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.
[caption id="attachment_78011" align="aligncenter" width="650" caption="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 email@example.com
[Image Credit: elycefeliz, flickr]