The Organisation for Economic Development and Co-operation (OECD) defines trust as a person’s belief that another person or institution will act consistently with the expectations of positive behavior.
Trust in businesses and the economic institutions in which they operate is essential for the broader legitimacy of democratic and market systems. Democracy, in turn, cannot thrive if citizens lose trust that it can deliver broad-based economic opportunity. Yet, in today’s situation of a global pandemic, trust can be in very short supply.
Given the scope and seriousness of the COVID-19 crisis and its economic and social fallout, governments alone cannot address the long-standing challenges that the crisis exacerbated.
Businesses as both the engines of economic growth and key societal stakeholders have a unique opportunity to play a constructive role in shaping the post-COVID recovery and its systemic ramifications. They can lead by example by looking beyond the immediate economic recovery to guide their own operations with integrity, transparency, and sustainability. In parallel, they can also partner with governments and civil society on much-needed relief efforts as well as longer-term reforms.
Businesses must embrace good governance and transparency in their own operations and promote systemic integrity that safeguards a level playing field and an inclusive business environment. The decision last year by the Business Roundtable, composed of CEOs from leading U.S. companies, to endorse a stakeholder model of the corporate purpose beyond shareholder primacy was significant, though the public remains somewhat skeptical.
To shore up trust, the private sector must now demonstrate its commitment to follow through. Global norms of business conduct must become more broad-based and inclusive of local companies – especially small and medium-sized enterprises (SMEs) – that often are not a part of high-level conversations and agenda-setting. Businesses can also convene citizens, and can amplify voices that might otherwise be ignored. Businesses can lead by example, and can demand broader accountability and equality. For instance, the U. S. Chamber of Commerce is changing its congressional scorecard to encourage lawmakers to work across the aisle and stand for immigrant and minority rights.
In its work with partners around the world, CIPE has seen good examples of local business communities taking on the leadership role and working together with governments and other stakeholders in response to the long-standing issues as well as new challenges created by COVID-19:
- In Nigeria, the Niger Coalition of Business & Professional Associations (NICOBPA) secured the local supply of essential goods and services such as pharmaceuticals and food items to limit the impact of the lockdown.
- In Indonesia, the Center for Indonesian Policy Studies (CIPS) launched a series of policy briefs on COVID-19 on topics such as food security, access to educations, and investment amid the pandemic, and conducted well-attended webinars on these issues.
- In Brazil, the Brazilian Corporate Governance Institute (IBGC) responded quickly by moving training sessions online and making all its resources available to a wide audience.
- In Georgia, CIPE’s support to the nascent Georgian associations helped them adapt and become relevant to their members during COVID. Several associations have seen growth in membership as a direct result of their quick response to the crisis.
- In Afghanistan, the Herat Chamber of Commerce and Investment (HCCI) launched a survey committee to assist Herat Food Bank in distribution of food by developing a database of families in need throughout the province.
- In Tunisia, the Arab Institute of Business Leaders (IACE) proposed solutions to the COVID-related problems of local businesses, while continuing to conduct advocacy virtually on previously identified priorities that remain essential for the country.
The COVID-19 crisis is a tipping point, bringing into focus what a responsible business should look like and how to balance the essential profit motive of business activity with the equally fundamental imperatives of social solidarity and compassion. Companies everywhere are faced with the need to renew and reaffirm their social license to operate.
That calls for transparency of corporate priorities and engagement with different stakeholders: from employees and supply chain partners to local communities.
Strengthening trust in business comes down to shaping the global norms and standards by which companies abide, translating these norms and standards into local legal and regulatory environments conducive to doing business with integrity, infusing corporate purpose with values reflecting the stakeholder model, and energizing the private sector to lead as the key agent of change.
Businesses around the world are at the heart of restarting the economy post-COVID and creating jobs to overcome employment losses during the pandemic. If they act both individually and together, this terrible crisis may also be a once-in-a-generation opportunity. In a recent article in the Diplomatic Courier, CIPE’s Executive Director Andrew Wilson outlined six essential themes for an economic recovery roadmap, involving:
- Restarting economies.
- Diversifying supply chains.
- Combating corruption.
- Battling authoritarianism and challenges to democracies.
- Solving economic challenges for women and marginalized groups.
- Assuring chambers of commerce and business associations assume a larger role in getting economies on track.
CIPE’s goal is to provide constructive input into how global norms and standards of business conduct are shaped through multi-stakeholder cooperation, such as the OECD and Group of 20 (G20) consultative processes, and to bring local private sector voices into these international deliberations. CIPE further leverages thought leadership and outreach to help promote a constructive model of public-private dialogue both at the international and local levels. CIPE also captures and disseminates successful models from its work, with the emphasis on how to build economies that are inclusive of women and marginalized groups.
The business community around the world – from global brands, through hardest-hit SMEs, to chambers and associations – must help fill the trust gaps exacerbated by the pandemic. While stakeholder capitalism is not a new concept, how businesses deal with the pandemic can help operationalize it to get the post-COVID economic growth right.
As governments are looking to the private sector for solutions to deliver post-COVID recovery, industries and business associations have a chance to come together and offer constructive input into policy priorities, both immediate and down the road as economies open up. The question for CEOs as well as heads of chambers and associations everywhere post-COVID will be: what did you as a leader do? How is your organization a force for good?
Anna Kompanek is the Director of Global Programs at CIPE.