« Back to Home Page

The Role of Trust in Sustainable Business

3p Contributor | Wednesday July 6th, 2011 | 10 Comments

By: Barbara Kimmel

What is the role of trust in creating sustainable business? Trust Across America posed this question to several experts to assist us in our own research on trustworthy business practices.

Why is the creation of measurable standards of trust important?  According to Frank Sonnenberg, author of Managing With a Conscience,

In the twentieth century, a company measured success by the number of tangible assets (such as property, plant, and equipment) it posted on its balance sheet. In the Information Age, however, intangible assets rule the day. Intangible assets such as trust, creativity, speed, relationships, reputation, loyalty, employee commitment, brand identity, and the ability to adapt to change determine success.

Why track company performance based on trustworthy behavior? Because trust is an inherent element of optimism that buoys any economy, and companies that understand the correlation between trust and sustainable business create greater value for all stakeholders, in addition to “doing the right thing.” 

Chris Laszlo, PhD, author of Embedded Sustainability: The Next Big Competitive Advantage (and Associate Professor at The Weatherhead School of Management at Case Western Reserve University) agrees.

Creating business value in today’s competitive environment depends on intangibles such as the relationship a company has with its key stakeholders. This, in turn, depends on trust. Destroy that trust, and you destroy value, as BP discovered in the months following its Deepwater Horizon disaster when it lost more in market value than the sum of all its clean-up costs to date. But it’s not only about managing risk. Trust is also about the new business opportunity to collaborate with customers, non-profits and many other groups in co-designing profitable market solutions. Co-creating brand value and co-designing products – all of this requires trust.

Trust Across America’s proprietary research confirms that the most trustworthy companies provide long-term benefits to all stakeholders, including shareholders. In November, 2010, our data identified 59 companies that met our benchmark standard for trustworthy business behavior.  The chart below is a graphic representation of the performance of the “Gold 59” since 1999 vs. the S&P 500.

image courtesy Trust Across America

These companies have already outperformed the S&P by approximately 35% since we began tracking them in November 2010, and it’s no fluke.  If someone had been smart enough to have picked those same companies in 1999, they’d have outperformed the S&P by over 500%. 

This group contains many “household” names like Aflac, Fed Ex, Lexmark and Cigna. Others are not as well known- Albemarle, Praxair, Ecolab and Lubrizol, which was recently acquired by Berkshire Hathaway. But whether well known or unknown, they all share a common characteristic. They have integrated a culture of trustworthy business that benefits all stakeholders, including shareholders- representing the “best in breed” of sustainable business.

Charles Green, the Founder of Trusted Advisor Associates, sums up the correlation between trust and sustainability as follows:  “A sustainable business has an expanded view of both time and stakeholders; it’s about more than quarterly earnings for shareholders.  Reliance solely on economic and market-based tools works for mono-focus and short-terms; by contrast, trust scales as a management tool.  More deeply, trust itself is also built on extensive relationships over time. It is a natural way of doing business for those who believe in sustainability.”

What are your thoughts on the role of trust in sustainable business?

Barbara Kimmel is the Executive Director of Trust Across America. For more information, please contact barbara@trustacrossamerica.com

http://www.trustacrossamerica.com

[Image Credit: elycefeliz, flickr]


▼▼▼      10 Comments     ▼▼▼

Newsletter Signup
  • http://www.businessethicsblog.com Chris MacDonald

    I think the connection is definitely there, though hard to define. Notice that the first two experts you quote don’t say anything about “sustainability”, at least not in the usual sense of that word. They’re talking about business success, which is something different. Not unrelated, but different.

    • Tom Heffner

      What is the criteria for selecting companies? Without knowing the criteria, the results do not mean much.

      • http://www.trustacrossamerica.com Barbara Kimmel

        Tom-very simply, they must meet minimum benchmarks on all of our FACTS trust drivers (financial, accounting, corporate integrity, transparency and sustainability, as well as a minimum benchmark on our aggregated trust score.

    • http://www.trustacrossamerica.com Barbara Kimmel

      Chris- as you have highlighted recently, the “usual sense of the word” means different things to different people. This post is about the relationship between trust and sustainable business. Corporations that exploit short term opportunities can be considered profitable, but unless they have an eye on the long term benefits to all their stakeholders, they cannot be considered trustworthy. Sustainability is a sub-condition of trustworthy business behavior.

    • http://www.trustacrossamerica.com Barbara Kimmel

      Chris- as you have highlighted recently, the “usual sense of the word” means different things to different people. This post is about the relationship between trust and sustainable business. Corporations that exploit short term opportunities can be considered profitable, but unless they have an eye on the long term benefits to all their stakeholders, they cannot be considered trustworthy. Sustainability is a sub-condition of trustworthy business behavior

  • Bradley Short

    I really like that graphic that you use. I’d love to see a full list of the “Gold 59″ companies that you mention. Do you have a link to the whole thing? Thanks!

    Bradley Short
    http://www.twitter.com/businessearth
    http://www.businessearth.com/category/blog

  • http://ctsmithiii.wordpress.com/ Tom Smith

    This reminds me a lot of one of my favorite books, “The Integrity Chain” by Dr. Ralph James. The premise of the book is integrity leads to trust which leads to repeat business which leads to greater profitability.

    Likewise lack of integrity will result in a lack of trust, a lack of repeat customers and poor profitability. Consequently not a sustainable business.

  • http://www.BraidedTraditions.com Sue Spielman

    Good article on what might be considered the ‘intangibles’ of business. Couple of additional thoughts to offer for discussion…if the term sustainable business is used analogous to ‘repeatable’ business, then trust can (and will be) a contributor to continued movement , hence repeatable business. Through a lens of natural science, there is an Oral Teaching on truth gives movement. There are qualities of truth (such as unity, change, willingness, and clarity…to name a few) that when present will create a movement (in this case we are talking about sustainable business). Trust can also be described as the presence of qualities of truth, which will then give movement. It is an interesting concept (and practice) for businesses to consider that their trust is actually measurable through various qualities of truth.

  • http://www.business4good.org Juergen Nagler

    Very interesting article. The UN Global Compact and Goldman Sachs launched a report along the same lines in 2007, saying that ‘responsible’ companies perform better in the long run.

    Where to find the list of your ‘gold standard’ companies. Couldn’t a fund manager set-up the portfolio as a fund? Would be interesting to see the comparison with FTSE4GOOD etc…

    Best
    Juergen
    http://www.business4good.org
    http://www.twitter.com/Business4Good

  • http://www.jeremy-king.com Jeremy King

    Barbara. A thought provoking article. I’m sure you’ve written about this elsewhere but it would be informative to see – transparently – the criteria underlying your index of trustworthy companies together with details concerning rebalancing/ inclusion/ exclusion etc.