BUILDING TRUST AND INVESTMENT

Public trust in business is more important than ever. Yet it is declining at a time when the private sector is well positioned to help shape the governance agenda and achieve inclusive and sustainable growth. How can companies build trust to drive transformative change, asks Jane Nelson.
Jane Nelson
Director
Corporate Social Responsibility Initiative,
Kennedy School of Government,
Harvard University

There is an apparent schism at the heart of the business community’s growing engagement in the global governance agenda. The Sustainable Development Goals (SDGs) and outcomes of the 2015 UN Financing for Development and Climate
Change conferences will shape the governance agenda for decades to come. One of the most common messages in almost every preparatory meeting and panel discussion is the need to increase private sector investment and engagement, and indeed the business community itself looks better prepared than ever before to invest, innovate and advocate for change with governments and civil society.

Yet public trust in business remains low. From protests such as the Occupy Movement to negative media coverage and survey results, large corporations and financial institutions are seen by many as being part of the problem rather than integralto the solution. The 2015 Edelman Trust Barometer shows that trust in business is below 50 per cent in half the 27 markets surveyed, although it remains higher than trust in government in most markets. There is also distrust in new technologies despite their potential to tackle social and environmental challenges.

This schism illuminates a point made by Jane Nelson, Director of the Corporate Social Responsibility Initiative at Harvard Kennedy School. She argues that to deliver more inclusive and sustainable growth, companies face a dual leadership challenge of building public trust and accountability while also increasing private investment and innovation.

“Corporations and financial institutions have enormous potential to increase both the quantity and quality of investment to tackle key development and environmental challenges. And they can do so in a way that generates business benefits and profit. A vanguard of leaders is already demonstrating this in practice,” she says. “Yet, despite all the progress being made, there tends to be a ‘guilty until proven innocent’ mindset among the public about business motivations and modes of engagement in sustainability matters.”

Nelson points to the imperative for business leaders to overcome public mistrust. They can do so by increasing the level and transparency of their stakeholder engagement activities and by improving disclosure on their sustainability performance and contributions to development.

More companies should engage proactively and transparently in dialogues with governments, NGOs, investors, the media, local communities and labour unions, she points out. They need to build a shared purpose and understanding of what business can and cannot achieve as a partner in sustainable development, and to advocate specific policy reforms and market incentives.

“Companies have a long history of lobbying for their own business interests, both individually and collectively. They validly continue to do that, but are under pressure to be more transparent about these activities and about the taxes they pay everywhere they operate,” Nelson says. “At the same time, a growing number of companies are becoming vocal in progressive policy dialogues on issues such as tackling climate change, deforestation and water shortages, addressing poverty and growing inequality, preventing human rights abuses, and supporting conflict resolution and peace-building.”

This is not entirely new. Nelson points to examples such as South Africa, Northern Ireland, the Philippines and Sri Lanka, where the business community played a progressive and pragmatic role in conflict resolution and political transition, sometimes in the face of repressive regimes. Likewise, she recalls being part of business engagement at the 1992 Rio Earth Summit, where the International Chamber of Commerce and Business Council for Sustainable Development convened a small number of visionary business leaders making the initial
case for business investment in sustainable development.

Another way companies can build public trust is to improve disclosure of their own policies and performance related to sustainable development. However, Nelson believes they can go further: “I see great untapped potential for companies to allow independent evaluations of how their products, services, technologies, projects and value chains are helping to solve problems that the UN and its member states are tasked with addressing. And how they are working collectively on a pre-competitive basis or in partnership with other sectors to overcome systemic obstacles to  progress. Not enough companies are demonstrating – or getting recognition for – their positive contributions to development and their ability to
create shared value.”


WHAT’S NEXT?
DELIVERING CHANGE

The UN Global Compact has played a valuable role in spreading responsible business practices, building trust and encouraging private investment in development. It has provided practical guidance on individual business action and accountability relating to challenges as diverse as peace building, water management and women’s empowerment. It has also convened companies to address complex public policy issues and helped to build effective public-private partnerships. In the coming years, these roles must remain essential, says Jane Nelson:

“This is especially important at country level, if we are to dramatically grow the number of companies that not just aspire to be sustainability champions, but also ‘walk the talk’ in delivering transformative change,” says Nelson.