Expert analysis from Joe Carmody, Managing Director, Edelman Ireland. This article has been written exclusively for IoD Ireland members.
The public has demanded fundamental change in Irish politics and the business world may be next to feel the winds of that change.
Weeks after the final votes were counted in the 2020 general election, Ireland is still coming to terms with our new political reality. After being presented with the two parties, Fianna Fáil and Fine Gael, who between them have shared power since the foundation of the state, hundreds of thousands of people in Ireland voted for change. This led to Sinn Féin being propelled into position as the second largest party in the country for the first time in its history.
Columns and columns of newspaper ink have attempted to make sense of the outcome. Even Sinn Féin did not expect their own success. But despite all of the hysteria, the result was, in fact, predictable.
The Edelman Trust Barometer has been tracking levels of trust in four separate institutions: government, business, media and NGOs, for two decades now. It points to public disquiet across a number of areas which helps to explain the mood of the public heading into the election.
Our latest Trust Barometer research sampled 1,150 people in Ireland in October and November, before the election was called.
Ireland is doing well economically. Some 2.4 million people were in employment last year, an all-time high, according to the Central Statistics Office. Despite this, Irish trust levels are among the lowest in the world, landing just ahead of Russia, Japan, South Africa and Spain. There is also a growing trust inequality in our country. Those who are wealthier, more educated and frequent consumers of news recorded significantly higher levels of trust compared to the rest of the population. Irish people are worried about the future and fear another recession. Just 37 per cent said they believe that they and their families will be better off in five years’ time. More than four in ten fear being left behind.
Translate that into the opportunity, or lack thereof, for young people to get onto the property ladder and the election outcome becomes more easily understood. Even capitalism itself, which historically has been proven to be the best system of economic and political management, is being called into question. The majority of Irish respondents (57 per cent) agree that in its current form, capitalism does more harm than good. Some eight in 10 expressed a desire to see forceful reformers appointed to positions of power with a mandate to drive real change.
These findings put an empirical floor underneath the outcome of this year’s General Election.
Given these facts and what has just happened in politics, is the business world about to undergo its own seismic shift? Firstly, we must look at the current state of trust in business. Only 48 per cent of Irish people say they trust business to do the right thing, although not all businesses are distrusted equally. Some 71 per cent of people trust family-owned businesses. In comparison, 49 per cent distrust public companies, 47 per cent distrust private companies and 44 per cent distrust state-owned companies.
Industries that previously enjoyed high levels of trust are in difficulty. Technology, historically the most trusted industry in the Edelman Trust Barometer, is starting to weaken. This year it lost its position as the most trusted sector in nine out of the 28 markets, including Ireland. Six in 10 people believe that the pace of technology change is too fast and there is a sense that there is no watchdog.
The public are demanding more of business. The 20-year history of the Edelman Trust Barometer shows that while previously businesses were just expected to be competent, this has changed. To build trust delivering financial returns and ensuring operational excellence is no longer enough. It is clear that profit must be delivered to allow reinvestment, innovation and return on risk but the public expects and demands that businesses also become more in step with the needs of people and society.
Stakeholders Not Shareholders
Now, ethical drivers are three times more important than competence for companies gaining trust. The vast majority (91 per cent) of Irish people believe that stakeholders, not shareholders, are most important to long-term company success. Some 72 per cent believe that a company can take actions that both increase profits and improve conditions in communities where it operates. A company may be ethically sound, and it may do good but critically it must be understood to do good.
This is by no means an altruistic endeavour. Investors are also moving in this direction and eight in ten align with the requirement for business leaders to balance the needs of society and the needs of the shareholder. Some 64 per cent of people now see themselves as belief-driven drivers, meaning they choose, switch, avoid and boycott a brand based on its stand on societal issues. This is a form of brand democracy. People believe that brands should be a powerful force for change, and they see their wallet as their vote.
What we need now is a new model of building trust and business can be a catalyst for this change. Many companies are recognising that reality and they are taking action to re-align their companies in ways that are more inclusive. In the US, the not-for-profit Business Roundtable has redefined the purpose of a corporation. Its members, 181 leading chief executives, have committed to improve society by not only meeting the needs of shareholders but the needs of all stakeholders – customers, employees, suppliers and communities
Chief executives are expected to lead from the front. Three-quarters of the public believe that chief executives should be leading on change, rather than waiting for government to step in. In other words, business should get ahead of regulation instead of being legally forced to do the right thing.
A significant majority (90 per cent) believe that business leaders should be vocal on issues that impact people’s future: training for jobs of the future, automation, climate change and technology’s impact on ethics and privacy. Prioritising all stakeholders instead of just shareholders is not only the right thing to do for society, it is a prudent business move. Business need not fear the dual objective of profit and working to improve society. If a business is ethically strong, the pay-off is a trust premium making it more attractive to investors, employees and consumers, resilient to risk and insulated from regulation. There will always be a rivalry between what shareholders want and what society needs, and the question is whether business is up for bridging that gap.