Building trust has economic value

Our recently published CEO Survey shows that nine out of ten Dutch CEOs are taking actions to restore public trust. This is a good thing, as trust in large companies has significantly declined over the past ten years. Building trust has economic and social value, and companies bear a responsibility in this regard, argue CEO Agnes Koops-Aukes and chief economist Barbara Baarsma of PwC.

Trust is the willingness to depend on the integrity or competence of others, to rely on their good intentions, even if those others are complete strangers. In large and complex societies, the likelihood of people not knowing each other is greater. Trust is then essential to bring about economic transactions.

Trust is like the air we breathe - when it's present, nobody really notices; when it's absent, everybody notices. With these words, investor Warren Buffett underscores the importance of trust for the economy. 

Without trust, transactions become expensive

Without trust, economic transactions become exceedingly costly. It becomes essential to scrutinize the intentions of unfamiliar parties, monitor their actions, and draft extensive contracts. This significantly hampers economic transactions. However, when trust exists between parties, these high transaction costs are unnecessary. People then rely on the integrity of their counterpart to honor agreements. In this way, trust is an important condition for economic development.

Mutual trust is growing

Mutual trust is the glue that holds society together, not only because it drives economic growth, but also because it provides connection in times of polarisation. Despite this polarisation, it is good news that in the Netherlands, the share of people who trust others has increased from 58 to 67 percent over the past decade. This places the Netherlands among the top 'high trust' countries.

Trust in politics and institutions is declining

Trust in national political institutions, on the other hand, is historically low. Less than thirty percent of respondents say they trust the House of Representatives and less than a quarter trust politicians. Nevertheless, trust in the European Union rose to 47 percent in 2023.

Companies have a responsibility in building trust

Companies also have a responsibility when it comes to trust. Not only by trying to regain the trust of citizens in companies but also by contributing to public trust. The first step in this for executives is to have a realistic view of the trust people actually have in their companies. PwC research shows that executives greatly overestimate that trust. In reality, according to CBS, trust in large companies in the Netherlands plummeted by ten percentage points from over 45 percent to less than 36 percent between 2012 and 2022, where it remained in 2023.

By operating within legal and social norms and within ecological boundaries, a basis for trust in companies is created. But companies can take more steps to regain trust.

'Net trust score' as a goal

There is more focus on increasing trust within a company when quantifiable trust goals are set, and departments are held accountable for achieving those goals. For example, customers can be asked to what extent they trust that the organization acts in the customer's interest. A minimum 'net trust score' can be set as a goal.

Communication around trust can also often be improved. Without revealing sensitive information, more openness about ethical standards, anti-fraud policies, decision-making processes, and dilemmas is possible. This can help increase trust.

Part of communication is also listening. By actively listening to the concerns and feedback of stakeholders and responding to them, organisations can show that they are involved in the community they are part of. This can also be done by contributing to solving social problems.

Transparent reporting and dialogues with stakeholders

That companies feel responsible for restoring public trust and are already taking steps was previously endorsed by executives. The same is evident from our most recent CEO Survey. In this survey, PwC asked Dutch CEOs what actions they had taken in the past twelve months to restore trust. Only one in ten took no specific actions.

The remaining nearly ninety percent do. About half say they report transparently about dilemmas in annual reports or have dialogue sessions with customers and other stakeholders. About a third of CEOs give interviews in the media and regularly have conversations with politicians and policymakers to contribute to restoring public trust.

Openness and dialogue are important connecting tools in a polarized society. That and good corporate governance will help companies regain trust.  This is an important but challenging task. After all, trust is hard to gain but easy to lose.

This blog was also published on fd.nl.