If business doesn’t demonstrate trust for its stakeholders, why should it expect them to trust it back?

On his website, Richard Karmel discusses issues relating to human rights and social responsibility in corporate society. 

Richard Karmel is responsible for Mazars’ award winning business and human rights reporting service line. Richard and his team have devised an innovative solution to help protect the reputation of businesses whilst ensuring compliance with their social obligations.

He recently led Mazars participation in the drafting of the United Nations Guiding Principles Reporting Framework. A tool to help companies understand and report on their human rights performance.

Earlier this month (March, 2015), Mazars co-sponsored The Economist Intelligence Unit’s business and human rights survey, which identified the challenges that businesses globally face in respecting human rights.

The EIU survey interviewed 853 senior corporate executives from companies based in Europe (30%), Asia Pacific (29%) and North America (28%). 51% of the companies have a turnover of over US$500m and 23% over US$5bn. 48% of the respondents were at C-suite or equivalent board level.

The key finding was that 83% of respondents believe that business is an important player in respecting human rights, and that what their companies do – or fail to do – affects those rights. However, what did seem surprising was that only 21% of companies say that a clear business case is driving their human rights policy.

To my mind this is worrying. In effect, companies are saying that they are still approaching human rights as a sideshow to their main business operations. If business wants to truly embed and integrate respect for human rights it needs to understand that it can also have a positive impact on itself as well as its stakeholders.

The aforementioned positive impact isn’t just about protecting the companies’ own reputations; it’s about being more profitable though greater respect for human rights. Yes, I have dared to use the “p” word in the same sentence as human rights. The two are not mutually exclusively.

I understand that in some quarters of society this may be misunderstood as generating profits at the expense of misery of others.  However, this is not what I intend. It is about benefitting all.

If a business truly respects human rights it will want to understand how its business practices are impacting the following:

  1. Its own workers
  2. Workers in its supply chain
  3. The communities in which it operates

However, the tricky part comes in generating that understanding. It requires the following:

  • Engagement
  • Listening and understating
  • Thoughtful and innovative approaches to adapting procedures to take account of stakeholder concerns

Once the above concerns are addressed, or even just seen to be understood, trust can begin being built up with the company.

In my latest YouTube video (below), I explain how a company can implement a human rights policy.

How to implement a Human Rights Policy

Watch Richard's latest YouTube video

Tim Melville-Ross, former chairman of the Nationwide Building Society, addressed why trust is so important for companies in an article that he wrote in 2013 in the Guardian:

Since the beginning of time, business has depended upon trust and goodwill in order for commerce to flourish. Indeed, the word credit has its origins in the Latin credere: ‘to trust, entrust, believe’. Business must be conducted in an open and honest manner, otherwise trust is eroded and businesses fail. But calls for an increased trust in business miss the point – trust needs to be earned.”

Marketing modules in business schools teach (trust me, I have been there!) that the nirvana for businesses is to earn the trust of your customers. If you have the trust of your customers, they will not only reward the companies with repeat sales, but they will also forgive transgressions; like Apple and their Foxconn issues.

What is not so widely taught is that earning the trust of your workers, suppliers and communities can be as equally lucrative:

  • Workers repay you with greater loyalty and more discretionary effort
  • Suppliers will reward the company with more stable, and constant high quality supplies
  • Communities will reward the company with a social license to operate

Overarching all these areas are legal costs.  If any of the above go wrong, as they unfortunately so often do, company profits are further dented with increased legal expenditure.

So why do many businesses not practice this engagement through respect for human rights? In my opinion, they haven’t intentionally avoided it; instead they have just never really trusted that the upfront investment will ever be repaid by the stakeholders, with whom it’s engaging.  So if these businesses don’t trust their stakeholders, why should a stakeholder trust them?

So the challenge to business – don’t look at respect for human rights as a cost but as an investment. Engage more, display trust and see where it takes you.

Richard Karmel

Richard.karmel@mazars.co.uk