“Business” is in danger of becoming a dirty word. Actions taken after the global financial crisis to restore growth and profitability have caused consumers, suppliers, staff, local communities and investors to question what business is for and how it should operate. We are now in a world where profit and growth are no longer enough, stakeholders want to see business get the balance back.
I believe the key to restoring that balance is trust. Stakeholders want to be able to trust businesses to act with a purpose that goes beyond growing and making profits. This means companies face a critical challenge. How do we define and measure trust in business with the same rigour as growth and profit?
As Global Vice Chair of Industry at EY I have the unique privilege of overseeing the work EY does across sectors and countries. And what I see is balanced businesses building trust across five pillars: shared purpose, connectivity, insight, diversity and integrity.
Having a shared purpose inspires and unites businesses and stakeholders to focus on what matters to them – for example ethical supply chain practices or respect for the environment. This shared purpose allows a company to develop premium brand positions, to attract and retain the best talent and build customer loyalty and advocacy – all based on trust. Importantly it also improves the bottom line, with research showing that purpose led companies outperformed the S&P 500 10 times between 1996 and 2011.
Trust in purpose is vital, not just in its own right, but in the other qualities it brings to a business. As companies grow their networks of suppliers, partners and distributors, stakeholders need to be able to trust that new connections made within the broader value chain are built on the same shared purpose. In turn, diversity keeps businesses in tune with those stakeholder networks, ensures thinking stays fresh and helps business act with integrity – balancing the needs of all when change and ambiguity create complex choices.
So we can see the benefits when stakeholders have trust in a company. The challenge is how do we help companies measure that trust so they can maintain the right balance between trust, growth and profit which I believe goes to the heart of their ability to build long term value for stakeholders?
At EY we are building a new metric for trust. We are defining the indicators which show whether a business is being consistent with its core purpose and values. We are looking at how to assess the effectiveness of businesses’ connections with stakeholders; how well innovation is aligned with their needs and whether the workforce is truly reflective of the consumer and local community base. Perhaps hardest of all, we are seeking to test the ability of leadership to maintain integrity in the face of change and ambiguity.
Measuring and tracking the progress they are making on trust will enable businesses to restore the balance on which their reputation is based. I believe it will also reinvigorate their ability to generate long term value for stakeholders. The reason this matters so much is that we need to restore purpose, trust and balance so the economy can prosper. “Business” is our future. We cannot let it become a dirty word.
Alison Kay is Vice-Chair, Global Industry at EY. Her purpose is to help businesses restore the balance between growth, profit and trust which she believes goes to the heart of their ability to build long term value for all stakeholders. You can follow Alison on Twitter @AlisonKayEY.