From reports of tainted food to consumer data theft and other cyber breaches, trust incidents are becoming increasingly visible to the general public. The heightened transparency inherent in our digital world means trust is a highly flammable, ever-present concern.
For most companies though, trust has been a soft factor. Its connection to a company’s value has always been there, but exactly what that business value is has been unclear. But now, new research from Accenture Strategy allows you to measure the impact of trust on your company’s bottom line. As more and more companies experience trust incidents, the hard facts tell us that trust in business is anything but soft.
Our research proves that no company is immune to the impact of a drop in trust on the bottom line. U.S. companies must adopt a top-down culture that fully bakes trust into the company’s strategy, operations and broader DNA. Those who don’t are putting their future revenues at risk.
In this age of transparency, how a company does things has become equally important to what it does. Companies need to very intentionally create a culture of building, maintaining and preserving trust, and bake it into their DNA, strategy and day-to-day operations.
Revenue at risk
The Accenture Strategy Competitive Agility Index quantifies the impact of trust on a company’s bottom line. We scored more than 7,000 companies across interdependent dimensions of competitiveness: growth, profitability, and sustainability and trust. Our 2018 analysis revealed that more than half (54%) of the companies we examined experienced a material drop in trust at some point during the past two and half years. And, the average company that experienced a drop in trust also saw their Competitive Agility Index score decline by two points. For every point a company’s score on the Competitive Agility Index drops, significant revenues are at stake.
Across the 54% of companies in our sample that experienced a drop in trust, revenues at stake equate to at least US$180B.
A US $30B retail company experiencing a material drop in trust stands to lose US$4B in future revenue.
Measuring the invisible asset
Accenture Strategy defines trust as a consistent experience of competence, integrity, honesty, transparency, commitment, purpose and familiarity. We view a trust incident to be any event or circumstance that results in the loss of real or perceived trust in a company. The Competitive Agility Index measures this from the perspective of six stakeholder groups: customers, employees, suppliers, media, analysts and investors.
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Today’s customers have more choices than ever. They are looking to affirm their own values when choosing companies with which to interact.
Employee trust is crucial in the war for talent as a company’s reputation and actions become more important to job seekers. Employees, more than ever, look for a company’s everyday actions to match its values.
Suppliers and trusted partners are key players in today’s business value chain. They enable faster innovation cycles with more flexibility.
The opinions of the general public also impact trust, which play out in real time across all forms of media.
Analysts and investors are interested in a broader perspective of business trust, including not only financial performance, but extra-financial performance (i.e., environmental, social-impact metrics).
It’s clear that trust has become material. If we define “material” as anything that could change the perceived value of a company, trust is now a bona fide poster child for materiality. Trust declined in 10 of 15 industry sectors in 2017, signalling that companies must better position themselves for resiliency from trust incidents.
When we compared companies that experienced a trust drop to those that did not, we saw a trend. Those that had a drop in trust saw their Competitive Agility Index scores decrease more than those that did not. While trust accounts for a fraction of a company’s total score, it disproportionately impacts revenue and EBITDA.
While the average percentage varies by industry, when a drop in trust occurs, companies in all industries will experience a material decline in both revenue and EBITDA. We've highlighted select industries below.
Amid declining returns and growing demand for cleaner energy and sustainable products, trust in oil and gas companies’ traditional competitive model is fading. Investors are scrutinizing the industry as never before. And they’re not the only ones. Consumers, employees and suppliers are questioning whether traditional players have a meaningful role in the energy transition. For large or integrated oil companies, a material drop in trust could translate into a loss of US$9 billion in future revenue.
Protecting the bottom line
Despite a company's best efforts, it is impossible to prevent trust incidents completely. However, companies can prepare—by having a strategy that balances growth, profitability, sustainability and trust. Doing so can mean fewer trust incidents. And, when an incident does strike, the balanced strategy helps minimize its impact.
Know where you stand. The only way to know where your company stands is to measure trust—to bring science to the table.
Make trust part of your cultural bedrock. Your leadership team must embrace trust as a core element of business strategy. All teams—at every level—must walk the talk.
Elevate trust's role in your overall strategy. Some companies make choices to deliver near-term cost savings and profit improvement without considering how they might jeopardize trust. In the mid- and long-term, companies need trust across the stakeholder map to access avenues to growth.
Trust is the furthest thing from a soft corporate issue. It's part of an interdependent strategy that significantly influences your bottom line and competitiveness. Knowing how much is at stake for your company—taking trust and your competitiveness to a forensic level—is becoming the new normal.
The bottom line on trust? It's intrinsically tied to your bottom line. If your company wants to claim true competitiveness, trust must be a critical input and output to your business strategy.
Reach out to our authors to see how trust impacts your company’s bottom line.