Business & Society: Building Trust

By Ashely Hegland 13 May, 2014

Edelman's Ashley Hegland tells us how business & society can lead change in important societal issues

86% of global respondents believe businesses need to reprioritize value to include societal benefits to build trust
Financial upside proven by protecting against resource scarcity costs & identifying new opportunities
Need to walk the talk or risk reputation damage; the right balance of “do” and “say” is a must to benefit business

My wish this year is simple but ambitious…

 “I wish for businesses across Asia to take the lead to understand, influence, and lead change on important societal issues”

Simply, I wish for businesses across Asia to take the lead to understand, influence, and lead change on important societal issues.

The water challenge in China is a good example of a pressing societal issue, but so are food security, deforestation, health care, and poverty alleviation to list a few.

 

While my wish may sound aspirational it is not whimsical. In fact, it is highly achievable and likely profitable while very much in the mutual interests of business, government and society.

Let me explain.

86% of global respondents believe a company can & should take specific actions to increase profits while improving economic and social conditions in the communities in which it operates.

 2014 Edelman Trust Barometer

The 2014 Edelman Trust Barometer indicates that 86 percent of global respondents believe a company can and should take specific actions to increase profits while improving economic and social conditions in the communities in which it operates. This effectively says that today, businesses are expected to shift from the historic, transactional nature of capitalism to a model of value creation that encompasses societal benefits as well as shareholder value.

Our Trust Barometer results highlight an opportunity, but more importantly, a responsibility for business to redefine and reprioritize the way it thinks about value.

While trust in Asia Pacific remains a key currency for business to ensure a license to operate and maintain growth opportunities, there is a growing body of evidence that suggests companies that address larger societal issues, like climate change, financially outperform those that do not.

” there will be financial upside to addressing these issues, through protection against resource scarcity costs and the identification of new business opportunities”

London-based Osmosis Investment Management states its belief that companies with a climate change focus benefit significantly from efficiency gains. Osmosis’ MoRE World Equity strategy, which includes the top 10 percent of resource-efficient companies by industry, delivered a 113.29 percent return for the five years ended December 31, 2013, which was an impressive 36 percentage points more than the MSCI World Index during the same period1.

In a world that is growing by a billion people every 12 years, it makes sense that people will expect companies to address societal issues – expectations from customers, employees, governments, and NGOs – will be high.

Quite simply, there will be financial upside to addressing these issues, through protection against resource scarcity costs and the identification of new business opportunities.

The question is not ‘if’, but ‘how’ business can best take on this role in leading societal change.

Understanding and addressing the right issues

The good news for business is that it is not expected to address every societal issue. In order to acquire and sustain trust with the key stakeholders that enable business success, companies must first understand and then address the societal issues that are ‘material’ to their specific business.

companies must first understand and then address the societal issues that are ‘material’

The bad news is that quite often, the most material issues to a company are also the most difficult (and costly) to address at an operational level. An airline must address carbon emissions; a large European retailer sourcing products from Asia must address complex labour issues in its supply chain; a pharmaceutical company can invest in finding profitable ways to solve healthcare issues in low-income countries.

companies are now expected to address the issue across the entire value chain of its business

Materiality varies from business to business.

To add to this challenge, regardless of the issue, companies are now expected to address the issue across the entire value chain of its business. That means that for a consumer brand, they must address the issue from raw material supply to consumer use. Not easy, considering that for many companies, there is a lack of operational control at either end of the value chain.

How: A function of what you do (operations) and what you say (communication)

Companies are expected to address material issues at both the operations and communication levels.

For example, a company that invests in communications, whether it be consumer-facing marketing or NGO-focused corporate communications, without sufficient issue-related operational investments (financial and human resource) risks damaging its reputation for not walking the talk.

companies that get the right balance of “do” and “say” across its entire value chain, stand to benefit the most from addressing societal issues

Similarly, a company that addresses an issue at the operational level but fails to effectively inform stakeholders about the work will likely be perceived not to be addressing the issue at all.

Aligning operations and communication functions internally is itself a significant challenge. Companies that get the right balance of “do” and “say” across its entire value chain, however, stand to benefit the most from addressing societal issues.

This is the Business + Society Intersection.

Here is an example of how Levi’s, a well-known consumer brand,  is addressing the water issue at an operational and communication level from supplier to consumer…

Business and Society Intersection - Levi StraussAt an operational level, Levi’s is working with suppliers to reduce water consumption and is constantly looking for ways to reduce water use within its own operations.On the consumer side, Levi’s discovered through a life-cycle assessment that 45% of the water used (not to mention 58% of energy) during the lifetime of a pair of Levi’s jeans occurs during the consumer-use phase2.As a result, Levi’s began engaging (read: “influencing”) its customers through in-store and online campaigns to recycle old jeans and reduce washing of their jeans.In terms of communication, at a corporate level, Levi’s discloses its social and environmental performance via its Sustainability Report, and constantly updates its website and dedicated “Sustainability” blog with information on this (and other) pressing societal issues. The issue is also communicated in visible product marketing for its “Waterless” jeans.

 

A wish that benefits business

” in a world of increasingly scarce resources & complex social issues, my hope is inspired by businesses that have much to gain from addressing these issues head on”

I admit that my wish this year is ambitious, particularly when you start to think about how many pressing societal issues there are to address.

But in a world of increasingly scarce resources and complex social issues, my hope is inspired by businesses that have much to gain from addressing these issues head on. Business leaders can increase trust and strengthen profitability, while at the same time improving the environment and communities in which they operate.

And this is something that every business leader desires. Let’s all wish for more companies to lead this change this year and into the future.


1Institutional Investor: www.institutionalinvestor.com (“Climate Change and the Years of Investing Dangerously”: April 7, 2014)
2 http://www.levistrauss.com/sustainability/innovative-practices/planet/

Further Reading

  • One Year On: H&M & Water Stewardship – H&M’s Sustainability Relations Responsible, Julia Bakutis updates us on their Water Stewardship programme one year on. Find out what they have done & what challenges lie ahead for H&M as a water steward
  • AIDF Water Summit: 5 Takeaways – Dawn McGregor gives us her 5 takeaways from AIDF’s Asia Water Security Summit ranging from exposure of GDP to water risk to the crucial need for un-siloed approaches and key areas of improvement in the water sector
  • Water Stewardship: A Stake in the Ground – There is no universally agreed definition of water stewardship, leaving companies unsure of what it is and what to do. Stuart Orr walks us through WWF’s latest report, A Stake in the Ground, an introductory guide for companies on managing multi-faceted water risks
  • Materials Sustainability in the Higg Index – Sustainable Apparel Coalition’s Sousa & Young on how Nike’s Materials Sustainability Index can help brands & suppliers make the right water-friendly choices in raw material selection
  • Fashion Update! Brand Winners & Sinners – With the new Phase III Textiles Investigative Report released by 7 China NGOs, we look at who has managed to stay on top since April 2012

Ashely Hegland
Author: Ashely Hegland
Ashley Hegland has been working in the field of corporate sustainability for over thirteen years. Having spent the majority of those years working in the Asia-Pacific region, Mr. Hegland has been a leader in the region’s development of these emerging business disciplines. Based in Hong Kong, Mr. Hegland currently serves as Regional Director, Sustainability Practice for Edelman in Asia Pacific. Mr. Hegland helps corporate clients address complex business-society issues through strengthened dialogue and communications with NGOs, government, employees, customers, media and other critical stakeholders. Mr. Hegland joined Edelman in Hong Kong in May 2006 after having completed his MBA degree at the Schulich School of Business (York University) in Toronto, Canada, where he specialized in Business Strategy and Marketing.
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