deliver stabilizing, unifying information to a variety of stakeholders. 

This post is the first of a series of interviews with thought leaders to explore issues on the frontier of the complex domain of ESG.  In our inaugural Aspen ESG Summit in Aspen, Colorado July 11-13, we will continue to seek fresh insights on ESG strategies and practices as catalysts for positive change.

We welcome Edelman as a sponsor for the event and thank them for their support.

 

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