CEOs on Notice for Lack of Sustainability Leadership

It’s the season for CSR reports, and the results show that with consumer and stakeholder expectations on the rise CEOs will feel the pressure to drive good business practices, writes corporate sustainability strategist Jill Riseley.

Corporate sustainability has been thrust into the limelight in recent weeks with a host of global reports released. This includes the 2016 Edelman Trust Barometer, the annual PwC CEO survey, Dow Jones Sustainability Index, as well as the conclusion of the World Economic Forum in Davos, Switzerland. With consumer, employee and business “trust” hot on the agenda, the corporate landscape identified by many of these report findings, will undoubtedly put a few top-level executives on edge.

In business we trust. 

Statistics from the 2016 Edelman Trust Barometer (which measures consumer trust in the institutions of government, business, media and NGOs) indicate that Australia’s trust in business had increased to 52 per cent (up by 6 per cent). A core reason for this increase was the perceived contribution of businesses to the greater good. This also indicates that consumer and employee expectations of business are also increasing and unlikely to diminish in the near future.

More than three-quarters of consumers surveyed thought business had a role to play in increasing the economic and social prosperity of communities in which it operates.

Australian corporations were also celebrated for their recent sustainability efforts with some companies – continued to be led by the banking sector – achieving a high standard of corporate sustainability. Westpac and Stockland both set their respective industry benchmarks for the Dow Jones Sustainability Index. Five Australian companies also appeared in the annual ranking of the world’s 100 most sustainable companies according to Corporate Knights. Commonwealth Bank in fourth position, Westpac at 33, ANZ at 67, NAB at 73 and IAG at 74.

Whilst CEOs are listening, perceived performance is lacking…

The global annual PwC survey found 76 per cent of CEOs saw their company purpose beyond profit. CEOs were also aware of the increasing expectations of stakeholders. More than half of the CEOs surveyed were concerned about the lack of trust in business today and 44 per cent believed that by 2020 company “success” will be redefined to address wider societal issues such as environmental sustainability, local community investment and wellbeing. Furthermore, there is a CEO consensus that in a digital age, consumers are more empowered than ever before.

Whilst CEOs may be listening, the bad news is consumers generally do not believe they are performing. Research found a significant gap between the importance consumers place on key leadership attributes that build trust, and perceived CEO performance. Edelman identified various corporate sustainability and responsible business aspects in 11 of the 16 trust drivers, for example “is dedicated to protecting and improving the environment” and “ensures the company addresses society’s needs in everyday business”. Put simply – on the factors that matter, drivers of trust, CEOs weren’t meeting consumer expectations.

More sustainable = more trusted = more reputable?

Therefore, given the majority of the drivers of trust are related to corporate sustainability and ethical behaviour, surely there is a logical correlation between consumer trust and sustainability credentials? Am I telling you that the most sustainable companies in Australia are also the most trusted or reputable?

Well no, unfortunately. Not quite.

Reputation and trust are fickle commodities which, when lost, are hard to rebuild. For example, some of Australia’s most decorated companies for sustainability have also suffered in the last 12 months from scandals of unethical behaviour, accusations of corporate excess and toxic cultures.

Furthermore, a corporate scandal will follow a company for years, and sometimes decades, after being resolved.

None of the Australian companies recognised for their strong sustainability credentials are found in the Australian Top 10 most reputable companies, according to RepTrak.

Australians are renowned for their cynicism and mistrust of corporate communications, and building a corporate reputation with Australian consumers is hard work. Put simply, “trust and reputation credits” are spent much quicker than earnt.  Despite the impressive efforts of sustainability teams, a deficit exists.

So what does this mean?

In a highly connected world, the consistency and authenticity of engagement and communications is essential. A good customer experience will trump a good advertising campaign.

Companies, in particular large employers, should also remember an employee experience will support or unravel perceptions of a values driven organisation with care beyond profit.

Edelman found Australia ranked 24th (of 28 countries surveyed) for employee trust in the company they worked for. This is a red flag for business given the links between trust and productivity and engagement. Consistent with other research, Edelman also found a direct link to employee advocacy and societal issue engagement.

At the end of the day, Australian consumers have a highly tuned rhetoric meter and long memories. The message is clear both consumers and employees expect a focus on more than just short-term profits.

The key takeaway for CEOs is to ensure values and purpose are embedded well beyond wall decals, volunteer days and Annual Reports. In addition, CEOs are expected to actively contribute to social issues and businesses that are creating social and environmental value will drive stakeholder trust and advocacy.

About the author: Jill Riseley is the Founder and Managing Director at Meliora Group, a strategic advisory firm specialising in corporate sustainability.