A company’s social licence to operate is not a given, so the onus is on organisations to build relationships, to proactively listen to stakeholders, be willing to change, and to embrace technologies to better understand their impact on people and communities.
An organisation’s weakest link can undermine trust at devastating speed. The impact that a company – its products and services, culture or operations – has on people and the environment have become everyone’s business.
The actions (or inaction) of a small group of individuals or a single asset, division or supplier, can have a domino effect on company’s relationships, reputation and its social licence to operate. Through contagion, such impacts – both perceived and actual – can rapidly affect an entire industry.
Trust in business is at all-time low, and companies are under ever increasing scrutiny. ‘Not knowing’ about an issue, ‘not responding well enough’, or ‘throwing money at it’ are no longer acceptable responses if an organisation or industry is to gain ongoing acceptance and secure approval by the community.
No sector is immune – government, media, NGOs as well as corporates must navigate a 24-hour media cycle now fed by social media, whose narrative is in the hands of thousands of voices scattered around the globe. Everyone who has an opinion or has been harmed now has a platform.
Erosion in trust isn’t a new phenomenon. What has changed is that companies no longer have control over the message. The balance of power has shifted from institutions towards individuals. As a result, the tools and capabilities that have traditionally served companies well are no longer delivering the same results.
Reputation and brand management, for example, have been valuable and reliable investments. Reputation has been measured, tracked and reported on…yet disconnect between business and stakeholders continues to grow.
Reporting and assurance are other familiar ways of building and maintaining trust. These activities have evolved significantly to keep up with better informed stakeholders and higher societal expectations. Companies have become more transparent in disclosing their business and sustainability performance, identifying the material issues that are of interest to their stakeholders, reporting on the value they create, and being honest about their mistakes.
KPMG’s Human Rights & Social Impact team has seen the landscape of corporate social performance expand from a traditional stakeholder focus on community, government, and media relations, into the thematic areas of human rights, responsible sourcing and social impact. Areas that impact the experience of all a company’s stakeholders. Businesses in Australia are increasingly concerned with managing their social and human rights risks and impacts. The efforts in readying themselves for the proposed introduction of Modern Slavery legislation is just one example.
A strong reputation, transparent reporting and a ‘do not harm’ approach are certainly foundational and meaningful pathways to maintain trust. Collectively, all are necessary inputs to enhancing trust, but other shifts and new capabilities are required in response to the current trust crisis.
Managing social licence is still an emerging space for most. It involves a shift in mindset that requires putting an organisation’s stakeholders at the heart of its approach to decision-making.
It also requires a more holistic understanding of risk and a genuine commitment to building stronger and more meaningful relationships with a broader range of stakeholders. Designing effective and inclusive stakeholder engagement processes is fundamental to building, maintaining and enhancing trust and social licence.
Boards are increasingly acknowledging this and looking to better understand, and respond to, the issues that are affecting their organisation’s trustworthiness. Developing the right mix of tools and capabilities to do this meaningfully remains a challenge, as does catalysing the internal change required to undertake such a journey.
Organisations determined to maintain trust should pay particular attention to vulnerable, marginalised or alternative stakeholders that they may be impacting. Vulnerable customers, as well as marginalised communities, are likely to hold insights that companies may have heard but not listened to. Their views can help a company understand the root cause of issues and unlock patterns of distrust.
Listening to people and communities that are potentially affected by a business and its operations can also help flag issues before they escalate.
At KPMG, we are seeing trust becoming simultaneously more digitised and more personal. Making sense of the thousands of voices that have an opinion about an organisation has never been easier or more accessible thanks to technology.
Technology offers us unprecedented insights into what stakeholders think, and a unique opportunity to listen, understand and connect with those who have an interest in – or an issue with – a particular company or industry.
Paradoxically, developing deep and meaningful stakeholder relationships, especially with an organisation’s most vulnerable and marginalised stakeholders, as well as with its critics, requires a human touch, and a listener who can empathise.
The act of listening in itself is a trust-building exercise, and one that ’bots’ cannot yet do on our behalf. What we can do is combine and leverage technology such as qualitative research software and proven qualitative research methods. Technology allows us to access and analyse large quantities of rich stakeholder data and gain a better understanding of the current and emerging issues that should be on an organisation’s radar.
Yet this must be balanced with the deep insights that come from listening to a human being who has experienced having their human rights harmed as a result of a company’s products or services.
We will also see the increasing use of technology such as artificial intelligence to leverage stakeholder insights to predict the impacts of decisions before they are made. This presents significant and exciting opportunities to eliminate harm and identify a company’s potential weakest link before it unravels.
The companies and industries that create new listening and responding capabilities, especially in response to the voices who are most difficult to hear, are the ones who will be proactively identifying their weakest links. The others will read about theirs on Twitter.
©2021 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation.
Liability limited by a scheme approved under Professional Standards Legislation.
For more detail about the structure of the KPMG global organisation please visit https://home.kpmg/governance.