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THE CHALLENGE OF TRUST

COHERENCE IN AN AGE OF COMPLEXITY

A COLLECTION OF EDELMAN TRUST ESSAYS FROM ACROSS EUROPE AND THE MIDDLE EAST THE CHALLENGE OF TRUST - COHERENCE IN AN AGE OF COMPLEXITY | 1


CONTENTS

FOREWORD

A COLLECTION OF EDELMAN TRUST ESSAYS FROM ACROSS EUROPE AND THE MIDDLE EAST Foreword 3 The Challenge of Trust Across EMEA in 2011 by Robert Phillips

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The Need for Institutions to Engage by Martin Porter

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Business and Government Must Work Together by Mark Cahalane

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How Can the German Food Industry Win Back Trust? by Cornelia Kunze

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In Search of Transparency by Isabelle Rahe-Journet

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Public Accountability is Crucial by Richard Sambrook

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Transparency Drives Trust After the Arab Spring by Iain Twine

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Attitudes to the Media by Veronika Moiseeva

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Raising Social Awareness in Business by Miguel Ángel Aguirre

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Government, Business and Social Responsibility by Fiorella Passoni

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Time For Some Straight Talking by Stefan Stern

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For more than a decade Edelman has been tracking public attitudes and trust towards a range of institutions – government, business, NGOs and the media. We have built up a body of evidence and trends which lead to very clear conclusions about public expectations of all kinds of organisations. However in the months since our 2011 Trust Barometer was published, the world has been swept with events which impact directly on public relations and trust: the Arab Spring, the financial crisis in the eurozone, the “Occupy” protests in cities across Europe, government scandals, media scandals (particularly with phone hacking in the UK) and more. When the next Barometer is published in early 2012 it’s inconceivable that these events won’t have had a profound impact on public trust and provide significant indicators for any organization seeking to engage the public. It’s clear that the world is becoming more complex, the public sphere more sceptical and trust in all institutions and business is fragile and in a state of flux. As we look back at these events, and forward to their implications for 2012 and beyond, how can

leaders help consolidate trust and build public engagement in a time of political, economic and social volatility? These essays, from Edelman leaders across Europe and the Middle East, discuss the events of 2011 and look at how to provide coherence in an age of complexity.

Richard Sambrook, Global Vice Chairman and Chief Content Officer, Edelman richard.sambrook@edelman.com

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THE CHALLENGE OF TRUST ACROSS EMEA IN 2011 Many of you will be familiar with Edelman’s Trust Barometer a twenty-three country survey that allows us to reflect on global events through this essential prism of Trust. We all know that Trust matters - because companies that are trusted are four times more likely to be believed than those who are not. Trust pays commercial dividends. But 2011 has been a truly momentous year for Trust with a wide range of challenges for governments, institutions, companies and NGOs. S&P’s downgrading of US debt is just one of many starting points - with politicians driving the economy to the edge, paralysing progress in return for scoring political points. Who would you trust there to ‘do the right thing’? It’s not just the US which has witnessed a cadre of political leaders who seem bewitched to understand whether to save the economies of the region or their own political fortunes. This has been a year when trust in governments and financial institutions has been hard hit across Europe too - from Ireland to Greece and points in between, as finance leaders struggle with the eurozone crisis. It’s not just economics. Riots on the streets of London likewise indicate a crisis of Trust in society. Nothing can be more visceral that watching the trust in political institutions simply burn away on our TV screens. Trust in Media can surely not emerge unscathed – in the UK at least – by the crisis that has engulfed News International and News Corp (disclosure: an Edelman client). In Japan, a tsunami provoked a nuclear crisis and, in turn, a political crisis, too. No riots on the streets of Tokyo, though. But instead the sixth Prime Minister in five years and reverberations felt as far afield as Germany, who pulled the plug on 4 | THE CHALLENGE OF TRUST - COHERENCE IN AN AGE OF COMPLEXITY

its nuclear energy programme…. in turn, sparking a crisis of Trust in Government, from Business. We live in a truly interconnected world. The Arab Spring will, in time, provide a Trust Case Study all by itself – asking questions from the role of Social Media to the issue of whether ‘dictatorships’ can ever survive in a democratising world where we seem to trust one another more than we now do authority figures. But Tahrir Square is not just about Egypt or Mubarak, nor is the Arab Spring just about the Middle East. Tahrir Square is emblematic of a new, and more youthful, world order. There is, without doubt, a Tahrir Square moment waiting to happen for a business or a brand. To add to the complexity, we now live in an age of disbelief, as well as one of complexity. This quote from the Wall Street Journal’s Peggy Noonan, following the death of Osama bin Laden, is apposite: “Here is the fact of the age. People believe nothing. They believe everything is spin and lies. When people believe nothing, they believe anything”. In an environment of sometimes acute public scepticism, how can organizations build trust? What are the key shifts in public attitudes to business and institutions that need to be understood? I think there are six key considerations. First, there is the shift from a Shareholder to a Stakeholder society. A few years ago, Trust Barometer data would tell us that a company would be trusted

if it maximized financial return for its shareholders. Now, ‘financial returns’ has tumbled from first to tenth of key considerations. Trusted companies are those who consider the interests of multiple stakeholders. The second macro trend recognises the oscillating fortunes of governments. In a democratizing Social/ Digital world, we no longer trust Governments to ‘do the right thing’. Whereas once Governments provided something of a trust certainty, no longer is this the case. You only have to look to the predicaments of Obama or Merkel, to Greece or to Ireland, to get a sense of how this now plays out. Trust is complex and fragile because one of the great Trust institutions – Government is crumbling, most notably in the West. Third, we are witnessing the continued rise of Civil Society and of Citizenship. Over the twelve years of the Edelman Barometer’s findings, we have seen the inexorable rise of Trust in NGOs, perhaps filling the leadership and ‘principles’ void created by Government and Business Fourth, possibly as a result of the first three points, we are seeing the continued dispersion of authority within our connected world. Old pyramids and hierarchies are crumbling and being replaced by flatter structures. We are seeing this in business, where the employee is gaining a greater share of voice and, some may say, this is translating into the democratizing force that the Arab Spring properly represents. So, governments, businesses and organisations have to engage with – and take seriously – a world of varied, discordant and at times hostile voices in a range of traditional, hybrid and purely social ‘media’ settings. There are good conversations to be had. But participation is required. As Noonan also pointed out, silence will only be filled by rumour and invention. Fifth, the demand for Transparency and Accountability is fundamentally altering the shape of Trust. This is not

just about how companies – and indeed governments - report; it is actually about how they behave. Open, honest and frequent communications regularly tops the poll for companies that are most trusted. Companies and (political) leaders who are not clearly accountable, will be trusted less. Sixth – and finally - the convergence of everything only serves to increase the complexity. We see Corporate and Brand coming together; the merger of Profit and Purpose; the new Partnerships of Government and Business. These are the new realities, as well as the new complexities – all of which underline the inter-dependency of everything. We cannot broadcast in silos any longer; we have to share in communities if we are to earn trust. These essays, from Edelman leaders across Europe and the Middle East, show how these factors are playing out in different markets and the challenges they are producing within all sectors. They show how all organizations must seek to shift from the old model of Public Relations to the new ecosystem of Public Engagement. That’s what we, at Edelman are calling it. Public Engagement is about meaningful participation in a continuous conversation. The travails of 2011 illustrate how authentic, open engagement is increasingly key to building a Trusted brand - in an age where there are fewer trust certainties than ever before; where trust must always be earned, never bestowed; and, ultimately, where trust remains in a state of increased fragility and flux.

Robert Phillips, President & CEO, Edelman EMEA robert.phillips@edelman.com THE CHALLENGE OF TRUST - COHERENCE IN AN AGE OF COMPLEXITY | 5


BRUSSELS

THE NEED FOR INSTITUTIONS TO ENGAGE It’s a received wisdom, concerning the evolution of the European Union, that each crisis it faces acts as the catalyst for a further phase of integration, as the need for greater collective action overcomes any perceived loss of national autonomy. The very process of debate, in other words, helps establish the necessary increased trust amongst those involved, whether governments, business or ‘civil society’, that it is in their own best interests to operate more closely together. So where does that leave the EU at present? It has clearly had no shortage of crises to deal with recently: from arguments about how to deal with immigrants within the so-called Schengen area, to the test to its common foreign policy that the situation in Libya threw up and most obviously, the challenge of reducing chronic public debt in Greece and a small number of other Eurozone countries at a time of low growth but without a common fiscal policy to accompany the monetary union. If one adds the longer term ‘ecological debt’ crisis and resource constraints that make global competitiveness ever more challenging, the scale of the current set of crises seems, even for the EU, as anything other than ‘business as usual’. But arguments for closer integration are not yet benefiting in the way that received wisdom predicts.

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Perhaps the risks of further short-term economic and financial turmoil, the reality of what being an economic giant but a political pigmy means internationally, and urgency of adopting a more genuinely sustainable model of development, will mean significant steps forward in European economic governance and, for example, in energy or foreign policy. But the gulf opening up once again between ‘elite’ informed opinion on the necessity for this and the diverse popular views around Europe who are either opposed or highly uncertain about closer co-operation, is greater than ever. Less a reflection of popular sentiment, but just as seriously, markets are clearly losing trust in the European body politic to find solutions to the current problems, creating a vicious circle of financial and political crises.

Can the EU find a way of breaking the vicious circle? The Arab Spring demonstrated how social media can now combine with popular discontent to produce rapid, radical and progressive change. The crisis of trust in Europe at present means this combination threatens to push in the direction of disintegration than further integration, with consequences that could indeed threaten the very existence of the EU, at least in its current form. There is much nervous talk in the corridors of power in Brussels about less solidarity among EU member states than before – just at the time when there is a need for more. And despite the fatigue with navel-gazing institutional debate, there is renewed interest in new ‘economic governance’ or an ‘Energy community’ – none of which is possible without a greater democratic legitimacy for these ideas. We used to talk about ‘communicating Europe’ as a key missing ingredient to the mix of activities undertaken by EU decision-makers (including national governments, of course) – but those efforts have clearly at best been insufficient or at worst simply failed.

So, if ever there were a time for a genuine effort at what Edelman calls ‘public engagement’ by European leaders in the fields of politics and business in particular, it must surely be now. The gap between elite decision makers and the European public has to be bridged. There has to be a concerted effort at building trust. Otherwise, the trust in European institutions, indeed in the idea of ‘Europe’ itself, will erode to the point where it is seen not so much as the solution but the problem itself – and that will certainly not help solve these crises.

Martin Porter, General Manager, Edelman Brussels martin.porter@edelman.com

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IRELAND

BUSINESS AND GOVERNMENT MUST WORK TOGETHER It would be easy to throw the trust baby out with the bathwater and suggest that Ireland is a “post -Trust society”. Given the economic shock we are experiencing, and a prevailing mood of cynicism toward the establishment in general, we are seeing a collapse in confidence in the leading institutions of the State. In Ireland it’s a time of introspection and anger. The focus of individual households is on endurance through adversity. However, there are grounds for optimism. Through more open engagement and dialogue business and Government can once again regain the vital intangible asset of every relationship - trust We launched Edelman’s 2011 Trust Barometer at the start of the General Election in Ireland. The then Leader of the Opposition, Enda Kenny, used our annual event to launch his election campaign message: a five point plan of restoration and renewal. At the heart of that plan was an acceptance that the people no longer trusted the political system. The Trust Barometer findings highlighted a clear and simple message - Government needs to engage in dialogue with citizens and business needs to reform. That Kenny now leads the largest majority government in the history of the state suggests that this message resonated. However, the challenge of restoring some sort of trust equilibrium in both social and commercial terms remains. There are indeed no quick fixes; however the undoubted route to recovery is engagement. That Ireland trusts government least of all EU countries is not a surprise. What

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is perhaps of concern is that the level of trust at 20% is so low. While our European counterparts tend to take to the streets to express their frustration, us Irish are a patient lot. We used the general election to vent our anger (so far). An enduring institution of state, the Fianna Fail, party was eviscerated. But it would be shortsighted of the current government not to realise that its mandate is based on a demand for radical reform of politics and government. Trust in the political system can and will be restored despite fiscal austerity, if the Government continues to listen and deliver. The latest trust study went into field before the IMF intervened in the Irish economy. Perhaps the loss of economic sovereignty would have skewed the business trust ratings into the profoundly negative had we gone into field at a later stage. What is interesting is how selective we have been in our attitude to business. We operate an economic filter, consigning those industries

we associate with our economic decline to pariah status, (banking in Ireland at 6% is the lowest rating ever produced in the 11 year global study), while accepting that business in general will be central to economic recovery. Despite all that has gone wrong, business in general increased its trust scores and recovered to European norms. So, what does Edelman’s 2011 Trust Barometer tell us in communications terms? Firstly, there is a unique opportunity for business and Government to partner with each other to signpost a route to recovery. Secondly, and in its simplest terms, it’s all about engagement. At Edelman we call it Public Engagement. This is a simple recognition that trust is the catalyst for all good relationships. It is not an elusive abstract concept. It is created not found. Trust is nurtured and protected through sustained and sensible engagement in the boundless

communities in which the individual and the corporation exist. The Trust Barometer points us in the direction the corporation must travel to maintain its license to operate and the challenge as we see it is to partner with our clients and jointly navigate the complexity.

Mark Cahalane, European Corporate Practice Chair and General Manager, Edelman Dublin mark.cahalane@edelman.com

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GERMANY

HOW CAN THE GERMAN FOOD INDUSTRY WIN BACK TRUST? When German NGO “Foodwatch” awards its annual “Golden Cream-Puff” for the “most shameless advertising lie”, communications departments and the management teams of the German food industry are in crisis-mode. Foodwatch will again successfully pillory one of the big brand names, with consequent news coverage by the traditional mass media such as the biggest tabloid and daily newspaper Bild. Foodwatch, founded in 2002 by ex Greenpeace activist Thilo Bode, is probably the most feared adversary of the German food industry. That’s something the relatively small NGO certainly loves to hear, as they strive for prestige and influence in their efforts to put an end to an era where, according to them, big food companies decide ruthlessly what should be on the consumer’s menu. Why was this small group of activists able to gain such influence over business and media? And why do their campaigns matter so much? Foodwatch is a phenomenon that has only been successful because the food industry hasn’t managed its own reputation for a long time. Business has failed to set the agenda for their own cause, has failed to engage stakeholders in times of crisis and instead preferred to bury their heads in the sand, when BSE attacked the beef and meat industry, “rotten meat” became the talk of the nation and when EHEC (ecoli bacteria) hurt consumers as well as vegetable producers for several weeks. As a result, as the Edelman trust barometer indicated at the start of the year, trust

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among opinion-leaders is at the bottom this year, far below the trust points in other countries, and far lower than 12 months before. Other studies revealed that not only influentials but also German consumers do not trust their food producers any more. The media as a whole have come to a consensus, that the food industry is cheating, maximizing profits, their products are deteriorating and only fierce regulation can stop business from doing what they do. Front page food scandals have become top-sellers for the media. Bild - 12 million readers every day – has positioned itself as the consumer’s advocate and supports Foodwatch and other NGOs in their endeavours. As a result, the ministry of consumer protection – which ironically is also the ministry of food and agriculture – seems more and more like a self-interested regulation hardliner, pushed reluctantly by the public. It’s resulted in a vicious circle, where it seems difficult for food companies to stand out, defend their position and communicate confidently their contribution to feeding the nation, their high safety

standards, their outstanding innovations and best price value. No wonder that, especially the well known brand names and multinational corporations, tend to be the whipping boys of NGO and media campaigns, and many seem to prefer silence to boldness when it comes to communication. There’s consensus among food industry managers, that an individual cannot win in talk shows and only risks personal their reputation and career, when exposing themselves to TV cameras. So can the German food industry turn round this game and win back trust and influence the public agenda? Yes, they have a chance. They can - under one condition: by actively doing what so far they have avoided like the plague and engaging in open, transparent dialogue with opinionleaders, consumers and media. We know when a company is trusted, its message is four times more likely to be believed. But a negative image makes it much harder to be heard. Not speaking is not an option. Trust has to be built in advance. So the food industry needs more and bolder spokespeople, needs to adopt a more advanced attitude towards social media, adapt to the rules of the new media environment and realize they are not the victims of media and NGOs. It’s only the industry themselves who can change their reputation and earn the trust they deserve as one of the most innovative industries, contributing,

health, taste and joy of living to 81 million consumers at one of the lowest price levels in Europe. When the world’s biggest food fair Anuga opens its doors in October this year, many of those associated with the food industry, will wait for a signal. The most important industry associations of food manufacturers, food retail and agriculture have announced plans for an extended image campaign. Let’s hope, they can gather their forces and do what they owe to themselves and those millions of staff giving their best everyday on behalf of the consumer – from farm to fork.

Cornelia Kunze, CEO, Edelman Germany cornelia.kunze@edelman.com

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FRANCE

IN SEARCH OF TRANSPARENCY In 2011, the Edelman Trust Barometer indicated that confidence in institutions in France appeared to be strengthening after a period of decline and doubt. On analysis, the renewed confidence of the French seemed to conform to the “systems theory” which suggests organisations can maintain their smooth operation by integrating external disturbances. But by 2012, a number of issues and crises will have upset this balance. It has been a year of public and political crises which have called into question the integrity of major institutions. The political calendar has started with “DSK” – the misfortune of Dominique Strauss-Kahn, the Socialist candidate in the polls for the French presidential election, discredited in a compelling but sordid series of sexual allegations. It’s but one trauma for the French political classes. It was followed by what is now called “the Karachi affair” where close associates of President Sarkozy were accused of taking kickbacks for arms sales to Pakistan. The scandal stretches into allegations of corrupt party funding which could also taint the President’s re-election battle.

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On the economic front, it is no better. Trust should be solid with banks, finance institutions and big business. But the debt problem has highlighted the intrinsic fragility of the financial system. With the crisis in the eurozone, France and other European partners are like the legendary cartoon cat running off a precipice and falling only when he notices that there no more ground beneath his feet. In the 2011 Trust barometer, the banks experienced some sort of recovery after the 2009 crisis, with confidence in them rising by 23%. How different today, when all bank stocks are experiencing a sharp decline and attempts to stem this crisis are dismissed as “empty gestures” by the markets or the rating agencies. If the financial situation has heralded a period of economic gloom for France, another scandal has destabilized the entire branch of the health industry by raising questions about the governance and opacity of authorization procedures for medicinal products.

Critics of the French system say the regulatory authorities have been so in thrall to drug-manufacturers, especially if they are French, that they find it almost impossible to withdraw treatments from the market. Earlier this year a judicial investigation was launched to establish any criminal responsibility in the affair and a major overhaul of the regulatory system is set to follow. The magnitude of this scandal raises core issues of conflict of interest and corporate transparency but also calls into question the moral and ethical standards that France has long prided itself upon. What a difference a year makes. Today the French have more need than ever for strong, not ambiguous, commitments they can believe in. As elections approach, they are looking for a new public confidence built upon transparency and honesty above all. Whether the political classes can deliver it is another matter.

Isabelle Rahe-Journet, General Manager, Edelman Paris isabelle.rahe-journet@edelman.com

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CHARITIES AND NGOs PUBLIC ACCOUNTABILITY IS CRUCIAL

Public trust is an increasingly important – and volatile – commodity for any kind of institution or organization. For the Charitable sector, in the context of a prolonged financial downturn and public spending cuts, it is essential for maintaining and growing public support. Trust is under strain across all sectors of society and has to be actively managed. With public issues in the UK like MPs expenses, phone hacking, and the banking crisis it is unsurprising that levels of trust in politicians, the media and financial institutions are at new lows. One consequence, however, is increasing expectations of transparency and accountability for all other sectors. Edelman has been tracking public trust, globally, for more than a decade. One of the recurring themes of the annual Trust Barometer survey is the long term growth in Trust in charities and NGOs. Last year, across the EU, NGO’s (including charities) continued to be trusted more than business. There is also a growing public view that business has to demonstrate a social value and purpose as well as simply delivering profits to shareholders. Indeed in the EU, most people believed delivering social value was more important than profit. Clearly, this provides opportunities for Voluntary and Charity Organisations – to act as partners, and to influence the wider

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business and political agenda. However, this is not without some problems. An Ipsos/Mori survey last year showed that in 2008 the most important factor influencing trust in charities was their ability to make a positive difference to the cause they supported. Two years later, the most important factor was ensuring an appropriate proportion of donations reaches the end cause – reflecting a dip in the public’s confidence in the efficiency of the charity sector. And confidence in the sector is not without other risks. Increasingly, if nonprofit organizations are seen as business partners and “part of the solution” to some of the UK’s big problems – climate change, resource scarcity, the Big Society and so on – they will further raise public expectations of transparency and accountability with consequent risks if they are found lacking. So how can charities manage public trust and reassure donors and potential supporters of their standards and efficiency?

Clear, transparent governance has long been recognized as a non-negotiable first step. As a principle, this has to continue to be developed, for example with the acceptance of internationally recognized reporting standards such as those proposed by the Global Reporting Initiative (GRI). The pressure for new and open mechanisms for accountability, supported by evidence, will continue to grow. So, too, expectations of clear standards and values in ethical, transparent, and cost-effective fundraising. VCO’s must expect greater scrutiny and an increase in measurements, benchmarks and comparisons. Alongside this will be an increase in media scrutiny with a focus on accountability and accompanying risks for organisational reputations. In this context, strong clear communications are essential. A clear narrative, supported by evidence, is essential in managing reputation, public profile and therefore trust. In the digital age, that is not necessarily straightforward. Social media debate can be turbulent, inaccurate and disruptive. All organizations need to understand the dynamics of public debate online and harness the skills to promote their story and react to issues when they arise. Those organizations that invest in building and managing trust and reputation also acquire equity in the bank

of public opinion. Organisations that are trusted are given greater latitude to deal with crises and issues when they arise than those organizations that start from a more distrusted position. The current climate of financial and political challenge has obvious risks for charities. As hard choices are made about public funding - and individuals and families have to make their own hard choices about their income and ability to donate - voluntary and charitable organizations will have to work harder to maintain and grow support. But as long as there is active management of their reputation and, crucially, real transparency over their standards, values, and operations, it is a climate in which the public is prepared to trust VCOs above almost any other sector of society.

Richard Sambrook, Global Vice Chairman and Chief Content Officer, Edelman richard.sambrook@edelman.com

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THE MIDDLE EAST TRANSPARENCY DRIVES TRUST AFTER THE ARAB SPRING

“Seize the day, and put the least possible trust in tomorrow.” Those aren’t the words of a corporate motivational speaker, nor of a Democrat on Capitol Hill hoping to solve the US debt crisis, nor even a revolutionary in Syria. They were written by the Roman poet Horace in the last century before the birth of Christ. Trust has always been a precarious commodity, something difficult to acquire but easy to lose. Without trust there is no society, no taxes, no rubbish collection, and certainly no democracy. Some countries, like most companies, can function as dictatorships, but eventually they lose the support of the population and the leader is overthrown. Even though writers and commentators have been bemoaning the loss of trust for millennia, trust in governments and corporations seems to be at an all time low in many parts of the world. Politicians are harangued for their lack of transparency and accountability, while companies are blamed for their lack of corporate governance. In the Middle East politicians have had a difficult year. The Arab Spring saw the overthrow of both the Tunisian and Egyptian governments, and widespread protests in Bahrain, Syria and Yemen. The old brand of paternalistic government is seen as too slow, too unaccountable and too old-fashioned. But there have been pockets of resistance to the idea of change for change’s sake.

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In the United Arab Emirates, for example, the local population have shown their loyalty both to their tribes but also to the ruler, Sheikh Khalifa al Nayhan. In Saudi Arabia, the ruling family has moved quickly to crush dissent but also to spend money on housing and job creation. Trust in media has also been strained in the region, as state-own or state-run media struggled to come to terms with the changes. In Egypt, for example, the January revolution encouraged journalists to stop censoring their reports and tell it as they saw it. News programmes on private television stations as well as the state-run channels now cover protests against the government and the ruling military council. Deference towards ministers is rare, replaced with scepticism and even criticism of top officials. But press freedom advocates say these gains are under threat from a military establishment hostile to dissent or even criticism. One of Egypt’s best known bloggers and social media activists, Hossam el-Hamalawy, was summoned for questioning by military prosecutors following an appearance on

state TV in which he accused military police of a number of abuses of power. In a separate incident Maikel Nabil, a blogger, claimed that the army had supported President Mubarak at the outset. A month later, 26-year-old Nabil, an activist in the anti-Mubarak protests, was given a three-year prison sentence. In some circles the generals are now perceived to be decreeing what media can cover, and what they must avoid saying. Even so, there is definitely greater press freedom in Egypt this year than last year. Editors of state newspapers perceived as complicit with Mubarak’s regime have been replaced. More than half a dozen new private newspapers and television stations have launched. And trust in the Media in the UAE was far higher than the rest of Europe when polled a year ago by Edelman. It will be fascinating to see how the events in the Middle East this year have changed attitudes to the media – both traditional and social. The role of social media in the events of the Arab Spring may well have been exaggerated. It was not a ‘Facebook Revolution’ or even a ‘Twitter’ one, but there is no doubt that social media helped activists realise that they were not alone and provided them a platform from which to rally support. Twenty people all saying the same thing on Twitter meant

that you could probably trust them, particularly at a time when state-run television channels or radio stations were either silent or obstructive. The consequences of the Arab Spring are still uncertain. If stable democracies are to emerge, it will take time and any region undergoing political transition is unstable. However the popular movements in Tunisia, Egypt and elsewhere have sent a clear message to politicians and business. The companies and governments that will prosper will be those that are seen to be honest, open and accountable. Mistakes can be dealt with, provided they are corrected quickly and transparently. This is the challenge of the next decade. Cover-ups are no longer possible or acceptable in the age of Twitter.

Iain Twine, General Manager, Edelman Abu Dhabi iain.twine@edelman.com

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RUSSIA

ATTITUDES TO THE MEDIA The level of trust in mass media in Russia – in line with the trend globally - is low. There are several reasons for this – including some specific to Russia – but the consequence is clear: journalism and journalists no longer hold the position in society they once did. Within recent years, technology has transformed the role of media in society. Today, there is a growing market for news as entertainment, with strong visual content attracting bigger audiences; Citizen journalism and interactivity placing a new emphasis on live events in a way that wasn’t true a few years ago and a consequent decrease in the readership and audiences for serious analytical news (and therefore in the influence of journalists and journalism). At the same time, traditional journalistic values are being undermined. Many professionals complain of the debasement of journalism education, with too many educational departments providing unqualified journalists, leading to loss of respect for the profession, which in its turn affects the level of trust in mass media.1 For all organizations, particularly international ones, seeking to use Russian media this can be a challenging and confusing environment. Today, two major media audiences can be identified: those, who obtain information mostly for entertainment (and as a source of gossip with friends), and those who want analysis and explanation. In Russia, Trust in the media is also determined by some historic peculiarities.

• The absence of a culture of information ‘consumption’ and trust in mass media. Soviet media delivered bald-faced propaganda, and even after the Soviet period were predominantly yellow. • Excessive political influence in mass media casting doubts on its independence and the widespread assumption of state influence upon media. But here, it should be noted that, according to VCIOM results of 2000, 38% of the respondents stood for strengthening of government control over media, and 35% were undecided. • Views that Russian media does not deserve trust, since censorship and self-censure abound; the belief that journalists are either corrupt or leaned on by editors. However, we should recall that in 2003 after the terrorist attack at the Nord-Ost Musical in Moscow, the introduction of censorship and selfcensorship was widely supported by the public as an anti-terrorism measure.2 • The commercialisation of publishing and media is not obvious or widely supported by many in Russia, who believe that content should be free, or almost free. • Overstated expectations of freedom of speech and media in the post-Soviet world.

(An opinion particularly expressed in the paper “Appearance of abnormal quantity of journalism departments resulted in devaluation of higher education on journalism” published in the Journalist professional edition 12.10.2010. ) 1

In 2003 the Union of Journalists of Russia adopted the Antiterrorist Charter, which is supposed to serve as an internal censor for reporters covering terrorist attacks and counter terrorist actions. 2

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There is a wide variation in public opinion polls in Russia about Trust in the Media. The difference in the results of various surveys is sometimes significant - more than 20%. There are a number of reasons for this. The questions posed can be inconsistent or imprecise. But it’s also true that the variety of media in Russia produces very different responses. Despite the widespread view that there is no independent mass media in Russia, there is a rather high level of attention to acute problems within Russian society, for instance, corruption. Such issues are freely discussed in press, radio, respectable websites and blogs.3 There are high levels of public approval for this kind of journalism, as shown by the results of surveys conducted by Levada Centre and the All-Russian Public Opinion Research Centre. There is also high trust in coverage or comment from those with inside information – who have first hand experience of the subject. This corresponds with the findings of the Edelman Trust Barometer which, in 2011, showed that across Europe, expert voices are the most trusted – particularly in crisis situations. However, there are very different responses for the more commercial media where audiences have different interests. Here audiences respond to entertainment factors, direct relevance to their lifestyles and opportunities to interact rather than to quality of analysis for example. For their large audiences entertainment driven news services also deliver strong value – but of a different kind. TV remains the most widely consumed media in Russia, being the basic source of information for 92% of those asked by

VCIOM – showing that traditional media is still the most efficient channel for communication. While TV seeks to engage a mass audience, the Internet is used for obtaining more specialist information. This too is reflected in viewing and trust figures. Media consumption in Russia remains complex, shaped by legacy attitudes and new social and cultural pressures. For international organizations in particular, this can be challenging when seeking to use Russian media to build reputation and support. TV continues to deliver big audiences, driven by popular culture, with high levels of public support. However, while the internet has lower trust and smaller audiences, it can still provide high value by targeting niche audiences with issues of direct interest.

Veronika Moiseeva, General Manager, Edelman Moscow veronika.moiseeva@edelman.com

Thus, in 2011, the corruption issue has been brought up in 645 publications of Kommersant newspaper, 141 articles by magazine Vlast, 63 materials of Kompaniya magazine, 565 materials by Komsomolskaya Pravda, 300 publications by Vedomosti and 110 materials by Expert magazine. 3

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SPAIN

RAISING SOCIAL AWARENESS IN BUSINESS During one of his recent visits to Spain, Muhammad Yunnus, winner of the Nobel Peace Prize in 2006, founder of Grameen Bank, and regrettably now removed from the management of that institution, spoke about his own vision of business organisations. In his view, built around his theory of “building business with social impact”, companies should be created to solve problems and not to make money. Yunnus’ blunt opinion breaks with the accepted view of companies as creators of wealth and value for the shareholder. Instead, he argues that companies have taken the wrong path by focusing exclusively on generating economic profits and pleads for a social business model whose main goal would be to create jobs. The first model is for doing business, whereas the second model is for changing the world. Despite the controversy surrounding his departure from the management of Grameen Bank, few would question Yunnus’ success there, based on reliability and focused fundamentally on generating social value. But what happens with other more “conventional companies”? Are they also able to change the world while they create wealth? The answer is not easy, although there are examples pointing in the right direction. These questions become more pressing in the context of the economic and social issues which have confronted Europe during the last few months. It is clear that the business projects that survive and succeed are those that maintain a vision and a strategy in the middle term. Apart from seeking profits – which is obvious, healthy and crucial for the business – they also have a social

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purpose. Using the Anglo-American concept, they are those companies that are able to combine profit and purpose. Some chairmen and chief executive officers of big multinational corporations have understood this, and have defined strategies based on sustainability where long-term purposes take priority over immediate results. Management thinkers such as Michael Porter and Mark Kramer are also defenders of this theory. They argue that companies have the duty of pursuing an agenda of shared value, combining economic value with the generation of value for society, so society can address its needs and challenges. It is also worth highlighting Professor Jordi Canals’ ideas included in his book Building Respected Companies, where he reflects on the relationship between bad practices in corporate governance and its responsibility in the current economic crisis. For him, today more than ever, it is crucial to rethink what a company means, what its purpose is and the role it should play in society. In this context, it is also important to question the role that should be played by its leaders, especially when it comes to creating sustainable companies. Edelman’s Trust Barometer in 2011 suggested that Spain seems to have

taken good note of this shift towards the social element. According to this global survey, Spain is the country that agrees least with Milton Friedman’s quote that “there is only one social responsibility for businesses: growing their profits”. Whereas in the United Arab Emirates, Japan and India 84%, 72% and 70% of respondents respectively agree with this premise, only 30% in Spain accept it, a similar percentage to countries such as Italy (33%) and Germany (35%). In other words, Spanish opinion leaders, like others in Europe, believed a year ago that the responsibility of business should go beyond just creating profit. In fact, according to the outcome of the survey, for most of the respondents – 7 out of 10 – creating company value should be in line with the interests of society (a similar percentage as the French (72%) or Italians (73%) who hold that view but still far from the Germans (91%) and the British (89%) According to these results, and it’s hard to imagine they’ll be reversed with the events of the last few months, the interests of ALL stakeholders should be equally important when it comes to decision making by the management of companies. In some way this confirms the shift from a society of shareholders to one of stakeholders. It is about companies playing a greater social role in the context of companies and nongovernmental organisations being the most trusted institutions in Spain (60%), ahead of governments (43%) and the media (46%). Across the world “trust” and “quality of goods and services” are the two main aspects that reinforce a company’s

good name. In Spain, good treatment of employees and honest and transparent practices are mostly valued by opinion leaders who took part in the survey. To sum up, trust in companies remains high despite the economic and financial crisis. Innovation and technology are the industries that generate most trust. CEOs and expert voices emerge with strength as a source for generating trust, reliability and confidence, and factors such as transparency and honesty, together with good treatment of employees, are amongst the most valued features that help strengthen a company’s good name. In this way, Trust emerges as a fundamental corporate value. Opinion leaders look at a greater sensibility in the social role of companies. As thought leaders like Porter and Kramer point out, companies should look for shared value, the combination of both financial and social interests. The recent economic crisis makes it a good time for us to think and debate. As Yunnus says, “leaving things as they were before would be a mistake. This is a wonderful opportunity to fix the system”.

Miguel Ángel Aguirre, General Manager, Edelman Spain miguelangel.aguirre@edelman.com

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ITALY

GOVERNMENT, BUSINESS AND SOCIAL RESPONSIBILITY Scarcely a day goes by in Italy without revelations about the inner workings of government, which expose both plans and peccadillos of the establishment. In a country where political debate bubbles effervescently 24/7, this scrutiny has been neither the monopoly of the centre-left nor of the centre-right. As in so many nations in the industrialized world, the new wave of transparency – whether from judicial leaks or media investigations – has indiscriminately exposed the behaviour of political leaders and state bureaucracies, and hypnotized the informed public. The constant drumbeat of revelations – fuelled by the all-pervasive media – has eroded trust in government (or Parliament, or Congress) as institutions, whether in advanced democracies like the United States or vibrant emerging countries such as Brazil. Indeed, confidence in government has been at the forefront in the Arab Spring across the Mediterranean rim from Italy and has triggered requests for accountability and modernity. Edelman’s 2011 Trust Barometer took the pulse of the public early in the year, before some of the momentous protests. But some trends had already begun to emerge, showing that business is more trusted than government in one third of the 23 countries Edelman surveyed. Many Italians were astonished to find the United States among the bottom four countries with the least trust in government.

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Inevitably, trust-seekers move on the other institutions, such as to the dynamic small and medium-sized business sector. Companies also set their hopes on the European umbrella against rainy days, and on other regulatory mechanisms to restore order to the market place and to the political piazza. Individuals gravitate towards the kaleidoscopic collection of Italian NGOs who work against the Mafia at home or support thousands of Italian peacekeepers and volunteers abroad, granting a record 70% trust to NGOs in Italy compared to 62% globally and 59% in Europe. In a world buffeted by government and corporate financial crises, Italians prefer to fall back on other smaller and intimate institutions such as the family, the Armed Forces and the Churches, which have driven a large portion of the NGO agenda. Confidence in regulators, who overlook the marketplace in the areas of communications, antitrust and energy has also returned to the forefront. It has opened up new sectors for competition and allowed new players into the economy. It is as if Italy has quietly been applying U.S. President Reagan’s old mantra: “Trust… but verify”.

Italy is often described as an “anomalous country” in the European landscape, with apparently opaque governments, few “national champion” companies and a gaping North-South divide. On the other hand, and importantly, it has often been at the forefront of new trends in innovation and design. However, behind the façade of labour union activity and bureaucratic hurdles, other surprises may lurk. Much of the country is moving toward the European norms, thus climbing up the Edelman trust composite scores. With the exceptions of the media system and the automotive sector, which both suffered trust losses, the resilience of Biotech and technology has continued to reside at the top of the standings. Thus, even in an age of constant disruption, when the South Mediterranean countries’ establishments are the target of merciless scrutiny by the North, some countries like Italy are moving to “the new normal”, and to a growing respect for its own solid industrial sector. To wit, confidence and trust in the business sector have gained 31% age points in the past two years, to 64%,

not that far from the results of NGO league leaders (70%). In fact, the “Italian style” answer to the tempest of economic turmoil seems to be that – at the cost of some sacrifices by shareholders – companies must operate for the collective good, and at the same time increase their social responsibility. It is in that challenge and in Edelman’s Public Engagement strategy that Italy radiates glimmers of promise behind the bare knuckles debate over the role and trust of government in the public arena.

Fiorella Passoni, General Manager, Edelman Italy fiorella.passoni@edelman.com

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UNITED KINGDOM

TIME FOR SOME STRAIGHT TALKING The British have long enjoyed looking down on the corrupt practices known to be widespread in other countries with a rather superior air. “That sort of thing would never happen here,” was the traditional view. “You don’t find people lining their pockets in this country.” Financial corruption has indeed rarely been discovered. Nods, winks, old school ties and elite networks have instead provided routes to power. But after a tumultuous couple of years Brits have been forced to question their smug superiority over other nations when it comes to straight-dealing and good practice. It has all been a shattering blow to certainty, and trust, in the UK. Last year saw a 30 point drop in the UK’s trust in the banks for example. The uproar over MPs’ expenses fought for space in the newspapers with the ongoing coverage of the financial crisis, which has revealed dishonesty and incompetence at the heart of the world’s financial system. Major British banks were out of control and had to be saved by the tax-payer. And then came the explosion of the phonehacking scandal, which has shone an unforgiving light into the practices of British journalists and which still has a long way to run. [NB In July News Corporation became an Edelman client.] The Metropolitan Police

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also has many pointed and uncomfortable questions to answer. Politicians, bankers, media, police officers: it has become increasingly hard to know who can still be trusted. Must we conclude that, as we always used to say about other countries, “they are all at it”? You would understand it if many were to think that way. While the riots which erupted in some English cities this summer mainly involved simple criminality, it is possible that the ring-leaders found so many willing accomplices because they shared a feeling that the system as a whole was corrupt, and that crimes such as petty theft and even arson were in some way a natural response to a society in trouble. Even the thoroughly law-abiding have their doubts. The public – employees, customers, managers, citizens – are probably more sophisticated and less naive than many commentators realise. They have had enough of glib spin and sloganising. They are not going to be taken

in by flimsy PR campaigns that deal only with surface issues. They will go on-line to research “facts”, and dig up their own information. You cannot fool most of the people most of the time. Don’t even try: you will be found out. A year ago, Edelman’s research said Trust, quality of products, how companies treat staff and of course transparency are the top contributors to corporate reputation. The events of 2011 can have only strengthened that view. The lesson for businesses is that, to win and retain trust, they must learn to speak simply and candidly to the outside world. Humility and candour are the “new black”. So what if you are not perfect – who is? Straight talk and the admission of failure reach the parts other communication strategies will not. The supposedly “feral” British media will find it hard to maintain permanently high levels of outrage towards businesses and organisations that are prepared to admit mistakes, and convince onlookers that they are serious about listening to criticism, and learning from it. Not least

because the British media themselves are being forced to take a hard look at their own shortcomings after the revelations of the last year and the collapse of public trust in their methods. This is an old Edelman message, but it remains true: engaging positively with the public is the first step towards building trust. And given where trust levels currently reside, now is a good time to start reaching out with as much openness and enthusiasm as possible.

Stefan Stern, Director of Strategy, Edelman London stefan.stern@edelman.com

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CONTACT

Edelman Southside 105 Victoria Street London SW1E 6QT +44 20 3047 2000 www.edelman.co.uk | www.edelman.com Digitial publishing platform | www.edelmaneditions.com For media enquiries contact: Nienke Beuwer | nienke.beuwer@edelman.com Marina Mikus | marina.mikus@edelman.com

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Edelman Trust Essays - 2011  

Edelman Trust Essays EMEA - 2011

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