The trust game

Building trust among key stakeholders is a strategic concern for any corporation. Today, as companies seek to improve their reputations, they can’t ignore the environment. These issues are not only top of mind among consumers but also regarded by almost half of the respondents of a recent McKinsey Quarterly survey as an area in which corporations have a negative impact on society because they pollute and otherwise damage global ecosystems.

Each company must analyze what role environmental issues and climate change can and should play in its strategies. For some, building trust among consumers and seizing an important business opportunity can go hand in hand. A packaged-goods company that introduces smaller containers made of recycled pulp products, for example, not only stands to benefit from lower materials and transportation costs but also visibly contributes to the reduction of greenhouse gas emissions.

But many corporations would be wrong to focus almost all of their societal efforts on environmental issues and to forget about others that are important in their industries. In retailing, for example, consumer research suggests that measures such as reducing energy consumption and selling environment-friendly products are important for winning credibility as a socially responsible company. The most burning issue for this industry, however, is the way global retailers treat their employees, so companies should address that one as well.

Indeed, when asked which specific area would be most effective if large corporations wanted to raise their overall reputations, 19% of consumers said that companies should improve the benefits and conditions of their employees, 17% that they ought to become more environmentally friendly. Significant variations by country underline the need for corporations to tailor their approach to different geographies. In the United States, for instance, executives and consumers are less worried about climate change than are their counterparts elsewhere. US consumers said that improving employee benefits and conditions was the most effective reputation builder by far; consumers in neighboring Canada chose environmental action.

The complexity of managing sociopolitical issues may be one reason most business leaders continue to view them mainly as risks. Nonetheless, they are clearly opportunities as well. More than half of all consumers say they are willing to recycle, to buy energy-efficient appliances, and to drive more fuel-efficient cars, so the markets for these products and services are likely to grow.

Corporations have ample opportunity to differentiate themselves from their competitors by acting on environmental and other social issues and to build trust among consumers by publicizing these activities successfully. Creating awareness is critical because consumers say they are more willing to do business with companies they trust to perform well on societal issues.

Source: The McKinsey Quarterly, March 2008

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