Why building trust is crucial as we take on tomorrow

The demand for business to help address society’s biggest challenges has never been greater. This was a key message highlighted at the World Economic Forum’s Davos Agenda meeting, which virtually brought together leaders from around the world to talk about how to restore trust and build a fairer, more sustainable, more productive future. Partly this demand is a result of the pandemic, as workers have found their safety – and that of everyone they meet – dependent on their employer’s willingness and ability to facilitate safe working conditions. But the roots of this trend reach deeper than the tragedy that has spread across the globe over the last year. From addressing social inclusion and diversity, to climate change and plastic pollution, the expectation that business should do the right thing, not just the most immediately profitable thing, is growing. 

These demands are not just coming from policy makers and civil society. Investors increasingly view the way a company responds to societal and environmental issues as crucial in determining the company’s ability to win customers, attract talent and manage financial, regulatory and physical risks. These things contribute to strong corporate performance.

Rising expectations are a function of declining circumstances. The world really does face stark challenges that require dramatic action to address them. Millions of people are facing an economic future without the skills needed to succeed – research suggests half of all employees need reskilling by 2025. The scars of the pandemic will make many issues worse, as unemployment increases and children bear the costs of unequal access to home schooling. Around 1.6 billion children have had their education disrupted by COVID-19, which is predicted to have a $10 trillion hit on worldwide income. The least off have the most to lose, but these are issues for the whole economy and so can affect every business.

The picture on climate change is, if anything, starker. As our Net Zero Economy Index shows, prior to the pandemic the rate of global decarbonisation was 2.4%. This is progress, but it needs to be over 11% to achieve the Paris Climate Agreement targets.

With such huge challenges facing the world, it is no surprise that expectation of action from business is rising.

But there is another reason why people increasingly expect business to lead. People are losing faith that anyone else can make a difference. In Edelman’s annual global survey of more than 33,000 people, the net competence score for government was -34. For business it was +14. Respondents also thought that business is more ethical than government. Governments in many countries enjoyed a surge of trust early in the pandemic, but the Edelman findings suggest that has all but evaporated, at least for now. Around the world, the public think business has the capacity to make a difference, even as they doubt the effectiveness of the state. 

Business leaders have to do everything possible to live up to these expectations. The consequences of not doing so are dire, not just commercially in terms of losing trust, access to capital and license to operate, but also societally. Society needs business to work with government to address society’s most pressing challenges. Innovation and scale in the private sector have huge potential to help speed progress.

If doing right and doing well were in profound tension, there would be a huge risk that business would miss the mark. However, objective economic reality is playing a helping hand. Whatever your politics, it is a fact that climate change is a threat to the ability of business to operate. However much – or little – you care about equality as an end in itself, it is a fact that missing out on talent because you are not good at recruiting a diverse range of people puts you at a competitive disadvantage. Delivering positive outcomes for stakeholders and financial value for shareholders should not be seen as trade-offs.

For business to make a meaningful difference in tackling society's biggest challenges, however, stakeholder interests need to be hardwired into each stage of the business decision cycle, from strategy formulation, to business unit planning and incentives, to reporting to establishing appropriate governance structures. By integrating stakeholder interests into core business targets, companies avoid the pitfall of treating Environmental, Social and Governance (ESG) imperatives as a parallel track to financial objectives. Instead, ESG becomes integral to the conception of value creation, with all the same rigour and accountability as is currently applied largely to financial performance. This change needs to happen at pace, both for individual businesses seeking to compete in this new context, and for society as a whole. 

For us, enabling this change means transforming the way we work and what we do for clients. By supporting clients to transform their operations, be more transparent in their reporting on non-financial metrics, upskill their workforce, and develop road maps to Net Zero, everyone at PwC can support change. Our own Net Zero commitment, our commitment to upskilling and our efforts to improve diversity are the start of a journey to build ESG insight into everything, from the advice we give consulting clients, to the context and relevance of tax advice, to the way we conduct assurance. 

The COVID-19 response has shown how quickly companies can change at both the system and individual level. That should be an inspiration for the change that is to come. We now know that a scale of change people may have previously said is impossible is not just possible, it is happening. Business has a license and obligation to help lead that change as we take on tomorrow.