A crisis of trust

A warning to both business and government

International

Trust—or, too often, the lack of it—is one of the central issues of our time. Without trust, institutions don’t work, societies falter and people lose faith in their leaders. The Edelman Trust Barometer has been tracking trust in institutions for the past 15 years, and the warning signs are now plain to see. For the first time since the Great Recession, half the countries we survey have fallen into the “distruster” category (that is, their overall level of trust, among the informed public, is below 50%). This is directly linked to the failure of key institutions to provide answers or leadership in response to events such as the refugee crisis, data breaches, China’s stockmarket downturn, Ebola in west Africa, the invasion of Ukraine, the FIFA bribery scandal, VW’s manipulation of emmissions data, massive corruption at Petrobras, and exchange-rate manipulation by the world’s largest banks.

Where do things go from here? Here are five trust trends to look out for in 2016:

First, trust in institutions in the developing world—currently 12 points higher than in the developed world—will decline as economic growth slows and corruption is revealed. Severe drops can be expected in Brazil, China, Indonesia and Mexico. To stop the erosion, developing markets will need to address inequality, poor environmental standards and lax regulation.

Second, CEOs will see the need to take a broader view of their mandate in society beyond short-term gains and new-product launches. In our survey, 81% of respondents believe that business can pursue its self-interest while doing good work for society. For example, Paul Polman’s vision at Unilever (an Edelman client) is to double the size of the business while reducing its environmental footprint and increasing its positive social impact. Recently, the company announced that its most sustainable brands accounted for half its growth in 2014 and grew twice as fast as the rest of the business.

Third, the concern about the pace of innovation, and the motives behind it, will heighten. Technology remains the most trusted industry, but, for the first time this past year, trust in the sector ebbed in most markets. This spring, 87% of consumers polled in a related survey said they would refuse to buy a new product or service due to concerns that included the risks to data and the environment. Expect stronger regulation of sharing-economy companies, including privacy and security mandates, safety provisions and quality control.

Fourth, the mainstream media will see a further decline in their central role as the credible source even as more companies and governments become story-tellers, creating their own content for consumers via short, sharable and visual pieces of content. Respondents for the first time rated online search higher than television and newspapers as their first source of credible information. This reflects a more general dispersion of authority in which peer-to-peer communication is trusted over the traditional top-down model. The most credible sources today, respondents say, are an academic, a technical expert, a regular employee and “a person like myself”—all more trusted than CEOs.

Fifth, the hot political issue of 2016 will be equality. In a related study in 12 countries last year, 88% of respondents said they believe government should work to reduce the rich-poor gap and 74% thought that wealthy individuals have too much political influence. This weight of public opinion will translate into a push for higher taxes on the wealthy and the end of exemptions.

All in it together

All this poses a giant challenge to government and business alike. Government is now the least trusted institution: the gap between trust in government and business is 19 points or higher in countries such as the United States, Mexico, Brazil, South Africa, Malaysia and Italy. Yet over half of those surveyed want more governmental regulation of business, especially in financial services, energy and food. And the corporate world cannot afford to gloat. Even as trust in business has recovered, trust in CEOs has declined by ten points since 2011 to a mere 31% in developed markets; trust in business is at 50%. Non-governmental organisations are also losing trust as they are perceived as ineffective.

In short, trust is at a tipping-point. Having plunged as a result of the global financial crises, trust showed some signs of recovery, but then plummeted again in 2015. For leaders of both government and business, 2016 needs to be a time for actions that achieve both economic growth and a fairer world.

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