5 Questions to … the OECD

11 november 2019

5 Questions to the OECD on their Trust in Business initiative

Dr Mathilde Mesnard, Deputy Director for Financial and Enterprise Affairs at the OECD
Dr Isabel Cane Business Development Advisor for Trust in Business at the OECD

1 Why has the OECD started the “Trust in Business initiative”?

Businesses today face increased levels of scrutiny around their conduct, and growing expectations from communities and policymakers that their operations deliver positive impacts to society beyond shareholder value. The potential for misalignment between expectation and business behaviour – and the reputational damage this could incur – is growing.

In this context, trust is emerging as a major source of long-term business value. And yet business faces a deficit of trust – according to the latest Edelman Trust Barometer, 47% per cent of people across the world do not trust business to do the right thing. This is troubling because trust impacts public sentiment and market efficiency, and intensifies political, economic, and social challenges. Inversely, trust is a key factor for establishing fair conditions of economic development, including the efficient allocation of capital, higher levels of innovation, productivity and improved business relationships.

The Trust in Business initiative is designed as a response to these challenges. The OECD holds some of the world’s leading standards on business conduct – first and foremost the OECD Guidelines for Multinational Enterprises defining responsible business conduct and related Due Diligence Guidance, alongside the G20/OECD Principles of Corporate Governance and the OECD Anti-Bribery Convention – so we know what good looks like. And yet the OECD has observed an implementation gap, which compounds the loss of trust in business and in the policy institutions that enforce business conduct and market norms. The Trust in Business initiative is a platform where leaders from business and government can discuss current issues, and meaningfully inform and implement OECD’s global standards and guidelines. These tools can strengthen trust in business and its ecosystem.

2 How would you define “trust” in this context? What are the key areas where it should be strengthened?

The OECD has done a lot of work on defining and measuring trust, and we recognise in our Guidelines on Measuring Trust that it is intangible and thus difficult to define. For a working definition, ‘trust is the expectation that the other party will act with integrity and do the right thing’. But what does this mean in practice? By trusting, we have the confidence that our interests will not be harmed, even if the other party has the power to do so. For example, in the financial industry, insurance companies and asset managers consider trust as their most valuable asset – without clients trusting them with their money, they would be out of business. More concisely, it is only through acting with integrity, which relies on a culture of purpose; transparency and accountability that trust can be earned and generated.

As a starting point, this translates into business leaders promoting integrity, and systems of responsible business conduct into the governance and activities of the company. For instance, trust should be present enough in every business so that it is able to shape the board’s operation while being at the centre of business’s duty towards clients.

3 Has there been an overall decline of such trust in businesses and (inter)governmental institutes or has there been a stronger decline in trust in respect of one or the other?

The 2008 global financial crisis had a significant effect on the loss of trust in business and institutions globally. Although trust in public institutions has largely recovered to pre-crisis levels in OECD countries, overall trust levels remain low and inequalities in levels of trust across population groups are higher than ever before. In the year 2017, Edelman has surveyed that out of 28 global markets, on average 48% of people do not trust in business to do the right thing and the OECD Government at a Glance reported 58% of citizens from OECD countries do not have confidence in their national government.

There is no doubt that trust needs to be strengthened across government and business; however, the impact on both institutions is different. The low trust in governments can be explained in part by a mismatch between citizen’s expectations and governments’ actions on key challenges such as climate change or adapting to the economic and social disruption of digitalisation and globalisation. The public are more trusting of business, and in particular companies they themselves work for as distinct to the private sector as a whole. Surveys like the annual Deloitte Global Millennial Survey show how citizens, especially the young people, expect business to take the lead on addressing social issues that governments have struggled with.  Business has to find a way to respond to these expectations and balance them with their obligations to shareholders, or they run the potential of incurring a new host of issues. This context implies the urgent priority for the OECD to build trust in both government and business.

4 How can we strengthen integrity and build trust in business?

The OECD is an international policy body, and so we’re looking to help policymakers create a business environment where companies can compete on good conduct and responsible practices – and this means better linking up with companies in implementing the global conduct standards mentioned earlier.

In October, the OECD hosted the inaugural Trust in Business forum, where we welcomed business, government and civil society leaders (including the ICC) to develop solutions to strengthen Trust in Business. During the forum, key drivers of trust for government and business were discussed and the prominence of adopting responsible leadership in building a culture of integrity, including through corporate governance and the tone from the top.

The accountability of staff is also important to ensure behaviour reflects the stated values of a business. Staff should understand the firm’s core values and understand that they will be rewarded and held to account for their conduct based on those values. As such, the leadership team need to make sure the values are communicated and understood throughout the organisation, and don’t get lost between the C-suite and the front line. We know that culture exists and is propagated at the business unit level. Therefore, while tone from the top is critical, so must middle and front line managers model the firm’s values.

5 What are the next steps and how can business and governmental leaders contribute to increasing such trust?

The OECD’s motto better policies for better lives improves economic, social and governance systems. The Trust in Business initiative aims to support the implementation of the OECD standards in the area of business conduct through action-orientated solutions and improved collaboration with private, public and civil organisations. By doing so it will reduce the implementation gap and level the playing field to foster trust.

An illustration of this is our Compliance without Borders project which aims at reducing the risk of corruption in state owned enterprises (SOEs). The initiative initiated in 2018, under Argentina’s presidency of the B20 Integrity & Compliance cross-thematic group and in support of the recently released OECD Anti-Corruption and Integrity Guidelines for State-Owned Enterprises. It aims to develop compliance capabilities in SOEs by seconding compliance officers on a temporary basis from private sector firms or from other SOEs, and illustrates the potential of public-private cooperation to develop innovative solutions.

The OECD Trust in Business initiative is a platform for leaders to catalyse good corporate conduct and respond to the expectations of society in meeting current and future challenges related to trust in business. We invite interested parties to engage.

If you wish to get involved, we invite you to visit our webpage and connect with us www.oecd.org/daf/ca/trust-business.htm