On 16th June 2020, Ed Williams delivered a speech to the Deloitte Risk, Regulatory & Public Policy Forum:
Thank you for the invitation to present to you today. I spoke at this conference last year and I must confess this has created some confusion in my mind.
It doesn’t feel like a whole year ago that I attended this event – it is still very fresh in my memory – and yet the world has changed in so many profound ways that it feels like it has been so much longer than twelve months. I don’t know if you feel that way too, but for me it is a strange temporal paradox.
And these are discombobulating and troubling times for everyone. When Edelman published our annual global Trust Barometer report in January, the world hadn’t come even close to predicting the extent of the situation we are going through today. Back then, the world as we now know, would have felt like the stuff of fiction, the script of a disaster movie.
The loss of life, the disruption to our way of living and the severity of the economic consequences is still hard to grasp. This was an issue, many felt, like SARS or MERS, a health crisis contained to another part of the planet – far away from our contented lives.
Edelman didn’t plan to produce a Spring Trust update, but the Covid-19 crisis has demanded it. We undertook a special Trust Barometer that surveyed 11 markets around the world – over 13,000 people in total – between 15th and 23rd April. So, this field research was done around eight weeks ago, and lots has changed since then, yet there are some profound insights that I believe carry forward.
The results – in some respects – are simple. Exceptional times are producing some quite extraordinary results. But I want to draw out three key headlines with big implications, I think, for you.
First headline: trust hit a record high.
We found the highest aggregate trust score - across business, government, media and NGOs - in two decades of studying trust. Fear - large-scale, multi-variable fear - seems to have driven a particular type of trust in the system.
I would suggest though that this is trust through necessity. But nevertheless, the surge in levels of trust across the board tells us something pretty unusual is going on.
But… and I really want to stress this point, we think this trust is very fragile. People are experiencing a cauldron of emotions. They are critical of government and business. They are not passive actors in all of this – with things being done to them.
We found evidence of significant levels of fear - people remain very worried about their wellbeing. They remain scared about their health, and the health of their friends and families. In part, because Governments were perceived to have failed in getting medical supplies and protective equipment to people – while business is seen to be falling short on looking after the health of workers and customers.
Moreover, there are big fears about jobs. Job insecurity pre-dated the Covid pandemic – people were already worried about automation, globalization, workforce reductions and an economic downturn. Now layer on top of that anxiety about job losses and the state of the labour market as a result of coronavirus: 56% of people say they are very concerned about job loss due to the pandemic and not being able to find a new job for a very long time.
And when you look at today’s job numbered in the UK and the doomsday forecasts of 4.5m out of work in this country, you can see how job worry is going to become redundancy reality.
But economic concern goes much wider than fears about jobs. In recent years, Edelman has talked about the mass-class divide – the gap between how the those with income, education and information think about the institutions and everyone else. We saw the gap first in the US, UK and France. It then spread to Canada and Germany and then to India and the Middle East.
What the pandemic seems to have done is reinforce the sense of a two tier system in people’s mind - around two thirds of people say that it has heightened their awareness of division between the affluent and those on lower income, and that action must now be taken to make things fairer. A similar proportion say the poorest are unfairly burdened by this public health crisis and are suffering and making the greatest sacrifice because of it.
So, when you consider all the strong undercurrents swirling around under the headline record trust figure, I can tell you that we expect trust to decline. Indeed, over the years of tracking trust, we have seen that after a rapid trust rise, we tend to see a fall.
Back in April, our data showed that Government at that point in the crisis had seen a particularly rapid trust rise - and perhaps the most remarkable finding was the complete reshuffling of the institutional trust deck as a result.
This brings me to my second headline: Trust in government surged (note the past tense here!).
Our data showed trust in government leaping by a staggering 11 points – making government the most trusted institution in the world for the first time in 20 years of study. We had never seen anything like this kind of jump.
People turned to government for a response. The neo-liberal paradigm that has been so dominant since the Thatcher-Regan era and the fall of the Berlin Wall – the view that government should get out the way, get out of our lives and leave things to the private sector – did not hold in this crisis.
Around the world, government was seen as the strongest institution to lead across all aspects of this pandemic.
You might think that people expected media to take the lead in informing the public. Wrong. It was government.
You might think that people expected business to take the lead on providing an economic response and support. Wrong. It was government.
And you might think that people expected charities and NGOs to take the lead on helping people in the community. Wrong. Again, it was government.
In short, government found itself centre-stage – people wanted big government. This is a far more pronounced declaration of faith in the public sector than we have ever seen.
This situation provided a shield for business. Government had its hands on the wheel and business was in the backseat. But things are changing.
In recent weeks, the narrative in some countries – such as here in the UK – is already shifting to one that is far more critical of government.
Moreover, business is increasingly being pushed to the front as we see restrictions being lifted and governments attempt to bring our economies out of an induced coma.
Which brings me to my third and final headline today…
This is a moment of reckoning for business.
We’ve seen “reckonings” for business before. Post the banking crisis. The emergence of social purpose as a strategic pillar. But I’d argue this is different – attitudes have changed.
And it is a moment loaded with risk. By a margin of two to one, people said the economy must come second even if it means losing jobs, save lives first.
That makes the gradual easing of lockdown - to get economies moving - challenging for governments and hard for businesses. We have shaped public opinion that you can’t do both – balance protecting lives and getting the economy back on its feet.
But there is no getting away from it - as government rolls back support, and it will have to at some point - companies will be expected to step in, regardless of public opinion.
Business though has a long road to climb to address some of the embedded pejoratives that people hold about it: the criticism of executive pay packets, allegations of nepotism or corruption, charges of predatory and unethical behaviour. Some accusations are fair, many are not.
Our Trust Barometer report in January showed that a majority of people think that capitalism as it exists today does more harm than good in the world. And critically, while business is seen as competent by the public, it scores poorly on the moral dimension.
And this really matters when it comes to trust. Last year I talked about the four drivers of trust:
For those who didn’t attend last year, who have forgotten – or perhaps simply stopped listening! – these drivers do not explain all the variation in trust between institutions or the individual companies we track.
There are other things that matter. But these are the four most important ones. Suffice to say that we undertook extensive research into the science of trust to isolate them.
The first two are about competence.
Ability is simple – do I believe you have what it takes to do your job well?
Dependability is linked but different – can I rely on you? Can I make good predictions about what you will do?
The second two drivers are less about service and more about the moral character of a business.
Integrity is about how you make decisions and operate. Are you seen as fair, transparent, honest?
And purpose is about what you are for. Are you just there to make money or do people believe you are trying to have a positive impact on society.
To focus the challenge on Deloitte and others in your category, the pandemic has thrown up new challenges and exacerbated old ones. When it comes to audit, despite all the mitigating steps being taken, Covid-19 has undoubtedly challenged the vectors of ability and dependability.
Remote working and lower levels of supervision coupled with lack of clear sight about the future viability of companies - given all the economic uncertainties - inevitably creates greater risk.
As government rolls back support for companies and – in all likelihood we see many businesses go to the wall, it will put companies in your category in an exposed position. You will be seen to wield the knife. And there are lots of people who will want to push responsibility your way to deflect it from themselves.
And this is where we get into the moral realm. Where integrity and purpose become so important – these are the shield you must have at hand to protect you. They are the insulators against a collapse in trust and all the exposure and damaging consequences that flow from that.
And - when events mean you take a hit on trust - they help you recover it more quickly. If people think you have purpose and integrity, they will listen to you, cut you some slack and give you the benefit of the doubt.
Covid as you see presents real risk to your trusted reputation. It also is an accelerant to other trends that pre-dated the crisis. For example, business leaders have talked about stakeholder capitalism over serving shareholders for a long time.
Perhaps most strikingly when, in the US last summer, the powerful Business Roundtable Group changed its official definition of “the purpose of a corporation” from maximising shareholder value to “creating value for all our stakeholders” and improving society. 181 CEOS put their name to it.
Environmental, social, and governance concerns are radically reshaping the way companies and investors think about risk – value creation is being broadened and redefined.
And new forms of partnership are needed to create this new value. Complex, interconnected, systemic challenges cannot be solved in isolation – progress demands partnership. Public expectations are that companies put narrow self-interest aside.
Take the pandemic response - two thirds of people in our survey said companies should collaborate with competitors for faster development of more effective responses to the crisis. And it’s why business needs to form new partnerships with government too – working together to amplify activities and give them meaningful scale.
It is clear that we are now at the moment when where integrity and purpose cannot be about stated intent – they are being put to the test now and will be in a big way in the near future. It raises fundamental questions:
Are you seen as having an extractive role with society or a contributory one within it?
Are viewed as looking after narrow self-interest or contributing to the common good?
And are you regarded as a barrier to positive change or an agent of it?
Many businesses were asking these questions and leaning into them before the pandemic. For a company as entwined in the global economy and the future of business as Deloitte, they are vital. Both meaningful action and effective communication of that action are key.
So, in summary, where do we find ourselves? Well, to state the obvious in a place that we never comprehended.
We have governments around the world paying people’s wages – a form of universal basic income that up until now had only been postulated in essays from progressive thinkers. Or put it another way, we have companies taking public money to pay wages rather than resorting to large scale lay-offs.
We have companies leaning into national efforts to fight the crisis – transforming their production to meet local need or offering help to front line workers. We see nationalisation of private sector assets. We see pretty much every CEO and senior director taking pay cuts.
And what does life look like afterwards – pretty grim. Unemployment levels we haven’t seen since the Great Depression. Insolvent businesses. And huge indebtedness. A difficult picture to comprehend when you walk through the park on a sunny day
Covid is a catalyst moment. Things are in motion – trends are accelerating. There is a rising public energy – fuelled by fear and new expectations. They want to see businesses supporting them, doing good in the world and on their side in these times. They don’t want silence, they want to hear from you.
Think about those questions again – can you answer them? If the answer is no, you need to look closely at how you are doing business. Because businesses that think they can simply baton down the hatches, weather storm Corona, and simply return to the port they left are sadly mistaken. Those companies that recognise that the winds have changed and that they must effectively harness this power to navigate very choppy waters ahead, will be the ones that will succeed.